Strategies to gain ownership of or increase control over distributors or retailers

motivation or advantage

Main applicable conditions

It is widely used in the automobile and steel industries

Strategies to gain ownership of or increase control over suppliers

motivation or advantage

Main applicable conditions

不熟悉新业务领域所带来的风险

纵向一体化，尤其是后向一体化，一般投资数额较大且资产专用性较强， 增加了退出成本

Achieve economies of scale to gain competitive advantage

The industry has great growth potential

Have the funds, human resources, etc. required for horizontal integration

Competition in the industry is fierce

The industry has significant economies of scale

Horizontal integration complies with anti-monopoly laws and regulations and can gain a certain monopoly position in local areas

"Stand your ground", emphasizing the development of a single product, trying to gain greater market share through stronger marketing methods

main method

Mainly applicable to (condition)

The main direction

reason

Mainly applicable to (condition)

Developing new products through technological improvement and development can extend the product life cycle, improve product differentiation, and meet new market demands.

reason

Mainly applicable to (condition)

Concentric Diversity

centrifugal diversification

Weakened funding, distracted management

The dispersion of resources under the impact of macro forces has increased risks.

Inject resources, learn knowledge, train personnel, build brands, competitors’ response strategies

Well-designed business exit channels can effectively reduce diversified business risks, such as registering an independent entity to assume limited liability

Diversified operations, conflicts between multiple goals and limited corporate resources

The industries in which both parties to the merger and acquisition are located

The attitude of the acquired party

Identity of the acquiring party

M&A funding sources

Avoid entry barriers, enter quickly, seize market opportunities, and avoid various risks

Gain synergy

Overcome negative externalities of enterprises, reduce competition, and enhance control over the market

poor decision making

Paying exorbitant M&A fees

After merger and acquisition, enterprise integration cannot be carried out well.

Cross-border mergers and acquisitions face political risks

No suitable acquisition target exists

Maintain a unified management style and corporate culture

Provide career development opportunities for managers

Low price, no goodwill

Hidden or unpredictable losses that often arise from mergers and acquisitions are less likely to occur

lower risk

The process of developing new products enables companies to gain a deep understanding of the market and products

May be the only reasonable way to achieve true technological innovation

Can be carried out in a planned manner, easy to obtain financial support from corporate resources, and costs can be spread over time

Cost growth is slow

Corresponding motivations for mergers and acquisitions

Entry into new markets can involve very high barriers

When the market is developing very fast, internal development will appear too slow

No access to other companies’ knowledge and systems

Lack of economies of scale or experience curve effects from the start

Adding competitors to the market may intensify competition within a certain market

The industry is in an unbalanced situation and structural barriers have not yet been fully established. It is generally an emerging industry.

The behavioral barriers of existing companies in the industry are easily restricted

The enterprise has the ability to overcome structural and behavioral barriers, or the cost of overcoming them is less than the benefits after entry

From the perspective of economic organization form, strategic alliance is an "intermediate organization" between enterprises and the market.

From the perspective of corporate relationships, the parties forming a strategic alliance are an equal joint partnership formed through prior agreement based on resource sharing, mutual advantage, mutual trust, and mutual independence.

From the perspective of corporate behavior, alliance is a strategic cooperative behavior

Promote technological innovation

Avoid business risks

Avoid or reduce competition

Realize resource complementation

Open up new markets

Mergers and acquisitions are also possible

Reduce coordination costs

Equity participation

contractual bond

Enter into an agreement

Establish an alliance of cooperation and trust

Macroeconomic situation, industrial cycle, technology, policy, social values, fashion, etc., market saturation, intensified competition, etc.

Sluggish mechanisms, wrong decisions, and poor management cause the company or a certain business of the company to lose its competitive advantage.

The later stage of life of the product and its future profitability and development trends

Current market conditions and opportunities to regain competitive advantage

Is it worth giving up part of the business and investing in other businesses?

Which one is more cost-effective: closing or maintaining a small profit, especially whether the exit barriers are large and costly?

The role and synergistic advantages of the part of the business to be abandoned in the enterprise

Opportunities to meet existing customer needs with other products and services

How to use the freed resources

Tangible and intangible benefits brought about by enterprises reducing the degree of decentralized operations

Find the right buyer

low cost

Upstream and downstream

Cost-effectiveness

low price

The product has high price elasticity and there are a large number of price-sensitive users in the market.

Buyers pay less attention to brands and use them the same way

The industry is full of standardized products, making it difficult to differentiate.

Price competition is the main means of market competition, and consumers’ switching costs are low

Equip corresponding production facilities in industries with significant economies of scale to achieve economies of scale

Reduce costs of various factors

Improve productivity

Improve production capacity utilization

Improve product process design

Choose the appropriate trading organization form

Focus on gathering

Due to product features, customer loyalty is very high

Higher marginal revenue, lower total cost, dealing with suppliers Buyers have no choice and are less price sensitive, thus weakening their bargaining power

Improve performance and thus cost-effectiveness

Highly loyal and therefore not price sensitive

Products can be fully differentiated and recognized by customers

Customer needs are diverse

The industry in which the company operates is experiencing rapid technological changes, and innovation has become the focus of competition.

Have strong R&D capabilities and product design capabilities

Have strong marketing capabilities

Have an incentive system, management system and a good creative culture to motivate employees to be creative

Have the ability to improve the quality of a certain business as a whole, establish product image, maintain advanced technology and establish and improve distribution channels

The small market cannot support the necessary production scale, resulting in high cost risks

提供高质量产品的公司会增加市场份额，而这又会因规模经济而降低平均成本。其结果是，公司可同时在该产业取得高质量和低成本的定位。

生产高质量产品的经验累积和降低成本的速度比低质量产品快。因经验曲线而降低平均成本。

注重提高生产效率可以在高质量产品的生产过程中降低成本。

Government policies and local regulations restricting the concentration of certain industries

There are also companies in the new industry that have acquired sufficient skills and capabilities to occupy important market shares.

Develop into a large enterprise

Franchise or franchise

Technological innovation to create economies of scale

Discover industry trends early

There is little potential to increase differentiation within the product or service itself, so an effective strategy is to increase its added value

Specialization by product type or product segment

Customer Type Specialization

Geographic area specialization

Determined by the characteristics of the industrial structure, unless it can be fundamentally changed

The competitive structure of fragmented industries requires concentration and abandonment

The essence of competition in fragmented industries is flexibility

The actual situation of the opponent

Large investments are difficult to recoup

Learning curve quickly reduces initial high costs

A budding enterprise refers to a newly established enterprise

Incentives to set up a separate business

The central activity of marketing is to select customer targets and induce initial purchase behavior

Difficulties in selecting, acquiring and applying proprietary technology

Inadequacy of raw materials, parts, capital and other supplies

Customer confusion and wait-and-see

Reaction of the substituted product

Lack of courage and ability to take risks

Entry costs and competitive costs are much lower

Balancing industry advocacy and one’s own narrow interests

proper early entry

Dangerous early entry

At the same time, we aim to achieve a leap in customer value and the company's own value.

Psychological variables such as lifestyle and personality

Product-related behavioral variables such as purchase timing, benefits pursued, degree of loyalty, attitude towards the product, usage rate, etc.

Different industries have different requirements for the same product

The entire market is the target market

Target one or several submarkets with similar nature

According to the needs of different market segments, we design and produce different products and formulate different marketing mix strategies.

When the market demand is very similar, it is appropriate to adopt an undifferentiated marketing strategy; otherwise, it is appropriate to adopt a differentiated or centralized marketing strategy.

Homogeneous products adopt undifferentiated marketing strategies, while products with greater differences adopt differentiated or centralized marketing strategies.

If the strength is very strong and has the ability to cover all markets, it can be undifferentiated or differentiated. If the strength is limited, it can be centralized.

During the introduction period, it is appropriate to use no differentiation. After entering the growth and maturity stages, it is appropriate to adopt differentiation to establish characteristics, expand the market, stimulate new demand, and extend the product life cycle.

Competitors have no differentiation, so use differentiation to compete with them; competitors have adopted differentiation, and you can consider adopting differentiation or centralization based on further segmentation.

Entering a strong competitor, causing product sales and market share to decline

Customers’ consumption concepts and preferences change

Products are gradually entering a period of decline

premise

benefit

Product portfolio width (product categories), length (product items), depth and relevance

type

single brand name

Each product has a different brand name

private label

cost oriented pricing

demand-based pricing

Competition Oriented Pricing

psychological pricing strategies

Product portfolio pricing strategy

Discounts and discount strategies

Geographical Spread Strategy

penetration pricing

skimming pricing

Satisfied with pricing strategy

exclusive distribution

selective distribution

intensive distribution

P192 [Table 3-6] Advantages, disadvantages, scope of application

advertising promotion

Business promotion

public relations

personal selling

push strategy

pull strategy

push-pull strategy

market conditions

Internal production and operation conditions of the enterprise

financial conditions

Differences in work goals among various departments of the enterprise

Completely homemade

Self-made in the assembly stage, that is, "outsourcing and self-made"

Many varieties, small batches

High volume, low cost

Efficient supply chain - common products, low cost

Agile supply chain - personalized demand products

Manufacturer's inventory plus direct shipping

Manufacturer's inventory, direct shipping and in-transit consolidation

Distributor inventory plus carrier delivery

Distributor inventory added to door payment

Manufacturer or distributor inventory plus customer pickup

Retailer inventory plus customer pickup

Offensive strategy to increase production capacity based on expectations

A relatively conservative strategy, increasing production capacity only after full capacity or overproduction.

A relatively stable strategy, a small increase in production capacity to respond to changes in market demand

Order→Resource→Production

Resources→Order→Production

Resources→Production→Order

Strong relationships between companies and suppliers

Confidentiality of corporate information

Increase the purchase quantity to generate economies of scale and enjoy price concessions

Deeper supplier relationships provide access to high-quality supplies

Enhanced bargaining power of suppliers

Supply disruption risk

stable supply

Gain more knowledge and skills

The bargaining power of enterprises is enhanced

The relationship between enterprises and suppliers is not stable and the level of mutual trust is low.

It is not conducive to generating economies of scale and cannot enjoy price concessions.

It is not conducive for enterprises to obtain supplies with continuously improved quality and performance.

The technical content of the supplies is relatively low or the production technology is relatively mature.

Supplies are not important in the production and sale of the product

No after-sales service required

The supplier’s market is relatively mature

Large number of suppliers

Competition is fierce

Products face rapidly changing market opportunities and flexible customer needs.

The supply of supplies is highly adaptable

Some supplies have higher technical content

Supplies play an important role in the production and operation of products

Enterprises have relatively large demand for supplies

The production technology of the supplies is mature and highly substitutable.

Suppliers have strong production capabilities and the ability to achieve economies of scale

Internal relocation of personnel: promotion, transfer, demotion, etc.

Targeted and specialized training for existing personnel

Carry out personnel replacement: cleaning and replenishment

Expand business scale or develop new growth points

Permanent layoffs or layoffs of employees

Encourage employees to retire early

Recruitment freeze

Shorten employee working hours, implement job sharing or reduce wages, etc.

Training redundant employees

Hire people from outside

Improve the efficiency of existing employees

extended working hours

Reduce employee turnover rate

outsourcing of certain operations

channel

Companies with a cost leadership strategy tend to pay more attention to employee recruitment costs when recruiting employees, especially general and auxiliary employees, who are highly substitutable and often use external recruitment and human resources outsourcing. During selection, resumes, interviews and paper-and-pencil tests are commonly used to reduce costs.

Companies with a differentiation strategy may adopt a more rigorous strategy;

Enterprises with a centralized strategy place more emphasis on the speed of recruitment and use cognitive ability tests and personality tests to quickly identify employees who are qualified for the job.

On the job training

Off-the-job training

level

standard

New employee training

On-the-job employee training

On the job training

Off-the-job training

impartial training

transformative training

knowledge training

skills training

attitudinal training

Employees’ performance target system (including performance goals, indicators and standards) and performance appraisal cycle during the appraisal cycle;

In order to achieve the ultimate goal, the work that employees should do and the measures they should take during the performance appraisal cycle;

Planning and guidance for performance monitoring, performance appraisal and performance feedback phases.

Key Performance Indicator Method (KPI)

Balanced Scorecard (BSC)

management by objectives

basic salary

variable pay

indirect compensation

external fairness

internal fairness

individual fairness

internal financing

Equity Financing (Equity Financing)

debt financing

Asset Sales Financing

Difficulties faced by debt financing

Difficulties faced by dividend payments

Capital asset pricing model (CAPM) estimates the cost of equity capital

Risk-free rate to estimate cost of equity capital

long term debt cost of capital

Weighted Average Cost of Capital (WACC)

The need to retain profits for future use

Legal requirements for distribution of profits

Dividend constraints in debt contracts

financial leverage of a business

The level of liquidity of the business

The need to repay debt soon

The signaling effect of dividends to shareholders and the overall financial market

fixed dividend policy

Fixed dividend payout rate policy

zero dividend policy

residual dividend policy

Introduction period

growth period

mature stage

Recession

The size of operating risks is determined by specific business strategies, and the size of financial risks is determined by capital structure. Together, they determine the total risk of the enterprise.

High operational risk and high financial risk

High operating risk and low financial risk

A combination of low operating risk and high financial risk

Low operating risk and low financial risk

To sum up, the reverse matching of operating risks and financial risks is a strategic principle in formulating capital structure. Different development stages of products or enterprises have different operating risks, and enterprises should adopt different financial strategies.

market value added

Factors affecting market value added

Sales growth rate, financing needs and value creation

Financial strategy options for value-added cash shortages

Financial strategy options for value-added cash surplus

Financial strategy options for impaired cash surplus

Financial strategy options for loss-impairing cash shortages

Traditional method (continuous method)

New method (discontinuous method)

International distribution channels are more complex than domestic ones and involve more intermediate links

International distribution channels generally cost more than domestic ones

Exporters sometimes have to sell to overseas markets through different distribution channels than the domestic market

International distribution channels often provide companies with overseas market information, including how well products are selling in the market and why.

Pricing is on the high side in order to obtain greater returns than the domestic market

Set prices that are close to the revenue levels in overseas markets and domestic markets

The price is low in the short term, even if the income is low or even losses are incurred

As long as profits can be increased after offsetting variable costs, the price should be set at a price that can sell products in excess of domestic market demand.

advantage

defect

motivation

advantage

shortcoming

Product production is broken down into multiple processes

Production takes place in two or more countries

At least one country uses the imported product to produce and exports products that use the imported product

Has core advantages

Has non-core advantages

Also called a bureaucratic value chain. When the production specifications of the product are not easy to code (that is, it is not easy to summarize and organize), the product structure is very complex, and there is a lack of highly competitive suppliers, the division of labor model that leading companies are most likely to adopt is through foreign direct investment, mergers and acquisitions, or the establishment of new suitable suppliers. business and set up product manufacturing centers within the company. In a bureaucratic value chain, leading companies must effectively coordinate and integrate the complex production activities and transactions of subsidiaries and branches. Leading companies are often required to build "headquarters functions" such as human resources, finance and operations management to manage their businesses.

If product specification coding is easy, product structure is simple, and leading companies have the ability to obtain services from or serve completely independent companies scattered in various countries (regions), a market-type division of labor model will emerge. This division of labor model is suitable for standardized products, and leading companies only need simple coordination capabilities to complete transactions.

When the complexity of product specifications and structures is high, in order to reduce the transaction complexity that is unavoidable in the internal division of labor model, leading companies will seek to "lock in" some suppliers with weak core capabilities, thus creating a captive division of labor. model. In this model, leading companies provide clear, documented instructions to suppliers and provide technical support when necessary. Suppliers also need to be under the clear control of leading companies in order to produce products that meet complex specifications. In this division of labor model, the cost for suppliers to switch to other types of value chains or other leading companies is very high and they choose to stay in the existing value chain, that is, they are "captured." Leading companies take control.

Emerged from the growing ability to encode specifications for complex products. When the product structure has modular characteristics, it can be standardized, thereby reducing the difficulty of information encoding, and suppliers also have the ability to supply. The connections between codified knowledge provide buyers with the advantages of speed, flexibility, and low cost of investment. However, the flow of information between enterprises is much higher than normal market transactions. The modular division of labor model can minimize the coordination costs of the global value chain and facilitate the selection and replacement of suppliers. This management model is widely used in the electronics industry. The combination of very powerful first-tier suppliers, contract manufacturers and standardization of product specifications means that leading companies are able to obtain customized products without having to engage in complex transactions with suppliers.

If product specifications are difficult to code, transactions are complex and suppliers have strong capabilities, a related division of labor model will emerge. Since buyers and sellers must transfer knowledge that is difficult to codify, and more competitive suppliers can provide competitive auxiliary functions to leading companies, interdependence may arise between the two, and both parties may be punished for breach of contract. The mechanism is also easy to work. Complex and difficult-to-describe information exchange is often achieved through high-frequency face-to-face communication or highly clear controls, which makes the cost of switching to other types of value chains or other enterprises very high.

Improve production technology and enhance production organization and management efficiency

Improve product design and enhance product competitiveness

Occupy higher value-added links in the value chain

Upgrading by entering a value chain with higher technical or capital barriers or gaining a higher status to improve profitability and competitiveness

(1) Focus on customers who like domestic products and ignore those customers who advocate international brands. (2) Frequently adjust products and services to meet the special or even unique needs of customers. (3) Strengthen the construction and management of distribution networks to alleviate the competitive pressure of foreign competitors.

When facing challenges from multinational competitors, you should pay attention to: (1) Don’t try to win all customers. (2) Don’t blindly imitate the strategies of multinational competitors.

Not only can it increase corporate income, but it can also promote economies of scale and gain valuable international business experience.

When extending local advantages overseas, you should pay attention to looking for markets that are similar to your home market in terms of consumer preferences, geographical relationships, distribution channels or government regulations to make the most effective use of your own resources. For example, expatriates are more likely to accept products produced in their own country.

(1) Establish joint ventures and cooperative enterprises with multinational competitors. (2) Sell the business to a multinational competitor. (3) Redefine its core business and avoid direct competition with multinational competitors. (4) Focus on market segments based on its own local advantages and shift its business focus to certain links in the value chain. (5) Produce products that are complementary to those of multinational competitors, or transform them into products that suit local tastes. The "dodger" strategy is probably the most difficult of the four strategies to implement because it requires major surgery.

(1) Don’t stick to cost competition, but measure your own strength against the leading companies in the industry. (2) Find a market that is clearly positioned and easy to defend. (3) Find a suitable breakthrough in a globalized industry. (4) Learn to obtain resources from developed countries to overcome their own lack of skills and capital.