MBA course: Marketing and

Business Strategy

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Navdeep Yadav
Product Manager
(MBA IBS Hyderabad)

3. Business and Expansion strategy

 3. Business and Expansion strategy

1. What is business strategy?

2.Porter five competitive forces
3. Horizontal Business Expansion
4.Vertical Business Expansion
5.P&G Supply Chain
 Business strategy
Master plan that the management of a company implements to secure a competitive
position in the market
Efficient operations, customers Satisfaction and desired business goal

Business lines, Expansion and growth, takeovers and

Corporate mergers, diversification, integration, new areas for
Level investment and divestment and so forth.

It is developed by the general managers, who convert

Business Level mission and vision into concrete strategies. It is like a
blueprint of the entire business.
Developed by the first line managers or supervisors,
Functional to solve functional areas like marketing, production,
Level human resource, research and development etc.
 Functional Level Strategy
Functional Level Strategy can be defined as the day to day strategy which is
formulated to assist in the execution of corporate and business level strategies

Marketing Strategy
Marketing Mix, SWOT Analysis, Concentrated
marketing

Financial Strategy Raising capital, Creating budgets, allocation of

funds and maintaining unit economics

Human Resource Strategy

Recruitment, development, motivation, retention of
employees, and industrial relations.

Production Strategy
Enhance the quality, increase the quantity and
reduce the overall cost of production.
Research and Development
Strategy
Innovating and developing new products
 Porter's 5 Forces
Analyzes five competitive forces that shape every industry and helps
determine an industry's weaknesses and strengths.

Threats of
new
Entrance
These forces determines the profit
potential and attractiveness of an
industry.
Bargaining Bargaining
power of power of
Supplier customer If there is
Porter's 5 • Huge Competition than No Return
Forces
• Mild Competition than Good Return

Competitiv Threat of
e rivalry Substitute
Porter's 5 Forces in Airline and E-commerce

Threats of new Entrance

• E-commerce - shopify 30m
• Airline – $70M Airbus 320

Competitive rivalry Bargaining power of

• e-commerce - Intense rivalry
• Aviation – Medium to low
customer
• e-commerce - Predatory pricing
competition
• Airplane – Five option to choose

Bargaining power of Threat of Substitute

Supplier • e-commerce – High threat of
• e-commerce low High substitute
bargaining power • Aviation – less threat due to
• Aviation have high BP - less options available
Boeing and airbus
 Porter Five force in real life
Threats of new Entrance
• Entry barriers
• Economy of Scale
• Brand Loyalty
• Capital Requirement
• Government policies

Competitive rivalry Bargaining power of buyer

• Number of competitors • Number of customers
• Diversity of competitors • Price sensitive market
• Industry Growth • Buyers ability to substitute
• Quality difference • Switching cost
• Brand loyalty

Bargaining power of Threat of Substitute

Supplier • Number of substitute
• Number and size of suppliers • Buyers propensity to
• Uniqueness of each supplier substitute
• Focal company’s ability to • Switching cost
substitute
Porter Five force for Smartphone industry
Threats of new Entrance
• Entry barriers
• Economy of Scale
• Brand Loyalty
• Capital Requirement
• Government policies

Competitive rivalry Bargaining power of buyer

• Number of competitors • Number of customers
• Diversity of competitors • Price sensitive market
• Industry Growth • Buyers ability to substitute
• Quality difference • Switching cost
• Brand loyalty

Bargaining power of Threat of Substitute

Supplier • Number of substitute
• Number and size of suppliers • Buyers propensity to
• Uniqueness of each supplier substitute
• Focal company’s ability to • Switching cost
substitute
 Horizontal business Expansion
Horizontal integration refers to the process of increasing market shares or expanding by
integrating at the same level of the supply chain, and within the same industry.

A B A
Retailer Merger Acquisition

Wholesaler

Distributor

Assemble Horizontal integration

Manufacturer A B C

Supplier Raw Material Semi Finished

Manufacturer Finished Goods
Goods
Commodity
Producer
 Horizontal business Expansion

A B A
Merger Acquisition

Retailer

Wholesaler

Distributor
Horizontal integration

Assemble A B C

Manufacturer Apple Samsung LG TV

Smartphone Laptop

Supplier

Commodity
Producer
 Vertical business Expansion
Vertical integration refers to an expansion strategy where one company takes
control over one or more stages in the production or distribution of a product.

Retailer Forward

Wholesaler
Used by Fortune 500 companies
Distributor • For quality control purposes
• For just-in-time production purposes
Assemble
• For cost control
• Leverage the capital to expand
Manufacturer

Supplier

Commodity
Producer
Backward
P&G Leveraging Supply Chain 4.0

A Product in the supply chain

of unilever can reach faster
than a human being.

To Improve performance, and

customer satisfaction

• The Internet of Things

• Advanced robotics
• Analytics and Big data
 How economies of scale works

Variable cost benefits Long Run average cost is down

Horizontal vs Vertical business expansion
Horizontal vs Vertical business expansion
Integrated expansion Strategy

Vertical
expansion

Horizontal expansion
 Samsung case study on Expansion

Nearly 90% OLED display are produced by Samsung

Almost all flash memory are made by Samsung.

Samsung components > Samsung device

Samsung financial statement
Economies of scale vs Economies of scope

Economies of scale Economies of scope

Samsung lower per unit cost strategy

• Producing more scale
• Producing a range of related products scope
 How economies of scale works

Variable cost benefits Long Run average cost is down

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