Guidelines for Forward/ Integration –
1) Present distributors are expensive, unreliable, or
incapable of meeting firm’s needs
2) Availability of quality distributors is limited
3) When firm competes in an industry that is expected to
grow markedly
4) Organization has both capital and human resources
needed to manage new business of distribution
5) Advantages of stable production are high
6) Present distributors have high profit margins
Guidelines for Backward Integration –
1)When present suppliers are expensive, unreliable, or incapable
of meeting needs
2)Number of suppliers is small and number of competitors large
3)High growth in industry sector
4)Firm has both capital and human resources to manage new
business
5)Advantages of stable prices are important
6)Present supplies have high profit margins
7)Need to quickly acquire a needed resource.
Guidelines for Horizontal Integration:
1-Firm can gain monopolistic characteristics without being
challenged by federal government
2-Competes in growing industry
3-Increased economies of scale provide major competitive
advantages
4-Firm has both capital and human resources to manage new
business
5-Faltering due to lack of managerial expertise or need for particular
resources
Guidelines for Market Penetration –
1) Current markets not saturated
2) Usage rate of present customers can be increased significantly
3) Market shares of competitors declining while total industry sales
increasing
4) Correlation between dollar sales and dollar marketing
expenditures historically has been high
5) Increased economies of scale provide major competitive
advantages
Guidelines for Market Development –
1) New channels of distribution that are reliable, inexpensive, and good
quality
2) Firm is very successful at what it does
3) Untapped or unsaturated markets
4) Capital and human resources necessary to manage expanded
operations
5) Excess production capacity
6) Basic industry rapidly becoming global
Guidelines for Product Development –
1) Products in maturity stage of lifecycle
2) Competes in industry characterizes by rapid technological
developments
3) Major competitors offer better-quality products at
comparable prices
4) Compete in high-growth industry
5) Strong research and development capabilities
Guidelines for Innovation:
1- Firm is facing pressure to stay ahead of its competition and has to
shorten the life cycle of existing products.
2-Rapid change and fierce competition
3-Major competitors come up with a new product with multiple
functions at competitive prices
4- High growth economy where customer demand for quality and
design
5- Well establish R&D capabilities
6-Seek to be global
Guidelines for Related Diversification –
§ Competes in no-or slow-growth industry
§ Adding new&related products increases sales of current products
§ Current products are indecline stage of the product
life cycle
§ Strong management team
Guidelines for unrelated diversification –
§ Revenues from current products/services would increase significantly
by adding the new unrelated products
§ Highly competitive and/or no-growth industry
§ Present distribution channels can be used to market new products to
current customers
§ New products have counter cyclical sales patterns compared to
existing products
Retrenchment –
1)Firm has failed to meet its objectives and goals consistently over time but has
distinctive competencies
2)Firm is one of the weaker competitors
3) Inefficiency, low profitability, poor employee morale, and pressure from
stockholders to improve performance.
4)When an organization's strategic managers have failed
5)Very quick growth to large organization where a major internal reorganization is
needed