Enhanced Market Power
1. Integration: The company started producing new products and services of its own by investing in R&D centres across the U. S. Through forward integration it gained ownership over distribution and retailers, thus moving towards customers while Polaroid remained focused on key functional areas. (Strategic Planning: Formulation Of Corporate Strategy 1999) 2. Diversification: Diversification through the horizontal route involved change in business definition in terms of customer functions, customer groups or alternative technology.
It was done to minimize the risk by spreading over several businesses (printers, printer cartridges, handy cams, industrial and professional cameras) to capitalize organization strength and minimize weaknesses, to minimize threats, to avoid current instability in profit & sales and to facilitate higher utilization of resources. It sold the health group business to Onex Healthcare Holdings, for $2. 55 billion in 2007. Diversification strategies applied to the spreading of market risks: adding products to the existing lines of business and is viewed as analogous to an investor to “spread the risks.
” The figure below explains the logic of the competitive advantage. (Competitive Strategy: Techniques for analyzing industries and competitors1980) Enhanced Market Power- Increased Kodak’s market share when Polaroid was in the same business. Not always market share does not
Profit Stability: New business reduced the variations in corporate profits by expanding the company’s lines of business. This occurred as the core business was dependent on sales that were seasonal or cyclical. Diversification strategy was followed to avoid instability in sales and profits. (Collaborate with your Competitors and Win, 1989) Improve Financial Performance: To exploit diversification opportunities because of liquid resources far in excess of the total expansion needs or the intention of tiding over its financial problems. (Strategic Management: Competitiveness and globalization, 2001).
Growth: Diversification is basically a way to grow. Unlike organic growth, which is slow, an acquisition or merger (inorganic) can deliver the results rather quickly since resources, skills, other factors essential for faster growth are immediately available. Fig. 4 takes into account the risk accounts of Polaroid involving modernization and adaptation of technology at suitable time Counter Competitive Threats: Such a strategic move is to counter the competitive threats by reducing the intensity of competition. Organizations are driven at times towards external diversification through merger by competitive pressures.
(Strategic Planning: Formulation Of Corporate Strategy 1999) Access to Latest Technology: Organizations have diversified their operations geographically to exploit opportunities in different regions and countries and also to take advantage of the incentives being offered by the various governments to attract investment. (David E. Project Feasibility Analysis. A guide to profitable New Venture, 1977) Joint Ventures: In joint ventures, two or more companies form a temporary partnership (consortium).
Companies opt for joint venture for synergistic advantages to share risk, to diversify and expand, to bring distinctive competences, to manage political and cultural difficulty, to take technological advantage and to explore unexplored market. (Project Management In Engineering Services and Development, 1990) Strategic Alliance: When two or more companies unite to pursue a set agreed upon goals but remain independent it is known as strategic alliance. The firms share the benefits of the alliance and control the performance of assigned tasks. The pooling of resources, investment and risks occur for mutual gain. In 2005 Kodak and Motorola, Inc. entered into a marketing alliance in the field of mobile imaging for a period of 10 years with a provision of gaining royalty.