Section 1
The barriers of entry are present before an organization decides to enter into an industry and sell
products. They differ in difficulty for different industries in our case the barriers of entry are the
following.
Economies of Scale:
Coca cola and Pepsi both produce beverages at a large international scale creating a very low
cost per product. This poses a significant barrier of entry to possible and existing competitors.
Product Differentiation:
Product differentiation refers to the uniqueness of the products in the industry. Pepsi and coca
cola have very similar products which lowers this barrier of entry to possible and existing
competitors
Capital Requirement:
The capital requirements are the financial barrier that exists when a firm decides to entry an
industry. Since the players in this industry are large international company the capital
requirement barrier is significant to possible and existing competitors.
Switching Cost:
Switching Costs is the barrier that is posed by the cost required of customers to switch the
product used. Since Pepsi and coca cola sell low cost beverages switching costs would pose a
low barrier to possible and existing competitors.
Access to distribution Channel:
Access to distribution Channel could pose a significant barrier to entry in the case of coca cola
and Pepsi as the large companies dominate the existing distribution Channel and have several
contracts with fast food restaurants and retailers
Cost Disadvantages independent of Scale
Cost Disadvantages independent of Scale poses a significant barrier to entry as coca cola and
Pepsi have both mastered the production of their goods and have premium access to the best
production techniques and methods.
Government Policy
Government Policy poses a low barrier of entry in the case of Pepsi and coca cola as government
intervention in the methods of taxation or banning of products is usually less extensive when it
comes to producing and selling beverages in comparison to other industries
Section 2 Part 1
It is crucial to redefine and develop values during a merger as the organization's involved need to
create synergy between each other which is greatly depending on whether the merger will be
profitable or a complete failure. For these reasons conducting a merger requires scrutinizing
every part involved in the merger.
Organizations that overlook crucial aspects of the merger that can create synergy such as
different functional department’s integration or different production processes and focus solely
on the current expanded market share often lead to failed acquisitions.
Since Compaq and HP are organizations with different value chains and different production
capacities. Ignoring this discrepancy could pose a significant threat on the success of the merger.
Section 2 Part 2
The three basic growth strategies are:
Mergers and Acquisitions
Acquiring a different organization in order to create synergy between the operations of both
firms and grow. Mergers and acquisitions are a staple strategy in growth as it can create a
combined effort to develop new products through the integration of core competencies of two
different firms
Internal Development
Internal development is another growth strategy that comparatively requires less money and risk
on the organization. This involves improving existing products and the success or failure of this
growth strategy is not contingent on the success or failure of the entire organization.
Strategic Partnership.
This growth strategy can be similar to mergers and acquisition as it involves creating synergy in
the production of two organizations. However, the difference is both organizations would be
completely independent and work together for a set period of time
Section 3
In this age, the societal demand is moving towards more ethical methods of production. This and
shift in demand poses a difficulty in the production of goods for companies. The internet creates
a method of information transition that has not been experienced before. Due to the internet,
organization’s in china and East Asian countries that have exploited cheap labor that does not
abide by ethical standards has been exposed. For example, Nike has recently issued an apology
due to methods of unethical production.
Section 4
Example: Dell
Forward integration
Forward integration is a type of vertical integration along the value chain of an organization. In
forward integration, an organization would attempt to move downstream in the value chain by
cutting out of the steps involved in the product reaching the customer after being manufactured.
An example of forward integration in the company Dell, after manufacturing their laptops the
next step in the value chain is selling them to wholesalers and retailers to reach their customer.
Dell could open its stores and cut out the middle man to distribute its computers and cut costs.
B. Backward integration
Backward integration is a type of vertical integration along the value chain of an organization. In
backward integration, an organization would attempt to move upstream in the value chain by
cutting out the steps involved in supplying the material needed for their product to be
manufactured.
An example of backward integration in the company Dell would be if they attempted to create
their processors. Dell currently purchases its processes from Intel. Thus, if dell creates and
supplies their processors they can cut costs and backwards integrate into becoming their own
suppliers.
C. Horizontal integration
Horizontal integration is when an organization attempts to grow and expand its market share
through the acquisition of similar organizations in their industry such as close competitors.
An example of horizontal integration would be if dell attempted to buy HP. In this case, Dell
would grow in market share through this acquisition as they would acquire the customers and
value chain of HP
D. Related diversification
Related diversification is when an organization attempts to grow by penetrating new industries
that can complement the existing industry they are currently competing in.
An example of related diversification would be if Dell attempted to manufacture phones. The
new industry would be closely related to the current industry they are competing in which is
creating laptops. They would be able to create synergy between their two products by using
similar technology and fast methods of transferring data.
E. Unrelated diversification
Unrelated diversification is when an organization attempts to grow by penetrating new industries
that are completely different from the industry they are currently competing in.
An example of unrelated diversification would be if Dell attempted to manufacture and sell a
clothing line. The value chain of the clothing line would be completely different and unrelated to
their existing one but could be beneficial as a method of diversifying revenue streams.
F. Market development
Market development is when an organization attempts to grow by targeting different segments in
its existing market.
An example of market development would be if dell attempted to advertise their laptops to
businessmen that require light and fast laptops. They would grow by selling the same laptops
they manufacture to a different segment in their market
H. Product development
Product Development is when an organization attempts to grow by creating new products to sell
in their existing market
An example of product development would be Dell creating powerful gaming laptops. The initial
buyers targeted by Dell where businessmen. However, they attempted to grow by remaining in
the market of selling laptops but supplying customers with different needs in the same market.
I. Product-Market exploitation
Product-Market exploitation is when an organization attempts to increase efficiency and
production by researching their existing products and markets.
An example of Product-Market exploitation would be if dell researches their current laptop lines
and create a software update that makes their laptops faster, or finding a bottleneck in production
that can reduce costs. Another example would be dell researching and refining their target
market and the demographic they sell laptops to.