Companies are bound to make strategies and implement strategies to increase production and boost sales. For a company to implement some of the strategies, they ought to be managed well because some of these strategies incur some costs to implement. This essay discusses the two most applied strategies by most firms to increase production and sales i.e. forward integration strategy and Michael Porter’s generic strategies.
Forward Integration Strategy
Forward integration involves gaining ownership or control over distributors or retailers. With forward integration, manufacturers are able to acquire ownership or control over their distributors and suppliers. Forward integration becomes an excellent strategy to pursue when the firm realizes that their distributors are becoming too expensive, they might opt to carry the operations alone. When the firm realizes that, the distributors are becoming unreliable, and not delivering, according to set deadlines, or not meeting the firm’s needs. A firm might opt for forward integration due unavailability of quality distributors who are able to supply quality goods. When the firm has an excellent capital base, and human resource needed to run its distribution, and retail operations, then forward integration becomes a better option. A firm may decide to take control of the distribution, to stabilize the production and supply hence increase in production and profitability. A typical example is the coca-cola company, who take control and distribution of the coke brand to the final consumer.
Michael Porter’s Generic Strategies
Porters Strategies enable companies to acquire competitive advantage over other firms, by applying three strategies, which porter referred to as generic strategies (Strategic Management, 2009).
Cost leadership, Differentiation, Focus
Costs Leadership. This strategy is mostly applied when some consumers are so sensitive about the cost of the organization’s product. The organization might opt to produce standardized product at a lower cost to cater for that class of consumers.
Differentiation. A group of consumers is price insensitive. Most organizations produce unique products, and services, to take care of these consumers. They tend to be inclined to the brand rather than the pricing.
A firm may choose to concentrate on selected target markets. This strategy is sometimes called a niche strategy, because a firm focuses all its marketing efforts to a small area, or segment. The firm meets the needs of consumers in that target market. This strategy is mostly applied by small firms, who like to compete with other companies, so they target areas where competition is weakest to earn high returns on their investment (Porter, 1998).