Compare integration and intensive strategies. Provide 2 examples for each.

Integration and intensive strategies are essential approaches for companies aiming to grow
and compete effectively. Integration strategies involve increasing control over external
elements of a company’s environment, such as suppliers, distributors, or competitors. These
are typically used when external relationships affect performance, and the firm seeks better
control and efficiency.

Forward integration occurs when a company gains control over distribution or retail
channels. It is implemented by acquiring or establishing downstream entities like
warehouses or delivery services. For example, Amazon expanded into logistics and
last-mile delivery to reduce reliance on third-party couriers. The benefit is increased control
over delivery time, improved customer service, and higher margins. This strategy is best
used when intermediaries are costly or underperforming. It is typically pursued in industries
like retail, e-commerce, or manufacturing, where customer experience and delivery are
crucial.

Backward integration involves taking control of suppliers. Implementation is done through

acquiring raw material sources or producing internally. Starbucks, for instance, bought a
coffee farm to ensure consistent bean quality and stable supply. Benefits include better cost
control, improved quality, and reduced reliance on volatile supply markets. It is best used
when input prices are unstable or suppliers are few and powerful. Common industries
include food & beverage, automotive, and energy, where supply security is strategic.

Horizontal integration is when a company acquires competitors to expand its market share.
This is implemented via mergers and acquisitions. An example is Facebook (Meta)
acquiring Instagram to consolidate social media dominance. Benefits include reduced
competition, access to new customers, and cost savings through economies of scale. This
strategy is best used in saturated or fragmented markets where consolidating can lead to
leadership. It’s common in industries like telecommunications, technology, and media.

On the other hand, intensive strategies focus on growth using a company’s current
products and capabilities. These strategies are implemented internally and aim to enhance
customer reach and product impact.

Market penetration involves selling more existing products in current markets.

Implementation may include advertising, price reductions, or loyalty programs. For example,
Under Armour used athlete endorsements like Andy Murray to grow its customer base.
Benefits include increased sales, stronger brand loyalty, and higher market share. It is best
used when the market is not saturated and competitors are weak. This is popular in
consumer goods, fashion, and FMCG industries.

Market development refers to entering new markets with existing products. Companies
implement this by identifying untapped customer segments or expanding geographically.
Gap entering the Chinese market is a clear example. The benefits include diversification and
new revenue streams. It is best used when domestic markets are mature or saturated. This
strategy is common in retail, apparel, and fast food sectors expanding into global markets.

Product development means creating new or improved products for existing markets.
Implementation requires R&D, innovation, and customer feedback. For example, Amazon
developed its own brand of baby wipes to meet customer demand. The benefits are staying
relevant, meeting evolving needs, and increasing sales from current customers. This is best
used when customer preferences shift or product life cycles are short. It’s common in
industries like tech, healthcare, and consumer electronics.
In conclusion, integration strategies are externally focused and offer control over industry
elements, while intensive strategies are internally focused and aim to maximize growth from
current operations. Choosing the right strategy depends on company goals, industry
conditions, and resource availability. When applied strategically, each of these methods
helps firms grow, stay competitive, and better serve their markets.

CHAPTER 5: STRATEGIES IN ACTION (30–40

MARKS)
Chapter 5 explains various strategic options available to a firm based on its goals,
resources, and external conditions.

A. What Are Strategies?

Strategies are specific actions that organizations use to achieve long-term objectives. They
guide decision-making in areas like marketing, operations, R&D, and finance.

1. Integration Strategies
Integration involves gaining control over parts of the supply chain – either forward (towards
customers), backward (towards suppliers), or horizontally (acquiring competitors).

1.1 Forward Integration

● Definition: Gaining control over distribution or retail.
● How: Open own retail outlets, acquire distributor.
● When/Why: High distributor costs, customer feedback issues.
● Example: Apple owning its own stores instead of relying on resellers.
● Benefit: More profit margin, direct control of customer experience.

1.2 Backward Integration

● Definition: Gaining control over suppliers.
● How: Set up your own supply/manufacturing facility.
● When/Why: Supplier issues (high cost, low quality).
● Example: Starbucks purchasing coffee farms.
● Benefit: Cost savings, quality control, secure supply chain.

1.3 Horizontal Integration

● Definition: Acquiring competitors to increase market share.
● How: Merger/acquisition of rivals.
● When/Why: Reduce competition, access new markets.
● Example: Facebook acquiring Instagram.
● Benefit: Economies of scale, stronger market position.
 2. Intensive Strategies
Used to grow the business through current or new products/markets.

2.1 Market Penetration

● Definition: Increase market share for existing products in existing markets.
● How: Promotions, discounts, digital marketing.
● When/Why: Market not yet saturated.
● Example: Grab offering promo codes to gain users.
● Benefit: Quick revenue growth, brand awareness.

2.2 Market Development

● Definition: Enter new geographic markets with existing products.
● How: Export, franchise, joint venture.
● When/Why: Existing market is mature.
● Example: Tealive expanding to Australia.
● Benefit: New customers, international brand strength.

2.3 Product Development

● Definition: Launch new or improved products in current markets.
● How: R&D, tech investment, customer feedback.
● When/Why: Meet evolving customer needs.
● Example: McDonald's launching Ayam Goreng Spicy.
● Benefit: Keeps brand fresh, beats competition.

3. Diversification Strategies
Entering into new industries/products, either related or unrelated.

3.1 Related Diversification

● Definition: New products related to current business.
● How: Leverage brand, existing capabilities.
● When/Why: Synergy opportunity or declining main industry.
● Example: Facebook acquiring WhatsApp.
● Benefit: Shared resources, stronger portfolio.

3.2 Unrelated Diversification

● Definition: New products/businesses unrelated to current operations.
● How: Acquisition, investment.
● When/Why: Reduce overall risk, new profit areas.
● Example: AirAsia launching Tune Hotels.
● Benefit: Risk spreading, new income stream.
 4. Defensive Strategies
Used when the firm is in trouble and needs to recover or exit.

4.1 Retrenchment
● Definition: Cutting costs/assets to stop losses.
● How: Layoffs, close branches, cut budgets.
● When/Why: Falling profits or market share.
● Example: Staples closed 250 stores in the US.
● Benefit: Stops financial bleeding, short-term survival.

4.2 Divestiture
● Definition: Selling a business unit or division.
● How: Sell to another company/investor.
● When/Why: Focus on core business.
● Example: Tesco divested operations in Malaysia.
● Benefit: Raise cash, reduce complexity.

4.3 Liquidation
● Definition: Selling off all assets and shutting down.
● How: Asset sales, pay off creditors.
● When/Why: No chance of turnaround.
● Example: Trump Taj Mahal casino liquidation.
● Benefit: Exit strategy, salvage value.

5. Other Strategies
Joint Venture / Partnering
● Definition: Two firms combine resources for a specific purpose.
● Example: Proton + Geely = new China market access.
● Benefit: Shared risk, new markets.

Merger / Acquisition
● Definition: Combine or purchase firms to expand.
● Example: Disney acquired Marvel.
● Benefit: Quick growth, market dominance.

Outsourcing
● Definition: Hiring third-party to handle business tasks.
● Example: TNB outsourcing IT support.
● Benefit: Focus on core business, cost saving.
 CHAPTER 6: STRATEGY ANALYSIS AND CHOICE
(Also called: Matching & Decision Stage)

What Is Strategy Analysis and Choice?

● It is the process of evaluating and selecting the best possible strategic option based
on internal and external assessments.
● This chapter is about matching the company’s strengths/opportunities with the
right strategy, using tools (matrices) to help with the decision.

A. STRATEGY FORMULATION FRAMEWORK

It involves 3 stages:

Stage Tools Used

Stage 1 – Input IFE, EFE, CPM (summarize internal &

external factors)

Stage 2 – Matching SPACE, Grand Strategy Matrix, QSPM,

etc.

Stage 3 – Decision QSPM (choosing the best strategy with

numbers)

1. SPACE Matrix (Strategic Position & Action

Evaluation)
Definition:
A visual tool that helps decide a company’s strategic position based on 4 dimensions.

Axes (Ratings from +6 to –6):

 Axis Type Meaning

FP Internal (Financial Position) Strong or weak financial

strength

CP Internal (Competitive Market share, brand

Position) strength

IP External (Industry Position) Industry attractiveness

ES External (Environmental Economic, political risk

Stability)

Quadrants & Suggested Strategy:

Quadrant Strategic Implication

Aggressive (top right) Grow, expand, product/market development

Conservative (top left) Market penetration, slow steady moves

Competitive (bottom right) Cost leadership, improve efficiency

Defensive (bottom left) Retrenchment, divest, exit market

Diagram:
Draw 4 quadrants. Plot average scores from the four dimensions and identify your strategy
zone.

Example:
A profitable retail firm in a fast-growing market → falls into Aggressive quadrant → should
expand stores or products.
 2. Grand Strategy Matrix
Definition:
Helps firms choose appropriate strategies based on market growth and competitive
position.

Axes:

Axis Description

Y-axis Market Growth (Slow → Fast)

X-axis Competitive Position (Weak → Strong)

Quadrants and Strategies:

Quadrant Situation Suggested Strategies

I Strong comp. + Fast market Market dev, product dev,

growth integration

II Weak comp. + Fast market Improve position, internal

growth fixes

III Weak comp. + Slow market Retrenchment, divestiture,

growth liquidation

IV Strong comp. + Slow market Diversification, joint

growth ventures, new industries

Example:
An oil & gas company in a low-growth industry but strong financially → Quadrant IV →
should diversify into renewables.
 Diagram:
Draw 4 quadrants with Y = Market Growth, X = Competitive Position. Label strategy
suggestions inside each box.

3. QSPM – Quantitative Strategic Planning Matrix

Definition:
A decision-making tool used to evaluate and compare alternative strategies based on
internal/external factors.

How to Do It (Steps):
1. List key factors from IFE & EFE.
2. Assign weights (e.g., 0.05 to 0.20) – total = 1.00.
3. For each strategy, assign Attractiveness Score (AS):
○ 1 = not attractive
○ 4 = highly attractive
4. Multiply weight × AS = TAS (Total Attractiveness Score)
5. Choose the strategy with highest total score.

Table Example:

Key Factor Weight Strategy A TAS Strategy B TAS

(AS) (AS)

Strong 0.2 4 0.8 3 0.6

Brand

Skilled 0.1 3 0.3 2 0.2

Workforce

TOTAL 1.0 3.2 2.7

Choose Strategy A if total score is higher.

Example:
A company choosing between market development or product development.

● QSPM shows market dev = score 3.6

● Product dev = score 2.8
→ Choose market development.

Benefits:
● Objective and data-based.
● Forces detailed comparison.
● Avoids bias.

CHAPTER 9: STRATEGY EVALUATION (30 MARKS)

Strategy Evaluation Process (Use Diagram!)
1. Review Bases of Strategy
○ Are assumptions still valid? (e.g., customer needs, competitors?)
2. Measure Performance
○ Compare actual vs. expected.
○ KPIs: ROI, EPS, market share.
3. Take Corrective Actions
○ Adjust strategy if goals not met.

Diagram: “Strategy Evaluation Framework” – 3 steps with arrows.

 Rumelt’s 4 Criteria:
● Consistency – No conflict in strategy.
● Consonance – Fit with environment.
● Feasibility – Resources available.
● Advantage – Creates competitive edge.

CHAPTER 10: ENVIRONMENT, ETHICS, CSR (10–20

MARKS)
 1. Business Ethics
Definition

Business ethics are the principles, values, and standards that guide behavior in the world of
business. It focuses on what is right or wrong in a business context and ensures integrity
and fairness in decision-making.

How to Implement

1. Code of Ethics – A written guideline for employees to follow (e.g., anti-corruption,

fair trade).
2. Ethics Training – Educating staff on how to handle ethical dilemmas at work.
3. Whistleblower Mechanism – A safe way for employees to report unethical practices
without fear of retaliation.
4. Leadership Example – Ethical behavior must be modelled by top management
(tone from the top).

Example

● PETRONAS ensuring full transparency in oil contract bidding and rejecting bribes
during tenders.
● Unilever enforcing a zero-tolerance bribery policy across global operations.

Benefits

● Builds reputation and trust.

● Reduces legal risks (avoid lawsuits or penalties).
● Improves employee morale and retention.

When/Why?

● Always ongoing. Especially important when:

○ Entering international markets.
○ Facing public or investor scrutiny.
○ Operating in high-risk industries (e.g., oil, banking, construction).

2. Corporate Social Responsibility (CSR)

Definition

CSR refers to a company’s voluntary actions that go beyond legal requirements to contribute
positively to society and the environment. It's about being a responsible "corporate citizen."

How to Implement

1. Community Engagement – Donations, volunteering, scholarships, etc.

2. Social Programs – Supporting education, health, and poverty reduction.
3. Stakeholder Involvement – Listening to and acting on stakeholder expectations
(e.g., NGOs, investors, community).
 Example

● PETRONAS sponsors education through its Universiti Teknologi PETRONAS (UTP)

and supports carbon offset initiatives.
● Nestlé invests in sustainable agriculture to support farmers and reduce poverty in
supply chains.

Benefits

● Strong brand loyalty.

● Better stakeholder relationships.
● Easier access to capital (investors prefer ethical firms).

When/Why?

● When seeking long-term sustainability and public approval.

● To meet ESG (Environmental, Social & Governance) expectations from investors.

3. Environmental Sustainability
Definition

Environmental sustainability involves protecting the environment by managing natural

resources responsibly and reducing pollution to ensure future generations can meet their
needs.

How to Implement

1. Green Technologies – Solar, wind energy, electric vehicles.

2. ISO 14001 Certification – Implementing Environmental Management Systems
(EMS).
3. Carbon Management – Reduce emissions through carbon capture (CCS), clean
energy, waste reduction.

Example

● Shell uses Carbon Capture and Storage (CCS) to reduce CO₂ from oil operations.
● TNB shifting to renewable energy as part of their decarbonization roadmap.

Benefits

● Compliance with environmental laws.

● Competitive advantage as a “green brand.”
● Cost savings from energy efficiency.

When/Why?

● Rising consumer awareness.

● Pressure from government regulations (e.g., carbon tax).
● Part of climate action and UN Sustainable Development Goals (SDGs).
 Suggested Diagram: Triple Responsibility Overlap
Draw 3 overlapping circles (Venn Diagram) labeled:

● Business Ethics
● CSR
● Environmental Sustainability

In the middle, label it:

"Sustainable & Responsible Company"

This shows how a company must balance moral behavior, social value, and
environmental care.