Bridgestone Corporation is one of the biggest auto and trucks parts manufacturing company which is situated in Tokyo, Japan. It was first established in 1931 by the late Shojiro Ishibash, the company is not only popular in auto parts only, it is also popular in yen, Tires manufacturing units. They are global manufacturer of tires for big vehicles like trucks and other automobiles. The current Chairman and CEO of this company is Masaaki Tasva. From its annual report 2017, we found that the total revenue was 3.8 trillion yen, operating income is 463 billion yen and net income was 288.55 billion yen and had a total assert of 4.126 trillion yen. The company has 15 thousand plus employees (bridgestone, 2017). They are well known brand in market.
As per my observation and analysis. Bridgestone corporation is vertically integrated when an industry consolidates and become matures, most of firms in that industry would have reached the limits of growth using vertical and horizontal integration growth strategy (Zhang, 2013). Under the vertical growth strategy, two firms producing complementary product and one acquire or merge and form a big firm or form a complete firm, such as acquire between lather producing firm and shoe manufacturing company (Grant, 2016). These two companies have equal value and importance and the most important things is no any competition among these. So why the business apply vertical integration strategy because the major area of operation of this company is tire, tubes and auto parts. And Auto parts and Tires or Tires and tubes are complementary product for vehicle, bus, trucks, and airplanes and motorbikes (Board, 2018). So that they have one of the biggest sales network chain in all over the worlds. They have thousands of dealers and they have direct sales strategy that means they sales their product through their authorize dealers. And they are well for their service. They provide best service (Technical service) to their customer on time, they have strong technical team and they always ready for delivering the quality service so they are rich in all types of resources. In vertical integration business firm, specific strategy help firm to greatly reduce costs and increase effectiveness by lowering the transportation cost (Tracey, 2005).
The benefits and liabilities of Bridgestone’s vertical strategy are
Benefits:
Transportation cost are reduced
Overcoming entry barrier
Barriers to entry are the difficulties new firms encounter when trying to enter the particular market. The established firms may have economics of scale. In Addition, good relationship with customers often create product loyalty that also makes the new entrants difficult. In such a situation, new entrants may acquire an established company to be more effective than entering the market as a competitors offering a product that is unfamiliar to current buyers. The acquiring firm gains immediate access to the market.
Increase market Power
Achieving greater market power is a primary reason for acquisitions. Market power increases when a firm is able to sell its goods or services above competitive levels or when the costs of its primary or supporting activities are lower than those of its competitors. Market power is determined by the size of firm and its resources and capabilities to complete in the marketplace. In this business has really good market power because it is one of the world largest manufacturing units of Auto parts and Tires.
Increase Diversification
Acquisition are also used to diversify firms. It is difficult for companies to develop products that differ from their current lines for markets in which they lack experience. Thus, it is relatively uncommon for a firm to develop new products internally to diversify its product lines. Acquisition strategies can be used to support both the unrelated and related diversification Strategies.
They achieved Sustainable competitive market strategies
Developing a new products internally and successfully introducing them into the marketplace often requires significant investment and other resources. Hence, internal product development may be a high - risk activity. Acquisition provide more predictable returns as well as faster market entry.
Liabilities:
Capacity building issue
They are best technical service provider and those things only insure that when they have a motivated and skillful human resource so they should provide different workshop training and other activities to increase the capacity of their human resource.
Responsibility over Environment
It is a tires and auto parts manufacturing company and the raw material of tires is plastics, rubber and carbon so at the time of production we should be aware that we handle it very carefully and responsibly without affecting our nature.
There is managing and coordination difficulty in value chain layers.
Board, T. W. C. A. (2018). Jacobs, Thomas Wayne v. Bridgestone Americas Tire Operations, LLC.
Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Tracey, M. (2005). The impact of supply‐chain management capabilities on business performance. Supply Chain Management: An International Journal, 10 (6).
Zhang, D. (2013). The Revival of Vertical Integration: Strategic Choice and Performance. Journal of Management and Strategy, 4 (1), 1-14
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Bridgestone Corporation is one of the biggest auto and trucks parts manufacturing company which is situated in Tokyo, Japan. It was first established in 1931 by the late Shojiro Ishibash, the company is not only popular in auto parts only, it is also popular in yen, Tires manufacturing units. They are global manufacturer of tires for big vehicles like trucks and other automobiles. The current Chairman and CEO of this company is Masaaki Tasva. From its annual report 2017, we found that the total revenue was 3.8 trillion yen, operating income is 463 billion yen and net income was 288.55 billion yen and had a total assert of 4.126 trillion yen. The company has 15 thousand plus employees (bridgestone, 2017). They are well known brand in market.
As per my observation and analysis. Bridgestone corporation is vertically integrated when an industry consolidates and become matures, most of firms in that industry would have reached the limits of growth using vertical and horizontal integration growth strategy (Zhang, 2013). Under the vertical growth strategy, two firms producing complementary product and one acquire or merge and form a big firm or form a complete firm, such as acquire between lather producing firm and shoe manufacturing company (Grant, 2016). These two companies have equal value and importance and the most important things is no any competition among these. So why the business apply vertical integration strategy because the major area of operation of this company is tire, tubes and auto parts. And Auto parts and Tires or Tires and tubes are complementary product for vehicle, bus, trucks, and airplanes and motorbikes (Board, 2018). So that they have one of the biggest sales network chain in all over the worlds. They have thousands of dealers and they have direct sales strategy that means they sales their product through their authorize dealers. And they are well for their service. They provide best service (Technical service) to their customer on time, they have strong technical team and they always ready for delivering the quality service so they are rich in all types of resources. In vertical integration business firm, specific strategy help firm to greatly reduce costs and increase effectiveness by lowering the transportation cost (Tracey, 2005).
The benefits and liabilities of Bridgestone’s vertical strategy are
Benefits:
Transportation cost are reduced
Overcoming entry barrier
Barriers to entry are the difficulties new firms encounter when trying to enter the particular market. The established firms may have economics of scale. In Addition, good relationship with customers often create product loyalty that also makes the new entrants difficult. In such a situation, new entrants may acquire an established company to be more effective than entering the market as a competitors offering a product that is unfamiliar to current buyers. The acquiring firm gains immediate access to the market.
Increase market Power
Achieving greater market power is a primary reason for acquisitions. Market power increases when a firm is able to sell its goods or services above competitive levels or when the costs of its primary or supporting activities are lower than those of its competitors. Market power is determined by the size of firm and its resources and capabilities to complete in the marketplace. In this business has really good market power because it is one of the world largest manufacturing units of Auto parts and Tires.
Increase Diversification
Acquisition are also used to diversify firms. It is difficult for companies to develop products that differ from their current lines for markets in which they lack experience. Thus, it is relatively uncommon for a firm to develop new products internally to diversify its product lines. Acquisition strategies can be used to support both the unrelated and related diversification Strategies.
They achieved Sustainable competitive market strategies
Developing a new products internally and successfully introducing them into the marketplace often requires significant investment and other resources. Hence, internal product development may be a high - risk activity. Acquisition provide more predictable returns as well as faster market entry.
Liabilities:
Capacity building issue
They are best technical service provider and those things only insure that when they have a motivated and skillful human resource so they should provide different workshop training and other activities to increase the capacity of their human resource.
Responsibility over Environment
It is a tires and auto parts manufacturing company and the raw material of tires is plastics, rubber and carbon so at the time of production we should be aware that we handle it very carefully and responsibly without affecting our nature.
There is managing and coordination difficulty in value chain layers.
There may arise more legal complication
References
(n.d.). Retrieved from bridgestone: bridgestone.co.jp/corporate/histor...
Board, T. W. C. A. (2018). Jacobs, Thomas Wayne v. Bridgestone Americas Tire Operations, LLC.
Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Tracey, M. (2005). The impact of supply‐chain management capabilities on business performance. Supply Chain Management: An International Journal, 10 (6).
Zhang, D. (2013). The Revival of Vertical Integration: Strategic Choice and Performance. Journal of Management and Strategy, 4 (1), 1-14