Strategic Growth of Incorporated
Incorporated is a North American company that produces and process multi-filament polyester and nylon textured yarns and related raw materials. The Incorporated has different brands such as the Sorbtek, A.M.Y., Mynx, UV, Reflexx, MicroVista and Satura. In order to increase revenues and sales the company must have different strategies for growth in revenues and sales.
Revenues, according to investorwords (2006) is the summation of money accepted by the company for the delivered products and services during a certain period of time, revenue also includes net sales, exchange of assets, interest and increase in the equity of the owners.[1] On the other hand, Sales is the income that the company receives when the goods and services are sold.[2] (2006)
There are a number of strategies that Unifi Asia can use in order to boost its revenues particularly in Asia after having a Joint Venture with YCFC. The first strategy is Horizontal Integration. According to , (2006) it is a strategy is which the company sells a kind of product in a number of markets by creating subsidiary companies.[3] In addition 12manage (2006) defined it as obtaining activities that deals with the same products or substitute’s for a company’s goods, it also obtains the competitors and completing the entire range of products. [4] 12 manage also mentioned the benefits of horizontal integration, it benefits economies of scale, economies of scope, defense against substitutes, reduces competition, it fulfills the expectations of customers, and raises leverage on suppliers and customers. If it has benefits, it also has limitations; 12mange also enumerated the disadvantages, the synergies can be more imaginary, the substitute market is mostly different and it may lead to monopoly that may raise anti-trust issues.
In using Horizontal Integration the Unifi Inc. created different brands of yarns targeting various products such as the military, automotive, hosiery, industrial, medical, apparels and home furnishing. The company created different brands that cater to the needs of different products. It boosted the company’s revenues and sales because it has subsidiary companies that produce different types of yarns and polyester that are specific to various products.
In order to increase Unifi’s sales in Asia, the company must create another subsidiary company that produces silk yarns that are used for most of the costumes and clothes in the Asian region. Aside from creating another type of yarn, the company must venture in creating fabrics for different apparels. In this case the corporation will acquire a new product, in which it can add new revenues because the companies that will buy Unifi’s yarns can also obtain the fabrics with the same quality, since the company delivers excellent quality yarns and polyester.
Aside from Horizontal Integration, Unifi can also use Vertical integration in increasing its sales overseas. Vertical Integration is a business strategy in which all stages of production from obtaining the raw materials until selling the product are dominated by one corporation. [5] (2006)
Vertical Integration has also its gains and benefits according to (1988), the gains of the company are lower costs of transaction, there is a synchronized supply and demand on the chain of products, uncertainty will be lessen and the investment will be higher, there is capacity to monopolize the market. The benefit in the society is there will be better investment growth opportunities. On the other hand, there are losses in vertical integration for the society and the corporation, in the corporation there will be a higher cost when switching to other suppliers and buyers, and in the society, there will be monopolization of the market and a more rigid organizational structure. [6]
In raising the revenues and sales of Unifi in Asia, the corporation must set-up or absorbs firms in order to control the acquisition of raw materials, production and marketing in the Asian region. The corporation must produce the raw materials for yarns and polyester, manufacture the yarns and market and sell it under the company’s own brand name.
Joint Venture is another form of strategy for a corporation’s growth in revenue and sales, it is a contractual business involving two or more corporations, and the companies are engaged in a business enterprise without incorporation.[7] (2006 )
Last June 10, 2005 the company, Unifi Asia, entered a Joint Venture Contract with Sinopec Yizheng Chemical Fibre Company Ltd. (YCFC) The Joint Venture, intended to manufacture, process and market polyester filament yarn in the facilities of Yizheng Chemical Fiber Company in Yizheng, Jiangsu Province, China, the ownership was 50% for Sinopec and 50% for Unifi Asia. The Joint Venture of the two companies was named Yihua Unifi Fibre Industry Company Limited. By having a Joint Venture with Sinopec Yizheng Chemical Fibre Company Limited, Unifi Asia the company projected an increase in revenues and sales overseas particularly in Asia. [8](2006)
By having a Joint Venture (JV) with YCFC, the YCFC and its subsidiaries will be responsible for the production and sales of polyester chips and fiber, production of raw materials purified terepathatic acid. The joint venture with the YCFC will have gains in the Inc. in terms of its revenues and sales, especially in the Asian Region, because of the growing market in China the JV will speed up the access of Inc. in the rapid growing Chinese Market, the company will also have access to a greater number of consumers and will be able to take advantage of the huge size of the consumers. The company will not have a hard time marketing the products to the Chinese consumers since they have a Joint Venture with a Chinese corporation that will be responsible for all the tasks from production of raw materials until marketing of the product.
Mergers and Acquisitions (M&A), merger is the affiliation of two companies in order to form a new company while acquisition is buying one company by another without having a new name.[9](2006)
There are two types of acquisitions, the share purchases in which the corporation will buy the shares of the targeted company from the shareholders, and the asset purchases; the company buys the assets directly to the targeted company.[10](2006)
The Inc. had a number of mergers and acquisitions, in the year of 1991 Unifi obtained the operations for Macfields and Vintage Yarns. In 1993 Unifi merged again with companies Pioneer Yarn Mills, Pioneer Spinning, Edenton Cotton Mills and Pioneer Cotton Mills, and Unifi created a subsidiary named Unifi Spun Yarns, Inc. In the year 1997 the Unifi acquired again a company, the Spanco Yarns. In the year 1999, the company again acquired a corporation and this time it is a Brazilian producer of textured polyester, the Fairway Poliester LTDA, and in 2000 it acquired Intex Yarns Limited in Manchester England. Unifi renamed it Unifi Dyed Yarns Limited. [11]
The Inc. had already acquired many companies from the United States, Europe and South America. In order to increase its revenue particularly in the Asian region another step is the M&A, the company has done this before, and it would not be a difficult task if they would apply it to the Asian Market. The company has already made Joint Ventures in several companies around Asia, such as China, Thailand, Taiwan and South Korea. Acquiring the shares and even and merging with companies will definitely boost the company’s sales and generate more revenues.
Inc. can use any of the three types of merging as enumerated by in order to expand their company; they can use the Horizontal merger, in which Unifi will merge with an Asian yarn company. In vertical merger, Unifi will merge with a company that acquires the raw materials or manufactures the yarns and polyesters. And in conglomerate merger, Unifi will merge with another company, this time in a different industry such as apparels and furniture.
In Market Penetration, it is defined by as a term that was generated to allow businesses to determine the percentage of all the probable sales that were represented by the actual sales.[12] In addition it is also a market strategy that is used by a corporation in order to raise the sales of a product or service in an existing market by having an aggressive marketing strategy. [13]
In order to penetrate the Asian market, the Inc. must employ more profound and assertive measures in marketing the yarns and polyester to different companies as well as the consumers. The different marketing strategies that Unifi can use is the cutting of prices of the yarns and polyester, companies that utilizes the products of Unifi such as apparels, want cheaper materials by reducing the prices of Unifi’s products the corporation will be able to win in the bidding. Consumers buys cheaper products by having the prices of the products reduced the company will gain more customers. Another marketing strategy is to increase the corporation’s advertisement, Unifi must be visible to the consumers’ eyes in order for the product to gain more customers, advertisement through prints, radio, television and billboards must be made so that the product will be more popular and in return gain more customers. Unifi must have better shelf positions in leading groceries around the Asian region, by placing the products in a wider and more perceptible area the consumers will feel the presence of the products, the easier the access of a product to the consumers, the easier it is to sell. And finally the distribution of the product, Unifi must distribute the company’s product in a vast area, not just a particular place in the region. The Unifi must distribute their products not only in the Far East but it must include other Asian regions such as the ASEAN and South Asia.
In Market Development a manufacturer identifies and creates new markets for selling their products. The market development process delivers the growth of the business through new products for existing customers, existing products for new customers and new products for new customers.[14](2006)
In addition, Answers.com[15] (2006) enumerated the three general strategies in market development:
- Working within the demographic market to encourage new consumers- the Inc. must analyze the demographics of the Asian region, and see if the company can attract more buyers. Aside from the clothing companies that utilize the goods of Inc. the corporation must also encourage other sectors such as bookstores and craftshops.
- Look at the institutional market to know if the consumers can be increased- Inc. must always check the established to know which specific consumers can be targeted in order to increase the product buyers. Inc. must attract more non-buyers by developing new products and aggressive advertising campaigns.
- Attempting to develop markets in new geographical areas- the Inc. has already established markets in South America, United States and Europe and currently is developing new markets in the Far East and some parts of the ASEAN.
Moreover, Businessballs enumerated the market development process, (a) Establish market development aims and targets (b) Identify the target markets, sectors and niches (c) Assess the existing sales organization (d) Utilize a suitable prospect database (e) Develop the strategic propositions (f) Design the communication and method to acquire a query (g) Design the response and sales process (h) Design and provide the proper monitoring, measurement and reporting systems (i) Implement the sales development activity (j) Follow-up the activity and (k) Make changes and improvements.
Market Development is one step that Inc. must undertake so that new revenues will be generated by delivering the products to both existing and most especially new consumers. The company must also develop new products in order to provide the consumers more choices thus increasing the company’s sales, as well as, its customers.
Inc. has been in the business since 1969, the company has already experienced ups and downs on the business. The company has tried the different corporate strategies mentioned above. But the most appropriate strategy for Inc. to use in order to generate sales and revenues particularly in the Far East and South East Asian regions is through Mergers and Acquisitions. That particular strategy has been tried and tested by Inc. and so far it becomes more of an advantage for the corporation. As evidence during the company’s merge and acquisition with Macfield and Vintage Yarns their sales increases past billion. Inc. has done this again in parts of Europe and South America.
With the current trend of globalization, merging and acquiring other companies is the best strategy for any corporation such as Inc. The company will gain more in terms of sales and revenues if they acquire medium to large scale yarn companies in China and SE Asia, because these companies have the right connections, customers, and also ideas on the trend of the market since those companies are based in that particular area in which Inc. wants to target.
Merging with other yarn companies is also beneficial for Inc. because the corporation will not worry that much on introducing the product since the company or companies Inc. has already established customers, all they need is to enhance the products and have an aggressive marketing strategy. It will also lessen the company’s expenditures and time in establishing a factory, and hiring new employees. To sum it all up, merger and acquisition is the current trend for a lot of companies nowadays in expanding their market globally, this has already been done by Inc. for decades and according to the company’s history it is proven to be effective for generating sales and revenues.
Generating revenues and sales for a big company like Inc. requires number strategies, whether it would be a corporate strategy or business strategy. Penetrating a market especially if it’s overseas is a very risky business; it involves a lot of evaluation on the demographics, the needs of the consumers, the geographical area and many more. And because of the rapid growth in the economy of China many firms and corporations from the United States and elsewhere are establishing their businesses there. Companies are setting-up Joint Venture, just like in the case of YCFC and Inc. to boost the sales and revenues of the company, but aside from Joint Venture there are a lot of ways to raise the company’s sales such as market penetration, development and product innovation. For a company to be more successful overseas, the various strategies mentioned above must be incorporated. A company must know their targeted sectors in order to create products that are suitable for the needs of those particular consumers. A constant development and innovation of goods and services must be undertaken to cope up with the changes of the necessities of the customers. And a company must merge and acquire other companies in order to strengthen more the business and create more innovative and new products that consumers will purchase, that will lead to the increase in sales and revenues.
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