TYPES OF STRATERGIES

SUBMITTED BYABHINA.H.KS4 MBA

Strategy

A method or plan chosen to bring about adesired future, such as achievement ofa goal or solution to a problem.

The art and science of planning andmarshalling resources for their mostefficient and effective use.

The term is derived from the Greekword stratēgia, (art of troop leader; officeof general, command, generalship) forgeneralship or leading an army.

DEFINITION

"Strategy is the direction and scope of anorganization over the long-term: whichachieves advantage for the organizationthrough its configuration of resourceswithin a challenging environment, tomeet the needs of markets and to fulfillstakeholder expectations".

-Johnson and Scholes(Exploring Corporate Strategy)

TYPES OF STRATEGIES

STRATEGIES

INTEGRATION

INTENSIVE

DEFENSIVE

DIVERSIFICATION

I. INTEGRATION

Integration means combining activitiesrelated to present activities of a firm.

Integration is an expansion strategy as anexpansion strategy commits itself toadjacent businesses.

It is an important element in the processof improving organizational performancebecause it facilitates the continuousalignment of business strategies within theever changing business environment.

Types

IntegrationVertical

Forward

BackwardHorizontal

A. Vertical Integration Strategy

It is the process in which several steps in theproduction/ distribution of a product or serviceare controlled by a single company/ entity, inorder to increase that company’s/ entity’s powerin the market place.

E.g. Steel Company owned mills where the steelwas manufactured, mines where the iron orewas extracted, coal mines that supplied the coal,ships and railroads that transported thematerial, etc.

Advantages Disadvantages

Reduce transportation costImprove supply chain coordinationIncrease entry barriers to potential competitorsCapture upstream & downstream profits

Monopolization of marketsPotentially higher cost due to the lack ofsuppliers competitionIncrease bureaucratic costsDecreased flexibility

vertical

Forward

Backward

Forward and Backwardi. Forward A business takes over/ mergers with a

business at the next stage of production E.g. table maker joins with a furniture shop

ii. Backward A business takes over/ mergers with a

business at the previous stage of production E.g. a table maker joins with a tree cutter

B. Horizontal Integration Strategy

It occurs when there is a merger betweentwo firms in the same industry operatingat the same stage of production.

E.g.two table maker join togetherA radio station that also owns a

newspaper and magazine.

Advantages Disadvantages

Economics of scale: Selling more of the same product in different parts of the worldIncreased Market PowerReduction in cost

Increased work loadIncreased

ResponsibilitiesCreating a monopoly

II. Intensive Strategy The strategies require intensive efforts if a firm’s

competitive position with existing products is toimprove.

Intensive

Market penetration

Market development

Product development

A. Market Penetration

A market penetration strategy seeks toincrease market share for presentproducts or services in present marketsthrough greater marketing efforts.

Market penetration includes increasingthe number of salespersons, increasingadvertising expenditures, offeringextensive sales promotion items, orincreasing publicity efforts

B. Market Development

It deals with adding products indifferent geographic areas.

Introducing present products orservices into new geographicareas

E.g. wal-mart stores (60)

C. Product Development

It deals with increasing the salesas well as revenues by enhancingthe quality of existing products.

It is strategy that seeks increasedsales by improving or modifyingpresent products or services.

III. Defensive strategy

A management approach designed toreduce the risk of loss.

Mainly used by market leaders in SM. Goal- hold onto your position as the

market leader & fighting offcompetitors who try to take awayyour market share.

types

Defensive

Retrenchment

DivestitureLiquidation

A. Retrenchment

A strategy used by corporations to reducethe diversity or the overall size of theoperations of the company.

Typically the strategy involveswithdrawing from certain markets or thediscontinuation of the selling certainproducts or services in order to makebeneficial turnaround.

B. Divestiture

Selling a division or part of anorganization.

Often is used to raise capital for furtherstrategic acquisitions or investments.

C. Liquidation Involves selling a company, in its

entirety or in parts, for the value of itsassets.

IV. Diversification Strategy

It seeks to increase profitabilitythrough greater sales volumeobtained from products & newmarkets.

The main purpose of these strategiesare to allow the company to enterlines of business that are differentfrom current operations.

Types

Diversification

Related Unrelated

A. Related Diversification ( Concentric)

A process that takes place when a businessexpands its activities into product line sthat are similar to those it currentlyothers.

E.g. a manufacturer of computers mightbegin making calculators as a form ofrelated diversification of its existingbusiness.

B. Unrelated Diversification (Conglomerate)

A term which refers to themanufacturer of diverse productswhich have no relation to each other.

E.g. a toy manufacturer that is alsomanufacturing industrial wiring forthe construction industry.

References

Strategic management & business policy, Azha Kazmi, McGrraw- hill company

Strategic Management, Neil Ritson