chap1 type of strategy

8/10/2019 Chap1 Type of Strategy

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Introduction- StrategyWithout a strategy the organization is like a

ship without a rudder, going around in circles.

- Joel Ross and Michael Kami


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What is Strategy? Strategy means deciding where you want to

go and how to get there.

Strategy is a scientific and structuredresponse to leverage uncertainty.

Strategy can be defined as interpretative

planning, includes the determination andevaluation of alternative paths to an already

established mission and eventually choosing

the right alternatives.


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Strategy v/s Operational Efficiency Strategy

Operational Efficiency

Operational Efficiency becomes a necessary

condition, but is very far away from being

sufficient condition.


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What is Strategy? Strategy is managementsgameplanto

Attract and please customers

Stake out a market position

Conduct operations

Compete successfully

Achieve organizational objectives


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Levels of Strategy Corporate level Strategy

Structural and financial terms

Business Unit level Strategy

howcustomers needs can best be met

Profit-Centre concept

Functional level strategy

what is the role of particular department in

delivering the business unit strategy


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Levels of Strategy E.g. CPL

Corporate level Strategy: Giving quality drugs

at affordable price. Business Unit level Strategy:

Cadila pharma: Differentiation Strategy

Herbal (SBU) : Cost leadership Strategy

Functional level strategy:

R&D: providing drugs for life style related

diseases


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Strategy Alternatives Stability strategy

Growth/Expansion strategy

(1) Intensification strategyMarket penetration strategy

Market Development strategy

Product Development strategy(2) Diversification strategy

Horizontal Diversification

Vertical Diversification


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Strategy AlternativesHorizontal Diversification:

Concentric diversification

Conglomerate diversification

Vertical Diversification:

Forward Integration

Backward Integration


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Strategy Alternatives CombinationStrategy

M&A

J/VTakeover

Strategic Alliances

Retrenchment StrategyDivestment

Turnaround

Liquidation

Bankru tc


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Stability Strategy Stability: The firms stays with its current

business, products & markets and satisfied

with incremental growth.No fresh investment

safety and status quo-oriented strategy

e.g. Branded Cigarettes, Bata, Barbie dolls

Routes: Attracting non-consumers, customers of

competitors, increasing consumption.


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Market penetration strategy

Market penetration strategy: Existing products

in existing markets.

Route: Increasing capacityIncreasing MS thru penetrating further

e.g. Amway


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Product Development strategy

Product Development strategy: New products in

existing markets

Routs: changing the features of existing productchanging the quality of the product

developing new models

e.g. Air commandAir conditioner company

Singer Fashion Maker(decorative stitching

machine)

Close up, Maruti Swift


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Market Development Strategy

Market Development Strategy: Existing

product in new markets

Routes: Expanding the market territoryFinding new uses of the product

Creating new segment

e.g. Voltas Air conditioner( room AC- car

AC- railway coach, bus)

Gillete Turbo


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Intensification strategy

Nirmas Intensification strategy

Product development strategy

Nirma LimeLiril

Nirma BeautyLux

Nirma RoseBreeze

Market penetration strategy

To cater upper class segment investment of Rs. 380

cr.+ doubled the capacity and launched Nirma

super


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Horizontal Diversification

Horizontal Diversification : moving into more

than one industry; the new business usually

somehow relates to the existing one, althougha few conglomerates instead pursue a strategy

of unrelated diversification.


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Diversification Strategy

Concentric diversification(related

diversification) : When company produces a

new product which is related to its presentproduct OR acquires such a company

producing similar product

E.g. Usha Internationaljuicer, Mixer, Grinder, Iron, Toasters,

Geysers, room coolers, Vacuum cleaners,

Washing Machines, Exhaust fans


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Diversification Strategy

Conglomerate diversification(unrelated

diversification) : No connection between E

and N products. E.g. Reliance: Oil and gas, power generation,

capital market, Telecom, Textiles,

Entertainment

Godrej: Steel cupboards, Soaps, Furniture,

personal care.


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Vertical Integration

Vertical Integration :integrating business

along with your value chain both upstream

and downstream, so that one efficiently feedsthe other.


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Vertically Integrated

Diversification

Vertically Integrated Diversification: The firm

remains vertically within the same process

sequence. The firm dose not jump outside thevertically linked product- process chain.

Types: (1) Forward integration

(2) Backward integratione.g. Spinning- weaving- dyeingbleaching-

printing- folding


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Combination Strategy

Merger: Denotes the fusion of two or more

firms into one company

Acquisition: it is a transfer thru which onefirm buys up a part or whole of the assets of

another firm by paying compensation.

Takeover: It involves purchase of a portion orwhole of the equity of another firm resulting

in the transfer of effective control.


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Combination Strategy

Joint Venture: Two or more firms join

together, share the stake and float the

business. Strategic Alliance: Two or more firms arrive

at an agreement on certain issue of mutual

interest, no new firm is created, only workingagreements are agreed upon.


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Basically, a joint venture is when two or more companies make an

agreement to do business in one specific area. They can share the

insurance, shipping and liability costs and produce higher profits. It is

usually a short lived collaboration.

A merger is when two companies come together to form a singlecompany. They combine their respective resources. Sometimes there are

losses of jobs, but not all. Those decisions are specified in the merger

contract well in advance of the deal.

An acquisition is when one company is buying and taking over another. If

it is friendly, often the seller can stipulate who keeps their job and soforth. If it is unfriendly, the company taking over gets to make all the final

decisions. They cannot take away benefits already earned.

chap1 type of strategy

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