different categories of strategies

8/6/2019 Different Categories of Strategies

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By

Dr. Ketki Bhatti


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Organisation competes on the basis of cost.

E.g. Production andOperations: Primary

Functions. HR, Procurement and Administration:

Secondary Functions.

E.g. Reliance.

Economies of scale. Cost of key resources.

Outsourcing.

First mover advantage.


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Above average returns (E.g.Maruti cars).

High sales volume-Production facility nearby.

Large volumes make it difficult for the entryof substitute products-More preferable.

No. of buyers is large-Maruti is able to

negotiate lower sales margin with itsdistributors.

Barriers to entry- Small car market.


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Overdependence on products and services

which give economies of scale makes the org.

vulnerable unless it is being to build aportfolio of a number of products/services.

Change in consumer preferences.

Leads to aggressive price cutting bycompetitors-E.g.Bajaj.


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More features

Improved services

Low maintenance Greater convenience

Better product performance

Ease of use Superior quality


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Better R & D-Maruti Suzuki

Better Production andOperations activities

Improved Logistics Unique technology and Patents


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Higher price can be charged because of customerperceives that higher value is delivered to him.E.g.Mercedes car is one of the most expensive

cars. Lower threat from the substitutes. E.g.Toyota car

is not threatened by other cars such as Ford,Chevrolet, Maruti etc in India.

Higher profits can be achieved by followingdifferentiation strategy.

Brand name and a loyal customer base is createdwhich helps org.in the long term.


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Org. may spend resources to createdifferentiation but customer may not be

willing to pay for it. Differentiation features may be copied by

competitors quickly and offered at lowerprices to customers.

Excessive concentration on differentiationfeatures may actually increase costs. Differentiation does not guarantee a

competitive advantage.


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E.g. TATA-DOCOMO: Billing per second as

against billing per minute.

Move by clever advertising strategy-Perceived.

Both Cost Leadership and DifferentiationStrategy are addressed to the entire market.


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Virgin Mobile-Young professionals.

MTNL offers low prices in Mumbai for

internet users. Focus can be achieved by:

Servicing isolated geographic areas

Satisfying customer needs by special

financing

Tailoring product/service to unique customer

expectations.


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Higher profits are possible by serving

customers ignored by others.

Org. can gain experience which may be usefullater on to enter the overall market.

E.g.Nirma detergent started serving very fewlocalities in Gujarat at low prices.

Threat from competitors is low because theorg.has understood the niche market better.


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Many competitors who are serving the

market as a whole may decide to serve the

well-defined narrow market of focus players. Consumer preference may shift to the

products/services being marketed in thebroader market.

Narrow (niche) markets may disappearbecause of technological advances.


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As per David and Pearce-Not much grouping:

1. Intensive Strategies2. Integration Strategies3. Diversification Strategies4. Methods to Achieve Strategies

(David)/Grand Strategies (Pearce)


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Intensive Strategies:

Market penetration (Concentrated Growth)

Market development Product development

Integration Strategies:

Vertical integration (Backward, Forward)

Horizontal integration.


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Diversification Strategies:

Concentrative diversification

Horizontal diversification Conglomerate diversification

Methods to Achieve Strategies (David)/Graded Strategies (Pearce):

Mergers and Acquisitions

JointVentures and Strategic Alliances

Consortia.


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Consolidation Strategies:

Turnaround

Retrenchment Strategies: Divesture

Bankruptcy

Liquidation

Innovation as a strategy


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Same single product and same market,

follows same processes/ technology and

enjoys profitable growth. In creasing rate of usage of present customer.

Attempting to get customers of competitors.

Marketing to customers who are presently

not using the product and services.

E.g. Steel companies (TATA Steel), Talwalkars

gymnasium, Toyota, IBM etc.


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Least expensive option.

Energies and resources of entire organisation

are concentrated towards one strategicdirection.

Organisation can concentrate on serving themarket it does not cater to.

Important skills/ competencies develop


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All seniors have direct and in depth

knowledge of product, processes and

markets. Experience accumulated over a number of

years is likely to lead to higher productivity,quality and lower costs.


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The market may become saturated, and/orunattractive because of Competition.

Product may face obsolence due toemergence of technology (Comp v/s

Typewriter).

Substitute products may come in the market(E.g. Digital CameraV/s Conventional

Camera).


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Org. may fail to detect new trends (Scooters

are not preferred in rural markets as much as

motorbikes). The most attractive feature of this grand

strategy is that only a limited amount ofadditional resources than present may be

required.


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Extension into market segments not

currently exploited- E.g. Talwalkar Gym is

extending its services to Senior Citizensegment which is a new market.

Developing new uses for presentproduct/service to attract new market-Plastic

for Engineering Industry.


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Geographic extension: Gujarat Ambuja

Cement which at one time was primarily

serving MP and Gujarat decided to exploit thelucrative market in Mumbai.


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Major modifications or additions to the

products.

Developing new product features- For. E.g.Toothpaste COLGATE with salt.

Developing quality variations-Godrej No.1Soap.

Developing additional and sizes e.g. Suzukiscars.


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Integration Strategies:

Capture or control over suppliers, distributors

and or Competitors. Org. mainly remains in the same primary

industry.

Vertical integration- Bachward and Forward.

Horizontal Integration

Concentric Integration.


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Backward Integration-

To ensure a continuous and guaranteedsupply of inputs which meets the specified

quality standards.

Reliance: Textile-Chemical-Petroleum.


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Forward Integration-

Taking control of forwarding, distribution,

servicing etc. Raw Materials and Components-

Manufacturing Co. Automobile-Distributor.

Bombay Dyeing Co.-Owned retail shops to

market its textile products.

Backward and Forward Integration-

E.g.Suzlon Energy.


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Orgs. use vertical integration as grand

strategy for various reasons:

Backward integration strategy are many andsmall at competitive prices (thus improves

profitability).

Quality of inputs and on time delivery is

assured thus protecting the main operation.

In-house activities may also provide

competitive advantag.


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For Manager the span of responsibilities andnecessary competence to handle those

increases his responsibility.

Unless the outputs of various stages of theproduction market system are matched, there

is possibility of heavy inventories and

attendant problems, which may affect cashflow.

Org. is still in the same business.Hence,

vulnerable to economic cycles of the business

and at hi her investments.


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The controlling org. an the new org operate

at similar stage on the industry-

E.g. Price Water House-An accounting andconsulting major acquired Cooper and

Lybrand- also an accounting and consultingfirm and formed PWC(Price Water House-

Cooper).

The logic of such strategy is to eliminate/

reduce competition.

different categories of strategies

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