Intensive Strategies: MP, MD, PD are some time intensive
strategies because they require intensive effort if a firms competitive
position with existing product is to improve.
Market Penetration: It involves selling more products to the same
market by focusing intensely on existing markets with its present
products, increasing usage by existing customers and increasing
market share and restructures a mature market by driving out
competitors.
Example
• Mach 3 fare and lovely sache
Market Development: It involves selling the same products to new
markets by attracting new users to its existing products. Market
development can be geographic wise and demographic wise.
Example
• Gul Ahmed brought new product by the idea
Product Development: It involves selling new products to the
same markets by introducing newer products in existing markets.
E.g.: K & N has distribution all over Pakistan. Previous deal with
chicken now Kabab, Nuggets and now even necks of chicken for
customer.
Advantages Of Concentration Strategies
• Involves minimal organizational changes and is less
threatening
• Enables the firm to specialize by gaining the in-depth
knowledge of the businesses.
• Enables the firm to develop competitive advantage
• Decision-making can be made easily as there is a
high level of productivity
• Systems and processes within the firm become
familiar to the people in the organization.
Disadvantages Of Concentration Strategies
• It is dependent on one industry if there is any worse
condition in the industry the firm will be affected.
•
Factors such as product obsolescence, fickleness of
market, emergence of newer technologies are threat
to concentrated firm.
• Mangers may not be able to sustain interest and find
•
the work less challenging.
It may lead to cash flow problems
• Integration strategies are of two type’s vertical and
horizontal integration.
• Vertical Integration: when an organization starts
making new products that serve its own needs
vertical integration takes place. Vertical integration
could be of two types Back ward and forward
integration.
• Backward integration means moving back to the
source of raw materials while forward integration
moves the organization nearer to the ultimate
customer.
Generally when firms vertically integrate they do so in a complete
manner that is they move backward or forward decisively resulting
in a full integration but when a firm does not commit it fully it is
possible to have partial vertical integration strategies too. Two such
partial vertical integration strategies are ‘taper’ integration and
‘quasi’ integration. Taper integration requires firms to make a part
of their own requirements and to buy the rest from outsiders.
Through quasi integration strategies firm purchase most of their
requirements from other firms in which they have an ownership
stake.
• Horizontal Integration: when an organization takes
up the same type of products at the same level of
production or marketing process, it is said to follow a
strategy of horizontal integration. When a luggage
company takes over its rival luggage company, it is
horizontal integration. Horizontal integration strategy
may be frequently adopted with a view to expand
geographically by buying a competitors business, to
increase the market share or to benefit from
economics of scale.
• Backward Integration: Pakistan dependent on
India Brazile Australia and Iran for iron ore. Local
•
rate 15 Dollar international rate 70 Dollar.
K & N has established hatcheries for raw material
• Forward Integration: Gul Ahmed in addition to
production is becoming retailer itself. Philosophy is
to integrate new generation.
• Horizontal Integration: Dalda purchased Tullo.
• Diversification Strategies There are two categories,
concentric and conglomerate diversification.
• Concentric Diversification: when an organization
takes up an activity in such a manner that is related to
the existing business definition of one or more of
firms businesses, either in terms of customer groups,
customer’s functions or alternative technologies, it is
called concentric diversification. Concentric
diversification may be of three types.
• Marketing Related Concentric Diversification:
when a similar type of product is offered with a help
of unrelated technology for e.g., a company in the
sewing machine business diversifies in to kitchen
ware and household appliances, which are sold to
house wives through a chain of retails stores.
• Technology- Related Concentric Diversification:
when a new type of product or service is provided
with the help of related technology, for e.g., a leasing
firm offering hire purchase services to institutional
customers also starts consumer financing for the
purchase of durable sot individual customers.
• Marketing- Technology Related Concentric
Diversification: when a similar type of product is
provided with the help of related technology, for e.g.,
• Defensive Strategies
• Retrenchment Strategies
A retrenchment grand strategy is followed when an organization aims at a
contraction of its activities through substantial reduction or the elimination of the
scope of one or more of its businesses in terms of their respective customer
groups, customer functions, or alternative technologies either singly or jointly in
order to improve its overall performance. E.g: A corporate hospital decides to
focus only on special treatment and realize higher revenues by reducing its
commitment to general case which is less profitable.
Divestiture Strategies
A divestment strategy involves the sale or liquidation of a portion of business, or a
major division. Profit centre or SBU. Divestment is usually a part of rehabilitation
or restructuring plan and is adopted when a turnaround has been attempted but has
proved to be unsuccessful.
Reasons for Divestment
•The business that has been acquired proves to be a mismatch and cannot be
integrated within the company.
•Persistent negative cash flows from a particular business create financial
problems for the whole company, creating a need for the divestment of that
business.
•Severity of competition and the inability of a firm to cope with it may cause it to
divest.
•Technological up gradation is required if the business is to survive but where it
is not possible for the firm to invest in it. A preferable option would be to divest.
•A better alternative may be available for investment, causing a firm to divest a
part of its unprofitable business.
Example: Glaxose –D was Glaxo product but now with rafan. Company hold
doesn't remain on the and on the basis of understanding parent company could get
money straight away or in intervals.
Liquidation Strategies
A defensive strategy which is considered the most extreme and unattractive is the
liquidation strategy, which involves closing down a firm and selling its assets. It is
considered as the last resort because it leads to serious consequences such as loss
of employment for workers and other employees, termination of opportunities
where a firm could pursue any future activities and the stigma of failure E.G.
.
Royal Bank of Scot Land.
• PORTER’S GENERIC BUSINESS STRATEGIES
• Low Cost Leadership Strategies: Low cost leadership strategies
are based on a firm’s ability to offer a product or service at a lower
cost than its rivals. When a firm is able to build a substantial cost
advantage over other competitors it can pass on its benefits to
customers and gain a large market share. This requires being the
overall low-cost provider of the products or services (e.g., Costco,
among retail stores, and Hyundai, among automobile
manufacturers).
Some conditions that tend to make this strategy an attractive choice are:
• The industry's product is much the same from seller to seller
• The marketplace is dominated by price competition, with highly
price-sensitive buyers
• There are few ways to achieve product differentiation that have
much value to buyers
• Most buyers use product in same ways -- common user
requirements
• Switching costs for buyers are low
• Buyers are large and have significant bargaining power
• L
• Differentiation Strategies: When firm appeal to a broad cross-
section of the market through offering differentiating features that
make customers willing to pay premium prices, e.g., superior
technology, quality, prestige, special features, service, convenience
(examples are Nordstrom and Lexus). Success with this type of
strategy requires differentiation features that are hard or expensive
for competitors to duplicate.
Some conditions that tend to favor differentiation strategies are:
• There are multiple ways to differentiate the product/service that
buyers think have substantial value
• Buyers have different needs or uses of the product/service
• Product innovations and technological change are rapid and
•
competition emphasizes the latest product features
Not many rivals are following a similar differentiation strategy
• Focus Strategies: Focus strategies aim to sell good or services to
narrow or specific target market, niche or segment. Focus builds
competitive advantage through high specialization and
concentration of resources in a given niche.
Firms can build focus in one of the two ways. Focused Cost Leadership and
Focused Differentiation.
Focused cost Leadership: A market niche strategy, concentrating on a narrow
customer segment and competing with lowest prices, which, again, requires
having lower cost structure than competitors
Focused Differentiation: a second market niche strategy, concentrating on a
narrow customer segment and competing through differentiating features e.g., a
high-fashion women's clothing boutique Some conditions that tend to favor focus
(either cost or differentiation focus) are:
• The business is new and/or has modest resources
• The company lacks the capability to go after a wider part of the
total market
• Buyers' needs or uses of the item are diverse; there are many
different niches and segments in the industry
• Buyer segments differ widely in size, growth rate, profitability, and
intensity in the five competitive forces, making some segments
more attractive than others
• Industry leaders don't see the niche as crucial to their own success
• Few or no other rivals are attempting to specialize in the same
target segment