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Types of Strategic Management

Types of Strategies Levels

Questions addressed by different strategic level: Corporate strategy In what industries and markets should we compete?

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Business strategy How are we going to compete for customers in this industry and market?
Functional strategy How can we best utilize resources to implement our business strategy?

Grand Strategies

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Grand Strategies often called business or master strategies provide basic direction for strategic actions. Indicate the time period over which long range objectives are also met. Firms involved with multiple industries business product or lines or customer groups combine different types of strategies. Any one of these strategies could serve as the basis for achieving long term objective of a firm.
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Types of Strategies
Grand Strategies Generic Strategies

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Generic Strategies

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Focused on a business unit with a specific objective Part of Grand Strategies Key areas are , - Low cost Leadership - Differentiation - Focus
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Types of Grand Strategies

Concentrated Growth Market Development Product Development Innovation Horizontal Integration Vertical integration Concentric Diversification Conglomerate diversification Turnaround Divestiture Liquidation Bankruptcy Joint Venture Strategic Alliances Consortia

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Concentrated Growth Strategy

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Involves focusing resources on the profitable growth of a single product, in a single market, with a single dominant technology Rationale - Firm develops and exploits its expertise in a delimited competitive arena Determinants of competitive market success Ability to assess market needs Knowledge of buyer behavior Customer price sensitivity Effectiveness of promotion
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Market Development

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Market development Consists of marketing present products, often with only cosmetic modifications, to customers in related market areas by Adding channels of distribution or Changing content of advertising or promotion Product development Involves substantial modification of existing products or creation of new but related products Based on penetrating existing markets by Incorporating product modifications into existing items or Developing new products connected to existing products

Innovation Strategy

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Involves creating a new product life cycle, thereby making similar existing products obsolete.

Horizontal and Vertical strategies

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Horizontal integration
Based on growth via acquisition of one or more similar firms operating at the same stage of the production-marketing chain Involves eliminating competitors, providing acquiring firm with access to new markets.

Vertical integration
Involves acquiring firms To supply acquiring firm with inputs Backward Integration customers for firm as outputs Foreword Integration

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Concentric & Conglomerate strategies

Name of Institution

Concentric diversification Involves acquisition of businesses related to acquiring firm in terms of technology, markets, or Products(New Strategy is related to existing business line) Conglomerate diversification Involves acquisition of a business because it represents a promising investment opportunity (New and old business are un-related)
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Turnaround Strategies

Name of Institution

Involves a intensive effort over a period of time to fortify a firm, as distinctive competencies, returning it to profitability Causes of Turnaround - Internal Factors - External Factors Declining sales/low Margins/High Imminent Bankruptcy Steps: Cost Reduction/Asset Reduction (Retrenchment) Recovery Signs: Efficiency Management/ Entrepreneurial Reconfiguration.

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Divestiture and Liquidation Strategies

Divestiture strategy

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Involves selling a firm or a major asset component of a firm ,which is not performing.

Reasons for divestiture Partial mismatches between acquired firm and parent firm

Corporate financial needs

Government antitrust action

Liquidation strategy

Involves selling parts of a firm, usually for its tangible asset value and not as a going concern

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Strategy For Bankruptcy

Two approaches

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Liquidation: Involves complete distribution of a firms assets to creditors, most of whom receive a small fraction of amount payable. Reorganization - Involves creditors temporarily freezing their claims while a firm reorganizes and rebuilds its operations more profitably.

Advantage Of a Re-Organization Bankruptcy Proactive option offering maximum repayment of a firm as debt in the future, if a recovery strategy is successful

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Joint Venture/Strategic Alliance/Consortia

Name of Institution

Joint venture Involves establishing a third company (child), operated for the benefit of the co-owners (parents). Strategic alliance Involves creating a partnership between two or more companies that contribute skills and expertise to a cooperative project Exists for a defined period Does not involve the exchange of equity Consortia, Defined as large interlocking relationships between businesses of an industry.

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