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Published by muthoot2008

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Published by: muthoot2008 on Nov 25, 2012
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Discuss different types of strategic alternatives. Explain their importance in the presentcontext citing examples.AnsStrategic alternatives help an organization to change the business in a particular area, changes inproduction etc.The main strategic alternatives are Stability, Expansion, Retrenchment and Combination1)
Stability:- If a firm continues with the same product, same market and same technologydue to the stable environment. It involves maintaining status
quo or growing in a slowand selective manner. The scale and scope of present operations remains almost intact.Stability does not relate to do nothing (Eg-Hindustan Motors). Even during adverse timesfirms need to adopt a strategy to sustain current performance levels (Eg- Citibank). Weall know that Hindustan Motors did not make changes in its Ambassador car models evenin the new era of globalization and after 1991 when Mr. ManmohanSingh introduced thepolicy of liberalization and globalization. The variants of that model have not beendeveloped or the variants were not attractive to consumers.2)
Expansion:- When a company is looking to increase revenue it needs expansion. Theywill try to find out new markets. This can be done with the co-operation of othercompanies etc. Suppose a company likes to enter Kuwait market they have to seek goodagents or sponsors. Their sales have to be increased to a particular extent. Collaborationshave to be made with the retail and wholesale dealers. Suppose it is a technical equipmentitem they have to seek places where their product is in use. Expansion needs largeamount of money and infra-structure. They have to approach banks for the loan, makes adetailed project report.3)
Retrenchment:- This strategy is used when the firm makes changes in product due to lack of demand. Sony stopped production of cassettes which was their main product due tolack of demand. Coal used steam engines made way to diesel engines. So themanufacturers will have to stop old technology and go for new technological advancedproducts.4)
Combination: - Summation of all the strategies is termed as combination strategy. Acompany having different ventures have to consider this kind of strategy. V-Guard
industries they have ventures in entertainment parks, voltage stabilizer, motor pump sets,garments etc.Other strategies which is going aside with this areModernization:-Modernization basically involves up gradation of technology to increaseproduction, to improve quality and to reduce wastages and cost of production. The worn-out andobsolete machines and equipment are replaced by modern machines and equipment. Throughmodernization the firm becomes more competitive in the long-run. The growth will besystematic and does not affect the normal functioning of the firm. The workers can acquiremodern skills because of which their wages go up.However the strategy of modernization can be used only if the firm has adequate capitalthrough accumulated savings or is able to raise capital from different sources for the acquisitionof modern plant and machinery. Modernization will actually serve its purpose only if the workersare adequately trained in the new method of production.Integration:-Backward Integration;- involves moving toward the input of the present product. It is aimed atmoving lower on the production process so that the firm is able to supply its own raw materialsor basic components. For example Reliance Industries LTD has been able to grow largelythrough backward integration. It started business with textiles and went for backward integrationto produce PFY and PSF critical raw materials for textiles. PTA and MEG are raw materials forPFY and PSF, Propylene raw material for PTA and MEG and finally naphtha for producingpropylene.Backward integration ensures regular supply of raw materials or components. It facilitates higherreturn on investment for the company as a whole through better use of overhead facilities.Backward integration improves competitive power of the company. As it controls more elementsof the production process. It improves quality control over imports for the final product. Finallyit saves indirect taxes payable on the purchase of inputs.Forward integration means the firm entering into the business of distributing or selling itsproducts. It refers to moving upwards in the production/distribution process towards the ultimate

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