Corporate Level Generic strategies Alternative Strategies

Which business (es) the company shall be in?

Generic strategies Portfolio strategy



Applicable to strategic business units When they confront the question of the business (es) they shall be in

4 Alternative strategies


Stability Expansion Defence and Combination

Stability strategy / Neutral strategy

   

Whether the co., should continue in the existing business? Affirmative Co., is doing reasonably well in that business But no scope for significant growth Strategy to be adopted is stability

Jauch & Glueck observe when ?



1. Firm continues to serve the customers in the same product or service, market, and functional sectors as defined in its business definition or in very similar sectors

Stability strategy-when?


2. Its main strategic decisions focus on incremental improvement of functional performance

Stability strategy
  

It is not do nothing strategy It may involve incremental improvements Requires adoption of appropriate competitive strategies to remain successful in the business Have to make offensive and defensive moves vis--vis competitors

Long term stability strategy



Requires investment , R&D and innovation Business definition remains the same Do the same thing strategy endeavours to do the-same thing better

Stability strategy Challenge?



Maintain the current position

Stability strategy Industries?



Regulated industries : Beverages Tobacco products etc., Family dominated small and medium companies prefer stability strategy

  

Reasons for stability strategy?

   

1. Co., is doing fairly well and it is hopeful of the same in future 2. Family dominated or private co., may not like to expand its businesses (a) to dilute the control (b) if effective supervision is not possible by family members

Reasons for stability strategy?



3. The feeling that sticking to the known business is always better and safe 4. The co., may not have the resources and capabilities for expansion 5. The company may not want to take the risks of growth and expansion

Reasons for stability strategy



6. The co., which has core competence in the existing business does not want take the risk of losing sufficient attention to the current business by going for diversification

Reasons for stability strategy



7. The mgmt does not have the mindset of a strategist to analyse the environmental opportunities and seize the opportunities

Growth strategy?


Should the co., increase the level of activities in the current business and / or enter new business(es) affirmative A growth ( expansion) strategy is called for

Growth strategy when?



Enters new business ( including functions) or markets Effects major increase in its current business

Reasons for growth strategy



1.The current business is perceived having future 2. The current business is unstable or nature

no

volatile in

3.The current business does not fully utilize available resources and capabilities

the

Reasons for growth strategy



4. Need for spreading the business risks

5. In some cases expansion is a retaliatory move.  When a company in another business enters the firms business the firm retaliates by entering the other companys business .


Reasons for growth strategy

   

6. To imitate the growth strategies of competitors 7. Result of urge to grow 8. to increase market share or gain dominance 9. to exploit the environmental opportunities

Retrenchment strategies / defensive strategy



When? It drops product line (s) market (s), market segment (s) or function (s) Focuses on functional improvements or reversing certain deteriorating trends

Retrenchment strategy - Reasons



1. Certain divisions / product lines /products /market segments / functions are not profitable 2. Profit from a business is less than the target rate 3. To focus on its core business 4. The company is too diversified / scattered that effective management is not possible

  

Retrenchment strategy - Reasons



5. Co., has serious financial problem So that the funds obtained by divestiture can be used for strengthening other businesses

Retrenchment strategy - Reasons



6. Certain current business does to confirm to the co., philosophy / ethics 7. The co., is confronted with deteriorating performance indicator

Defensive strategies


Divestiture Liquidation Becoming a captive and Turnaround

Divestiture strategy when?

      

Di *vest ment A Co., sells or divests itself of a business or part of business Because of loss Less than target rate of return Urgency to mobilize funds Managerial problems or Redefinition of the business of the company

Liquidation
 

When an entire co., is sold or dissolved Reasons for divestiture also be reasons for liquidation When there are no buyers for a Co., that wants to be sold, its assets may be sold and Co., may be wound up

Becoming a captive ( Kept in under restraint)

A firm becomes a captive of another firm  when it subjects itself to the decision of the other firm  in return for a guarantee  that a certain amount of the captives product will be purchased by the other firm


Turnaround strategy


Involve: Mgmt measures designed to reverse certain negative trends and to bring the firm back to normal health and profitability

Combination strategy- When?

   

When it adopts more than one grand strategy i.e., Stability Growth and Retrenchment simultaneously or sequentially

Reasons for Combination strategy



Existence of a combination of reasons for any two Or more of the other three generic strategies

Combination strategy
    

Co., adopts any of the following: 1. Stability and growth strategies 2. Stability and retrenchment strategies 3.Growth and retrenchment strategies 4.Growth ,retrenchment and stability strategies

Combination strategy


Results from environmental changes and redefinition of the business