Chapter 9 (Module OUM)

Strategic Alternatives
Generating strategic alternatives

n CORPORATE STRATEGIES
q Integration strategies
q Intensive strategies
q Diversification strategies
q Defensive strategies

n BUSINESS STRATEGIES
q Cost leadership strategy
q Differentiation strategy
q Focus strategy
INTEGRATION STRATEGIES

•Forward integration
•Backward integration
•Horizontal integration
Forward integration

n Gaining ownership/ increased control over

distributors/ retailers
n Engage in sales or after-sales industries
n Became popular with increasing internet
appearance
n Built online stores and started selling their
products direct to consumers (bypassing
retailers)
Backward integration

n Seeking ownership/ increased control of a

firm’s suppliers (appropriate when current
suppliers are unreliable, too costly, or cannot
meet the firm’s needs).
n Starts making intermediate goods for itself or
takes over its previous suppliers.
n To secure stable input of resources and
become more efficient
Horizontal integration

n Seeking ownership/ increased control over a

firm’s competitors
n Aim for increased economies of scale and
enhanced transfer of resources and
competencies
n Company competing in raw materials industry
and buying another company in the same
industry.
n Example: Krafts Foods (Cadbury), HP (Compaq)
INTENSIVE STRATEGIES

•Market penetration
•Market development
•Product development
Developing Strategies for Growth and Downsizing
Product/market expansion grid strategies
Market penetration

n Growth strategy increasing sales to

current market segments without changing
the product
n Seeking increase market share for present
products or services in present markets
through greater marketing efforts
n Include : Increasing the number of salespersons,
increasing advertising expenditures, offering extensive
sales promotion items or increasing publicity efforts.
Market development

n Growth strategy that identifies and develops

new market segments for current products
n Introducing present products or services into
new geographic areas
Product development

n Growth strategy that offers new or

modified products to existing market
segments
n Seeking increase sales by improving
present products or services or developing
new ones
n Usually entails large research and
development expenditures
DIVERSIFICATION STRATEGIES
Growth strategy through starting up or acquiring businesses outside the
company’s current products and markets
Related diversification

n Adding new but related products/ services

n P&G : haircare, household cleaning,
laundry, snacks.
Unrelated diversification

n Adding new, unrelated products or

services
n Revenues derived from an organization’s
current products/ services would increase
significantly by adding the new, unrelated
products
n Virgin Travel, Virgin Hotels Group, Virgin
Communications
DEFENSIVE STRATEGIES

•Retrenchment
•Divestiture
•Liquidation
Retrenchment

n Regrouping through cost and asset

reduction to reverse declining sales and
profit
Divestiture

n Selling a division or part of an organization

Liquidation

n Selling all of a company’s assets, in parts,

for their tangible worth
COST LEADERSHIP STRATEGY

•when the business aims to be the lowest cost

producer in the market
•Effective when : 1. Composed of many price-
sensitive buyers; 2. Buyers do not care much
about differences from brand to brand; 3. There
are large number of buyers with significant
bargaining power
DIFFERENTIATION STRATEGY

•Can be in terms of product or service

characteristics like brand, product design,
technology features, network dealership or
customer service.
•Effective when profits above average, brand
loyalty existence or customer insensitive to price
changes.
FOCUS STRATEGY

•Organization focus on certain segments of the

market in selling its products or services.
•Emphasizes on buyer behavior, product line
segments or geographical location.
•Usually implemented by midsize and large firms
•Most effective when consumers have distinctive
preferences or requirements and when rival firms
are not attempting to specialize in the same target
segment.
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Ch 6 -29