STRATEGY

FORMULATION
TYPES OF STRATEGIES

A. Long-term Objectives
B. Integration Strategies
C. Michael Porter's Generic Strategies
D. Intensive Strategies
E. Diversification Strategies
F. Divestiture and Liquidation
Long-term Objectives
It represent the results expected from pursuing certain
strategies. Strategies represent the actions to be taken to
accomplish long-term objectives. The time frame for
objectives and strategies should be consistent, usually
from 2 to 5 years. Without long-term objectives, an
organization would drift aimlessly toward some unknown
end. It is hard to imagine an organization or an individual
being successful without clear objectives.
Integration Strategies

Integration strategies are processes that businesses can

use to enhance their competitiveness, efficiency or market
share by expanding their influence into new areas. These
areas can include supply, distribution or competition.
Michael Porter's Generic Strategies
firm's relative position within its industry determines whether a
firm's profitability is above or below the industry average. The
fundamental basis of above average profitability in the long run is
sustainable competitive advantage. There are two basic types of
competitive advantage a firm can possess: low cost or
differentiation. The two basic types of competitive advantage
combined with the scope of activities for which a firm seeks to
achieve them, lead to three generic strategies for achieving above
average performance in an industry: cost leadership,
differentiation, and focus. The focus strategy has two variants,
cost focus and differentiation focus.
Intensive Strategies
Intensive strategies are those strategies, which demand
furthermore intensive efforts to improve the
performance of existing products in the market. We may
also say that when an organization struggles to improve
its competitive position with the current products then
different types of intensive strategies should be
considered.
Types of Intensive Strategies in Strategic
Management

•Market Penetration
•Market Development
•Product Development
Diversification Strategies
Diversification strategy is applied when companies wish
to grow. It is the practice of introducing a new product
into your supply chain in order to increase profits. These
products could be a new segment of the industry your
company already occupies, known as business-level
diversification.
There are three different types of diversification
strategies that are commonly used today. These are:

•Concentric Diversification
•Horizontal Diversification
•Conglomerate Diversification
 Divestiture and Liquidation
Recent research reveals that superior performance of the diversified corporation is an outcome of :

the attractiveness of the industry

the positioning of the firm within the industry
the linkages among business units in term of resources and capabilities : the ability to transfer skills to share and leverage resources.

Divestiture & Liquidation Strategies

Situations occur when one or more of diversified company's business subsidiaries have to be sold off or shutt down.

Categories of divestitures
Strategic divestiture
Selling of undesired units
Selling in response to liquidity concerns
Forced divestitures

Stock market implications of divestitures

Divestitures can increase value : on average, divestitures linked with an explicit strategy are associated with share losses
Divestitures can destroy value : on average, divestitures represented as routine houskeeping exercises are associated with share losses
Positive valuation is consistent with most management ; events associated with negative valuation need more consideration
"Sell off dogs ?"
Negatives of disuniting
Emotional issues - employee morale and face-saving administrative transaction costs
Viability of the "buy-and-sell" strategy