Grand Strategies

- grand strategies are the decisions or choices of long-term plans from available
alternatives
- grand strategies are also called as mater or corporate strategy
- it is based on analysis of internal and external environment
- this direct the organization towards achievement of overall long-term
objectives (strategic intent)
- they involve Expansions, Quality improvement, Market development,
Innovation, Liquidation, etc.
- usually, they are selected by top level managers such as directors, executives
etc.
 Stability Strategy
- a strategy os stability when a firm attempts to maintain its status-quo with
existing levels of efforts, and it is satisfied with only incremental
growth/improvement by marginally changing the business and concentrates its
resources where it has or can develop rapidly a meaningful competitive
advantages in the narrowest possible product market scope
- absence of significant change
- i.e., continuing to serve the same clients by offering the same product or
service, maintaining market share, and sustaining the organization's return-on
investment.
 When do organization follow
- it is common for most of the organizations to follow this strategy at some point
of time in their life cycle
- when a firm serves defined market and its segments to fulfills its mission
- when a firm can relate itself with the environment and environmental factors
do not show any appreciable change. This is possible for most of the firms in a
short run, but for a few in long runs
- when organization continues to pursue the same objectives by adjusting to the
same level of achievement about the same percentage. Thus stability does not
mean absence of growth but the growth is limited within specified limits and
there is no substantial addition of facilities
 Why do organizations follow
- when management perception about performance in the present business is
satisfactory, they tend to follow stability strategy because they are not always
sure of a set of factors attributing to success. Thus, they decide to continue the
same business
- this strategy involves low risk unless there is a major change in the
environment. So it provides safe business. Therefore, it is preferred by risk
avoiding managers
- "slow or resistant to change" organizations follow this strategy. As they become
larger and more successful, they develop such tendency & prefer stability
- Organization's history may be full of changes, so to reap the advantages of such
past, stability is preferred for some time, usually after growth strategy
 Vertical Integration Growth Strategy
- it represents a decision by an organization to utilize internal transactions rather
than market transactions to accomplish its objectives
- a firm starts undertaking & contributing activities, in addition to present
activities, along the line of value addition stages from raw material stage to
production, and ultimately distribution of goods to customers, so as to gain
ownership or increased control and thereby expand the business.
- vertical integration can be achieved (two) ways 1. Forward Integration 2.
Backward Integration
 External Strategy
Merger Strategy
- it means that two or more organizations merge together by formally losing
their corporate identities and form another organization through combining
assets & liabilities & issuing a new stock for mutual synergetic benefits. The new
co. is called holding company and the merging companies are called subsidiary
companies. According to the nature of business of merging companies, merger
may be
- Horizontal
- Vertical
- Concentric
- Conglomerate
 External Strategy
Strategic Alliance
- it is one in which two (or more) firms unite by "a win-win type" agreement
mutually acceptable to both (or all),
- in strategic alliance partners join hands together for certain specified
objectives, when these objectives are achieved partners terminate their alliance
- Types of Strategic Alliance (based on its focus)
1. Technology Development Alliance
2. Operations and Logistics Alliance
3. Marketing Sales and Service Alliance
4. Single Country or Multi-country Alliance
5. X and Y Alliance
 External Strategy
Retrenchment Strategy
- it is a defensive strategy in which a firm having declining performance decides
to improve its performance through contraction in this activities i.e., reducing
the scope of its business by total or partial withdrawal from present business
- focusing on functional improvement with special emphasis on cost
reduction or
- reducing the number of functions it performs, by being a captive firm or
- reducing the no. of products, markets, customer functions etc.
- liquidation of business (as a last alternative) or
- combinations of above
 Reasons for adopting
- when the organization is not doing well and perceives that it may not do better
in future too in a particular line of business it is advisable to delete the line of
business. After deletion, the organization can concentrate in other areas, where
it has some advantages
- if the organization is not meeting its objectives even after following other
alternative strategies it may go for retrenchment strategy. Also, when the
management is under pressure to improve the performance, this strategy can be
pursued as a last resort
 Alternatives of Retrenchment Strategy
Divestment Strategy
- in divestment strategy the organization decides to get out of certain businesses
and sells off units or divisions
- divestment is done through
- outright sale of unit to another company for which the divested unit is a
strategic fit or
- leveraged buyout- a company's shareholder are bought out by
company's management and other private investors using borrowed funds or
- spin off i.e., creating a new co. financially and managerially independent
one from parent company and retaining or not retaining partial ownership by
distribution of shares of new company to shareholders of parent company
 Alternatives of Retrenchment Strategy
Liquidation Strategy
- it is one in which a firm closes down & sells its entire business at a fair price on
the basis of tangible assets, management good will & also intangible assets and
invests the realization somewhere else or distributes among debtors and
members when
- business can't be revived and its retaining value is less than its selling
- business is in peak form (value but future is quite uncertain, having no
direction)
- business has accumulated losses and some other organization offers
higher price to get tax benefits
- liquidation value is more than discounted present value of future flow
of income etc.
 Alternatives of Retrenchment Strategy
Combination Strategy
- Combination strategy is not an independent classification, but it is a
combination of different strategies, stability, growth, retrenchment in various
forms
- Thus the possible combinations of strategies may be:
- stability in some businesses and growth in other businesses
- stability in some businesses and retrenchment in other businesses
- growth in some businesses and retrenchment in other businesses
- stability, growth and retrenchment in different businesses
 Reasons for following
- Different products in different product life cycle
- when different products of the organization are at different product life-
cycle stages, they require different types of investment
- Business cycle
- business cycle may affect the prospect of various businesses differently
- Number of businesses
- when the number of businesses in an organization has gone beyond the
optimum number, they are required to be reduced because some business may
not be that attractive from long term point of view
 Cost Leadership Strategy
- cost leadership strategy is one in which a firm attains competitive advantage &
hence increased market share by offering products and services having the same
utility/quality features as competitors' products and services/ substitute
products and services; but the price/cost lower than the,

-cost leadership strategy works well in the following conditions:

- Competition is based purely on price factor
- No significant differentiation in product/service features
- there is almost no customer loyalty, with the result, they can switch
over from a firm to another firm