STRATEGIES

Generic Strategic Alternatives-Stability-Expansion-Retrenchment-Combination Strategies

Corporate Strategies
Corporate-level strategies (or simply, corporate strategies) are basically about decisions related to:
● Allocating resources among the different businesses of a firm;
● Transferring resources from one set of businesses to others;
● Managing and nurturing a portfolio of businesses; and
● Creating value across businesses in the portfolio.
Corporate strategies help to exercise the choice of direction that an organisation adopts. There could be a
small business firm involved in a single business or a large, complex and diversified conglomerate with several
different businesses.

Stability Strategies
The corporate strategy of stability is adopted by an organisation when it attempts at incremental improvement
of its performance by marginally changing one or more of its businesses in terms of their respective customer
groups, customer functions, and alternative technologies - either singly or collectively.
The major reasons for adopting stability strategy are:
● It is less risky, involves less changes and people feel comfortable with things as they are.
● The environment faced is relatively stable.
● Expansion may be perceived as being threatening.
● Consolidation is sought through stabilising after a period of rapid expansion.

Types of Stability Strategies

● No-change strategy: As the term indicates, this stability strategy is a conscious decision to do nothing
new i.e. to continue with the present business definition. This could be characterised as an absence of
strategy though in reality it is not so.
● Profit strategy: An organisation may assess the current situation and assume that its problems are
short-lived and will go away with time. Till then, the organisation tries to sustain its profitability by
artificial measures by adopting a profit strategy.
● Pause / proceed-with-caution strategy: is employed by organisations that wish to test the ground
before moving ahead with a full-fledged corporate strategy or organisations that have had a blistering
pace of expansion and wish to rest awhile before moving ahead.

Expansion Strategies
The corporate strategy of expansion is followed when an organisation aims at high growth by substantially
broadening the scope of one or more of its businesses in term of their respective customer groups, customer
functions, and alternative technologies - singly or jointly - in order to improve its overall performance.
The major reasons for adopting expansion strategies are as below.
● It may become imperative when environment demands increase in pace of activity.
● Increasing size may lead to more control over the market vis-à-vis competitors.
● Advantages from the experience curve and scale of operations may accrue.
● Psychologically, strategists may feel more satisfied with the prospects of growth from expansion: chief
executives may take pride in presiding over organisations perceived to be growth-oriented.
Retrenchment Strategies
The corporate strategy of retrenchment is followed when an organisation aims at contraction of its activities
through substantial reduction or elimination of the scope of one or more of its businesses in terms of their
respective customer groups, customer functions, or alternative technologies - either singly or jointly - in order to
improve its overall performance.
The major reasons for adopting retrenchment strategies are as below.
● The management no longer wishes to remain in business either partly or wholly due to continuous
losses and the organisation becoming unviable.
● The environment faced is threatening.
● Stability can be ensured by reallocation of resources from unprofitable to profitable businesses.

Combination Strategy
The combination strategy is followed when an organisation adopts a mixture of stability, expansion, and
retrenchment strategies either at the same time in its different businesses or at different times in one of its
business with the aim of improving its performance.
The major reasons for adopting combination strategy are as below.
● The organisation is large and faces complex environment.
● The organisation is composed of different businesses, each of which lies in a different industry requiring
a different response.
Any combination strategy is the result of a serious attempt on the part of strategists to take into account the
variety of environmental and organisational factors that affect the process of strategy formulation.

Concentration Strategies
● Concentration is a simple, first-level type of expansion strategy. It involves converging resources in one
or more of a firm's businesses in terms of their respective customer needs, customer functions, or
alternative technologies - either singly or jointly - in such a manner that expansion results.
● In strategic management terminology concentration strategies are known variously as intensification,
focus, specialisation or organic growth strategies.
● Among them, organic growth that means ‘growth from within’ as a strategy is often contrasted with
inorganic growth that takes the firm beyond toward diversification.

Ansoff’ Product-Market Matrix Strategies

Types of Concentration Strategies
● Market penetration involves selling more products to the same market: a firm may attempt focussing
intensely on existing markets with present products using a market penetration type of concentration.
● Market development involves selling same products to new markets: it may try attracting new users for
existing products resulting in a market development type of concentration.
● Product development involves selling new products to same markets: it may introduce newer products
in existing markets by concentration on product development.

Integration Strategies
● Integration means expanding through combining businesses or activities related to the present
business or activity of a firm. This can be done in two ways.
● One, the organisation can take over or partner with another firm at the same point of production to
expand its size of operations in the present business. This is integrating horizontally.
● Two, an organisation can take over or partner with another firm at a different point of production in
which case it is integrating vertically.
● Integration strategies push the organisations outside their boundaries.

Ansoff’s Matrix for Diversification Strategies

Horizontal Integration and Vertical Integration

● When an organisation takes up the same or similar type of products at the same level of production or
marketing process keeping it at the same stage of the value chain, it is said to follow a strategy of
horizontal integration.
● When an organisation starts making new products that serve its own needs, vertical integration takes
place. In other words, any new activity undertaken with the purpose of either supplying inputs or
serving as a customer for outputs is vertical integration.
● Vertical integration could be of two types: backward and forward integration. Backward integration
means retreating to the source of raw materials. Forward integration means moving the organisation
ahead to the ultimate customer or end user.
Diversification Strategies
● Diversification involves a substantial change in business definition - singly or jointly - in terms of
customer functions, customer groups, or alternative technologies of one or more of a firm's businesses.
● There could be many types of diversification strategies depending on whether the organisation uses
related or unrelated technology to make its new products for new markets.
● Two basic strategic alternatives of diversification are: related and unrelated diversification. In Ansoff’s
terminology, they are called concentric and conglomerate diversification respectively.

Concentric and Conglomerate Diversification

● When an organisation takes up an activity related to the existing business definition of one or more of a
firm's businesses either in terms of customer groups, customers functions or alternative technologies, it
is concentric diversification.
● When an organisation adopts a strategy which requires taking up those activities which are unrelated to
the existing business definition of one or more of its businesses either in terms of their respective
customer groups, customer functions or alternative technologies, it is conglomerate diversification.

Why are Diversification Strategies Adopted?

● Diversification strategies are adopted to minimise risk by spreading it over several businesses.
● Diversification may be used to capitalise on its capabilities and business model so as to maximise
organisational strength or minimise weaknesses.
● Diversification may be the only way out if growth in existing businesses is blocked due to environmental
and regulatory factors.
● Diversification takes an organisation away from the comfortable confines of concentration and
integration strategies to that of an environment fraught with many risks.

Integration Strategies
● Integration means expanding through combining businesses or activities related to the present
business or activity of a firm. This can be done in two ways.
● One, the organisation can take over or partner with another firm at the same point of production to
expand its size of operations in the present business. This is integrating horizontally.
● Two, an organisation can take over or partner with another firm at a different point of production in
which case it is integrating vertically.
● Integration strategies push the organisations outside their boundaries.

Horizontal Integration and Vertical Integration

● When an organisation takes up the same or similar type of products at the same level of production or
marketing process keeping it at the same stage of the value chain, it is said to follow a strategy of
horizontal integration.
● When an organisation starts making new products that serve its own needs, vertical integration takes
place. In other words, any new activity undertaken with the purpose of either supplying inputs or
serving as a customer for outputs is vertical integration.
● Vertical integration could be of two types: backward and forward integration. Backward integration
means retreating to the source of raw materials. Forward integration means moving the organisation
ahead to the ultimate customer or end user.
Types Of Partial Vertical Integration Strategies
● Taper integration strategies require firms to make a part of their own requirements and to buy the rest
from outside suppliers or when firms sell some of their products through company outlets and others
through independent retailers.
● Through quasi integration strategies firms purchase most of their requirements from other firms in
which they have an ownership stake or when firms sell most of their products through their own stores.

Building and Restructuring the Corporation:

● Internal Analysis: Identifying core competencies, organizational resources, and value chain dynamics.
● External Analysis: Assessing industry trends, competitive landscape, and PESTEL factors (Political,
Economic, Social, Technological, Environmental, Legal).
● Strategic Choice: Aligning internal capabilities with external opportunities to identify potential
restructuring options (mergers, acquisitions, divestitures, re-engineering).

Steps in Strategic Choice

Strategic choice could be defined as the decision to select from among the grand strategies considered, the
strategy which will best meet the enterprise's objectives. The decision involves focussing on a few alternatives,
considering the selection factors, evaluating the alternatives against these criteria, and making the actual
choice.
Steps in the process of strategic choice as below:
● Focusing on strategic alternatives
● Analysing the strategic alternatives
● Evaluating the strategic alternatives
● Choosing from among the strategic alternatives

Focussing on Strategic Alternatives

● The aim of focussing on a few strategic alternatives is to narrow down the choice to a manageable
number of feasible strategies.
● Focussing on alternatives could be done by visualising the future state and working backwards. This is
done through gap analysis.
● A company sets objectives for a future period of time, say three through five years, and then works
backward to find out where it can reach through the present level of efforts.
● By analysing the difference between the projected and desired performance, a gap could be found.

Managing Growth:
● Organic Growth: Expanding sales and market share within existing business lines.
● Market Development: Entering new markets with existing products or services.
● Product Development: Introducing new products or services to existing markets.
● Diversification: Entering new markets with new products or services.
● Strategic Alliances: Partnering with other organizations to achieve growth objectives.

Environmental Threat and Opportunity Profile (ETOP):

● Identifying key environmental threats and opportunities (e.g., technological advancements, competitor
actions, regulatory changes).
● Assessing the likelihood and impact of each threat and opportunity.
● Developing strategies to mitigate threats and capitalize on opportunities.
Organizational Capability Profile:
● Evaluating the organization's strengths and weaknesses across key functional areas (e.g., marketing,
finance, operations).
● Identifying core competencies that create a competitive advantage.
● Investing in capabilities that are critical for achieving strategic objectives.

Strategic Advantage Profile:

● Identifying the sources of the organization's competitive advantage.
● Assessing the sustainability of the advantage.
● Developing strategies to protect and enhance the advantage.

Corporate Portfolio Analysis:

● Evaluating the performance and strategic fit of different business units within the corporate portfolio.
● Using frameworks like Boston Consulting Group (BCG) Matrix to prioritize investment and potential
divestments.
● Aligning business unit strategies with overall corporate goals.

SWOT Analysis:
● Identifying internal Strengths and Weaknesses of the organization, and external Opportunities and
Threats.
● Matching internal strengths with external opportunities, and addressing weaknesses by mitigating
threats.

Mc Kinsey's 7s Framework:
● Strategy: The organization's overall plan for achieving its goals and objectives.
● Structure: The way the organization is arranged, including its hierarchy, reporting lines, and division of
work.
● Systems: The processes and procedures that guide the organization's operations.
● Shared Values: The core beliefs and principles that define the organization's culture.
● Style: The leadership style and management approach of the organization.
● Staff: The skills, capabilities, and experience of the organization's employees.
● Skills: The specific competencies and abilities that are critical for the organization's success.
Key Points:
● The 7 elements are interconnected and interdependent. Changes to one element can impact the
others.
● The framework is often used to assess organizational effectiveness and identify areas for improvement.
● It can also be used to guide organizational change initiatives.
● The framework is particularly useful for understanding the impact of change on an organization.

Examples of How the Framework is Used:

● To assess the impact of a merger or acquisition.
● To guide a change in organizational culture.
● To identify the skills and capabilities needed to implement a new strategy.
● To assess the effectiveness of a new leadership team.

Gap Analysis for Focussing on Strategic Alternatives

Gap Analysis
● Focussing on alternatives could be done by visualising the future state and working backwards. This is
done through gap analysis.
● A company sets objectives for a future period of time, say three through five years, and then works
backward to find out where it can reach through the present level of efforts.
● By analysing the difference between the projected and desired performance, a gap could be found.
Dynamic Competitive Positioning

Dynamic Competitive Positioning

● At the business level, organisations need to think of alternative ways of competing.
● The choice is essentially between positioning the business as being low-cost, differentiated or
focussed.
● Organisations need to understand the conditions in the industry and weigh carefully the risks and
benefits of each competitive positioning before making a choice.
● In practice, the choice leads to a situation of dynamic competitive positioning where low-cost and
differentiation are not discrete positions but lie on a continuum.
Possible Business Definition Alternatives for an Oral Care Company

Analyzing the Strategic Alternatives

● Narrowing down the strategic choice should lead to a few feasible alternatives.
● These alternatives have to be subjected to a thorough analysis. Such an analysis has to rely on certain
factors.
● These factors are termed as selection factors. They determine the criteria on the basis of which the
evaluation of strategic alternatives can take place.
● The selection factors can be broadly divided into two groups: the objective and subjective factors.

Evaluating Strategies
● Consistency The strategy must not present mutually inconsistent goals and policies
● Consonance The strategy must represent an adaptive response to the external environment and to the
critical changes occurring within it
● Advantage The strategy must provide for creation and maintenance of strategic advantage
● Feasibility The strategy implementation may not be expected to use more resources nor create
attendant problems arising out of implementation

Choosing from Strategic Alternatives

● Evaluation of strategic choice should lead to a clear assessment of which alternative is the most
suitable under the existing conditions.
● The final step is of making the strategic choice. One or more strategies have to be chosen for
implementation.
● A blueprint has to be made that will describe the strategies and the conditions under which they would
operate.
Tools and Techniques for Strategic Analysis
● Information technology has provided the benefit of having ready-made strategic planning software that
use spreadsheets and templates for data, various types of reports, and plan formats.
● Environmental appraisal, for instance, uses the techniques of forecasting, SWOT analysis, and
scenario-writing.
● Organisational appraisal is done by internal, comparative, and comprehensive analyses using
techniques such as financial and non-financial analysis, value chain analysis, benchmarking, and
balanced scorecard.
● Strategic analysis can be done at two levels: the corporate and the business levels.

Corporate Portfolio Analysis

● They are defined as a set of techniques that help strategists in taking strategic decisions with regard to
individual products or businesses in a firm's portfolio.
● It is primarily used for competitive analysis and strategic planning in multi-product and multi business
firms. They may also be used in less diversified firms, if these consist of a main business and other
minor complementary interests.
● There are a number of techniques that could be considered as corporate portfolio analysis techniques.
Among them we have the Boston Consulting Group (BCG) or product portfolio, General Electric’s
Nine-cell, Hofer’s Product-Market Evolution, Directional Policy, and the Strategic Position and Action
Evaluation matrices.

BCG Matrix (The Boston Consulting Group)

● Stars: They are high-growth-high-market share businesses which may or may not be self-sufficient in
terms of cash flow.
● Cash cow: They are businesses which generate large amounts of cash but their rate of growth is slow.
● Question marks: Businesses with high industry growth but low market share for a company are
‘question marks’ or ‘problem children’. They require large amounts of cash to maintain or gain market
share.
● Dogs: Those businesses which are related to slow-growth industries and where a company has a low
relative market share are termed as ‘dogs’. They neither generate nor require large amounts of cash.
General Electric Nine-cell Matrix

Distinctive Competitiveness:
● Identifying the unique characteristics that set the organization apart from its competitors.
● Leveraging these characteristics to create and sustain a competitive advantage.

Selection of Matrix:
● Choosing the appropriate organizational structure to support the chosen strategy.
● Considering factors like size, complexity, and strategic focus.

Balance Score Card:

● Monitoring and measuring performance across four key perspectives: financial, customer, internal
process, and learning and growth.
● Aligning performance metrics with strategic objectives.