CHAPTER 3

STRATEGY EVALUATION AND

SELECTION

Prepared by:
MS. NELDA A. ROSIMA
Instructor
Strategy evaluation’ is the process through which the strategists
know the extent to which a strategy is able to achieve its
objectives.

“Evaluation of strategy is that phase of strategic management

process in which the top managers determine whether their
strategic choice as implemented is meeting the objectives of the
enterprise.”
- Professor William F. Glueck and
Lawrence R. Jauch
Market entry strategies
1. Organic growth - is the process by which a company expands on its own
capacity. In an organic growth strategy, a business utilizes all of its resources –
without the need to borrow – to expand its operations and grow the company.
Three Primary Strategies for Organic Growth
1. Continual optimization of commercial activities, which involves how goods
and services are priced, marketed, and sold
2. Reallocating funds into activities – e.g., production of high-earning goods –
that fuel earnings and growth
3. Developing new models for operations or creating and developing new goods
to sell and/or services to offer
2. Growth by merger or acquisition – inorganic growth
A merger occurs when two separate entities combine forces to create a
new, joint organization. Meanwhile, an acquisition refers to
the takeover of one entity by another. Mergers and acquisitions may be
completed to expand a company’s reach or gain market share in an
attempt to create shareholder value.
3. Strategic alliances
 - happen when two or more businesses work together to create a win-win
situation. For example, Company A and Company B may decide to combine
their distribution facilities so they can share mutual resources and cut the
costs associated with shipping.
 You can form a strategic alliance with any company and for any reason.
Often, businesses seek out strategic alliances in the areas of design, product
development, manufacturing, distribution or the sale of goods and
services, but you can enter into an alliance to further any business objective.

Video link: https://www.youtube.com/watch?v=g6UdB0f7zzg

10 International Market Entry Strategies
1. Exporting
2. Piggybacking
3. Countertrade
4. Licensing
5. Joint venture
6. Company ownership
7. Franchising
8. Outsourcing
9. Greenfield investment
10. Turnkey projects
Substantive growth strategies
A horizontal integration and vertical integrations are expansion strategies, involving
the acquisition of one company by another company in relevant to the business and
its strategic objectives.
1. Horizontal integration refers to a strategy of acquiring a company in the same
business line or the same level of supply chain. It refers to the merger of two
concerns at approximately the same level in the production supply chain hierarchy.
They may belong to different industries but come together to improve the
economies of scale and increase synergies. It is different from vertical integration in
which entities occupying different stages in the supply chain are merged.
Ex. WALT DISNEY AND PIXAR ANIMATION STUDIOS (2006) Walt Disney bought Pixar Animation Studios for
approximately $7.4 billion USD. Walt Disney had been facing stagnation during the jump from cell
animation to digital. Pixar, by contrast, didn’t have Disney’s legacy, but it did have newer
techniques and more modern technologies to produce digitally animated films.
 FACEBOOK AND INSTAGRAM (2012)

Facebook acquired Instagram for an estimated $1 billion USD. The social media industry has
thousands of applications and posting capabilities, but Instagram was a true competitor with
Facebook for younger markets and for ad space. In the merger, Facebook strengthened its social
media position and removed the competition from Instagram. Similar to the structure of Disney
and Pixar, Instagram still operates independently with its own teams, but it is owned by
Facebook.
2. Vertical integration is a strategy where a firm acquires business operations
within the same production vertical. It combines backward integration and forward
integration. It means that the vertical integration strategy involves extending the
present business of a firm, in two possible directions. There may be backward
linkage (backward integration) and/or forward linkage (forward integration).
- refers to a strategy of acquiring a company who is at the different level of supply
chain usually the lower level. It is a competitive strategy that results in a
business taking complete control over one or many stages in the production or
distribution cycle. Generally, the strategy involves two different companies
partnering to improve efficiency and retain ownership of the phase.
- Ex. Mobile Phones | Apple
3. Related diversification - when a business adds or expands its existing
product lines or markets. For example, a phone company that adds or
expands its wireless products and services by purchasing another wireless
company is engaging in related diversification.

4. Unrelated Diversification - when a business adds new, or unrelated,

product lines or markets. For example, the same phone company might
decide to go into the television business or into the radio business. This is
unrelated diversification: there is no direct fit with the existing business.
Limited growth strategies
1. Do nothing
2. Market penetration
3. Market development
4. Product development
5. Innovation
Disinvestment strategies
1. Retrenchment strategy is a practice done by organizations to gain a better
financial position by lowering or reducing the costs of any of its business
operation. ( cost cutting and restructuring)
2. Turnaround strategies - is a form of retrenchment strategy when a company
realizes that it has made wrong decisions earlier. Now, it needs to undo some of
its works before it could impact the company’s profitability and income. It’s a
strategy where you retreat and back from the earlier made wrong decision, and
transform the company’s position from loss to profitability. (ex. Change of
leadership, cost efficiency strategies)
3. Divestment - refers to the act of partially or entirely selling organizational assets to
generate funds urgently. The urgency could be caused by a legal or regulatory
compliance issue. It is also referred to as divestiture.
4. Liquidation - is a closure strategy when businesses sell their assets in order to
wind up their business operations. Many business experts consider it an
unpleasant strategy because you terminate the business operations
permanently.
Strategy selection
1. Considering the alternatives
2. Appropriateness
3. Feasibility
4. Desirability
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