Module 3:

Business
Strategy
Definition

1 “Corporate strategy is the way a company creates

value through the configuration and coordination of

2
its multimarket activities” (Montgomery and Collis,

1997, p. 5)
3

4
 a

Grand
Strategy
Strategy
Generic
Strategy

d
Generic Strategy/Business Level Strategy

Generic strategy is that type of strategy which helps to create strong

competitive position in terms of cost or differentiation.
Its objective is to create strong competitive position, attract existing, new
and competitor’s customer and finally to increase profitability.
The basis of the generic strategies

Porter argues that a firm’s strengths ultimate fall into one of two
headings: cost advantage and differentiation.

By applying these strengths in a broad or a narrow focus, three

generic strategies result: cost leadership, differentiation and focus.
He then subdivided the Focus strategy into two parts: "Cost
Focus" and "Differentiation Focus."

They are called generic strategies because they are not

specific to a firm or an industry
There are five generic strategy which are:

1 Overall low cost leadership strategy

2 Broad differentiation strategy

3 Best cost strategy

4 Focused low cost strategy

5 Focused differentiation strategy

The terms "Cost Focus" and "Differentiation Focus" can be a little confusing, as they could be
interpreted as meaning "a focus on cost" or "a focus on differentiation." Remember that Cost Focus
means emphasizing cost-minimization within a focused market, and Differentiation Focus means
pursuing strategic differentiation within a focused market.
 1 3
Cost Leadership Differentiation Strategy: The The 'focus' strategy involves
'differentiation' strategy focusing on a narrow, defined
This Strategy advocates involves creation of segment of the market, also
gaining competitive advantage differentiated products for called a 'niche' segment.
due to the lowest cost of different segments.
production of a product or
service.
 Grand Strategy

Grand strategy is that type of strategy which helps to achieve

organizational objective. Its objective is to show direction to the
business firms to achieve firm’s objective.

Grand strategy are corporate level strategy.

Grand strategy is formulated by top level manager (chief executive
officer).

Grand strategy is a master strategy which provides the basic strategic

direction at corporate level. Grand strategies, fall under four
categories.
1. Growth
2. Stability
3. Retrenchment
4. Portfolio restructuring
 Some of the grand strategies are:
Vertical &
Horizontal Concentrated
Integration A 01 growth

Concentric & Market

Conglomerate B 02 Development
Diversification

Turnaround & Product

C 03
Divestiture Development

Liquidation & Strategic

Joint Venture
D 04 Alliances
Growth strategies

Organizations usually seek growth in sales,

profits, market share, or some other measure as
a primary objective. The different grand
strategies in this category are:

• Concentration
• Integration
• Diversification
• Mergers and acquisitions
• Joint Ventures
•
A concentration strategy is one in which an organization focuses on a single line of
business The firm directs its resources to the profitable growth of a single product, in
a single market, and with a single technology.

Integration may take two forms: vertical and horizontal integration.

Diversification is the process of adding new businesses to the existing businesses of

the company. In other words, diversification adds new products or markets to the
existing ones.

A merger is a combination (other terms used: amalgamation, consolidation, or

integration) of two or more organizations in which one acquires the assets and
liabilities of the other in exchange for shares or cash, or both.

In a joint venture, an organization works with another company on a project too large
to handle by itself, such as some elements of the space program.
STABILIT
Y Sustainable
Modest
Growth
Growth Strategy
Strategy

No-
Stability
change
Strategy strategy

Profit Pause
Strategy
Strategy
Liquidation Harvest
01
02
Defensive
Strategy
04
03

Divestiture Turnaround
 HORIZONTA
L

VERTICAL

MARKET
CONGLOMERA
EXTENSIO
TE MERGERS N

PRODUCT
EXTENSIO
N
Acquisition
TAKEOVERS
Key Hints
Activity