TOPIC 8

ALTERNATIVE
DIRECTIONS AND
METHODS OF
DEVELOPMENT
ACTIVATING PRIOR LEARNING

QUESTION: According to research statistics, food has remained

the biggest industry in the Philippine’s franchising business,
with milk tea concepts leading the trend. Since its influence
has reached the Philippine market, Filipinos, especially the
millennials, have then become a big consumer of the popular
drink. Milk tea shops are emerging at an exponential growth.

Now, supposing you are a budding entrepreneur and you

would want to put up a “milk tea shop”, what strategy would
you employ for your shop to be noticed or stand-out?
 A lt e r n a t iv e D ir e c t io n s
a n d M e th o d s o f
D e v e lo p m e n t

S tr a te g ic A n s o f f 's M e th o d s o f A sse s sm e n t o f S tra te g y

D ir e c t io n G ro w th S tr a t e g ic B u s in e s s S e le c tio n
M a tr ix D e v e lo p m e n t S t r a t e g ie s

M a rk e t In te rn a l S u it a b ilit y F o rm a l
P e n e t r a t io n G ro w th E v a lu a t io n

M a rk e t M e rg e rs & F e a s ib ilit y E n fo rc e d
D e v e lo p m e n t A c q u is it io n s C h o ic e

P ro d u c t D iv e r s if ic a t io n A c c e p t a b ilit y L e a r n in g
D e v e lo p m e n t a n d a n d
I n t e g r a t io n E x p e r ie n c e

D iv e r s if ic a t io n

G a p
A n a ly s is

W it h d r a w a l
S tra te g y
STRATEGIC DIRECTIONS

Strategic Direction is a course of action that leads to the

achievement of the goals of an organization’s strategy.

7 types of strategic directions

1. Mission 6. Values
2. Vision 7. Grand Strategy
3. Culture
4. Ideology
5. Principles
Cagayan State University shall produce globally
competent graduates through excellent instruction,
innovative and creative research, responsive public
service and productive industry and community
engagement.

CSU is a University with global stature in the arts,

culture, agriculture and fisheries, the sciences as
well as technological and professional fields.
• Mission - defines the purpose of an organization
• Vision - presents the picture of the future of an organization alongside the
mission statement
• Culture - the set of behaviors, expectations and norms that evolve in a
society, city or organization as a result of shared experiences of its members
Common elements of culture
SCHOOL CULTURE 8. Expectations
1. Symbols 9. Methods
2. Stories 10. Honor System
3. Legacy 11. Etiquette
4. Language 12. Ethics
5. Traditions 13. Comradery
6. Rites of Passage 14. Loyalty
7. Habits 15. Tone
• Ideology - a system of ideas and values that provide social,
economic, political and moral direction.
• Principles - are foundational guidelines or rules that provide
direction to future strategy and decision making
• Values - are principles that relate to matters of right and wrong
• Grand Strategy - is a long-term strategy that considers every
possible tool and approach at the disposal of the organization
STRATEGIC DIRECTION: ANSOFF’S GROWTH MATRIX

• The Ansoff Growth Matrix, or Product Market Expansion Grid, is a tool to

help businesses analyze, plan, and execute different strategies for growth
and assess the risk exposure associated with each one.
• also known as the Ansoff Product/Market Growth Matrix, is a strategic
planning tool used to analyze and generate four alternative directions for
the strategic development of a business or corporation.
• The model was developed by Russian-American mathematician Igor Ansoff in
1957 and focuses on two specific areas for potential growth:
- Products (what they sell)
- Market (who they sell to)
• Market penetration is considered the lowest risk of
the four strategies. Market penetration is essential for
the success of any retail or hospitality business. Here,
you focus on expanding sales of your existing product
in your existing market: you know the product works,
and you’re familiar with typical clientele.

• Market penetration attempts to expand the sales

volume of your current products in their current
markets, thus increasing your market share. In order
to achieve market penetration, you’ll want to draw
customers away from your competitors and redirect
them to your business. The aim is to encourage brand
loyalty and customer retention, perhaps by increasing
brand awareness via your marketing strategy,
implementing more product/brand promotion, or by
having more competitive pricing.
In a market development strategy, the firm
enters a new market with its existing
product(s). In this context, expanding into
new markets may mean expanding into new
geographic regions, customer segments, etc.
The market development strategy is most
successful if (1) the firm owns proprietary
technology that it can leverage into new
markets, (2) potential consumers in the new
market are profitable (i.e., they possess
disposable income), and (3) consumer
behavior in the new markets does not
deviate too far from that of consumers in
the existing markets.
• Product development is considered slightly
more risky as you’re introducing something
new to your existing brand. It’s important to
note here that product refers to services too,
rather than just physical commodities -
whatever is being sold is considered a product.

• Product development includes expanding your

current product line and offering something
new for your customers to buy, and revamping
and enhancing current products to improve
them. The overall goal is to attract new
customers within the same market, and to
increase the rate at which existing customers
buy from your business.
• Diversification is the riskiest of the four
options. This is when you introduce a new,
unproven product into an entirely new market.
It’s creating a strategy that targets customers
who you usually don’t cater to, offering a
product that you don’t have experience in.

• However, diversification can be extremely

beneficial when a brand’s main industry is
facing a downturn. When diversification is
implemented correctly, it will provide a
wonderful boost to brand image and the profit
of the company. It also allows a company to
make use of excess cash flows
Types of diversification
Diversification involves marketing not only the product, but the brand too. This
growth plan can be divided into four sub-categories
1. Horizontal diversification - involves buying or developing new products with
the aim of selling them to existing customer groups.
2. Vertical diversification moves backwards up the supply chain. Businesses
will enter the sector of their suppliers to deliver a complete package type
service.
3. Related diversification - is when a company's new offerings complement the
products they already produce or at least exist in the same sphere.
(Concentric diversification)
4. Unrelated diversification - is when a company's new offerings are outside of
its known capabilities. (Conglomerate diversification)
 Other Techniques Used in Strategic Planning
• Strategic gap analysis measures the difference between an
ideal outcome and the real outcome.
The analysis identifies the steps that must be taken to
close that gap. For a business or other organization,
the analysis can lead to an action plan for greater success.
• As the name suggests, a withdrawal strategy is a strategy
for withdrawing from a particular product-market area that
is usually done when the entity can no longer compete
effectively, or the entity wishes to use its limited funds
and resources in a different product market area.
Methods of Strategic Development
Three Main Approaches To Developing A Product-Market Strategy For
Growth

Growth Strategy refers to a strategic plan formulated and implemented

for expanding firm’s business. Every firm has to develop its own growth
strategy according to its own characteristics and environment.
1. Internal growth
2. Growth through acquisition or mergers
3. Diversification and integration/ Joint venture and strategic alliance
Internal growth
Refers to the growth within the organization by using internal resources. Internal growth
strategy focuses on developing new products, increasing efficiency, hiring the right
people, better marketing etc.
Internal growth strategies
A. Expansion
1. Market penetration strategy
2. Market development strategy
3. Product development strategy
B. Diversification
4. Vertical diversification
5. Horizontal diversification
6. Concentric/related diversification
7. Conglomerate/unrelated diversification
Growth through acquisition or mergers

Growth through acquisition or merger is a common tactic used to achieve diversification

and market positioning. It can help:
• increase market share
• expand the workforce
• widen the existing service or product offering
• grow revenues
• achieve economies of scale
• reduce costs through shared budgets and greater purchasing power
However, combining two businesses can pose challenges that did not exist before, such as:
• maintaining a presence in multiple markets
• managing a complex product and services portfolio
• retaining a larger and more diverse customer base
• managing more people and operational complexity
 Diversification and Integration/ Joint ventures and strategic
alliances
A joint venture (JV) is a business arrangement between two or more parties whereby
they combine their resources to perform a specific task or achieve a business
objective.
There are two types of joint ventures:
• Incorporated – There is a separate legal personality. Therefore, it can enter into
contracts and hold property under its own name.
• Unincorporated – Parties hold specific shares in the joint venture depending on the
agreement but does not hold a separate legal existence.
A strategic alliance is an agreement between two or more parties to undertake a
mutually beneficial project while remaining independent of one another. Essentially,
it allows the independent parties to work towards a common goal that will benefit
the parties involved.
Assessment of Business Strategies
Suitability: does it address the strategic requirements, given the circumstances
and the situation?
Acceptability: does it address the strategic requirements in a way that will be
acceptable to significant stakeholders?
• * The acceptability of a strategy is concerned with whether it will be
acceptable to key stakeholders. If it is not acceptable to a key stakeholder, the
stakeholder will oppose the strategy. Management should then consider
whether a strategy that is not acceptable to a key stakeholder should be
undertaken or not.
Feasibility: is it practical?
• The feasibility of a strategy is concerned with whether it will work. A strategy is
feasible if it can be implemented successfully. Assessing whether or not a
strategy is feasible will require some judgement by management.
Suitability of Strategy
• If the purpose of the strategy is to gain competitive advantage, it is
necessary to assess how the strategy might do this, and how
effective the strategy might be. Will the strategy succeed in
reducing costs, if this is its purpose? Will the strategy succeed in
adding value, if adding value is the purpose?
• If the purpose of the strategy is market development, how
successful might the strategy be?
• Similarly, how suitable are the chosen strategies for market
development, product development or diversification?
• Is the business risk in the strategy acceptable, or might the risk be
too high?
Feasibility of Strategy
• Is there sufficient finance for the strategy? Can we afford it?
• Can we achieve the necessary level of quality that the strategy will
require?
• Do we have the marketing skills to reach the market position that
the strategy will expect us to achieve?
• Do we have enough employees with the necessary skills to
implement this strategy successfully?
• Can we obtain the raw materials that will be needed to implement
this strategy?
• Will our technology be sufficient to implement the strategy
successfully?
 Acceptability of Strategy
• Management will not regard a strategy as acceptable if the expected
returns on investment are too low, or if the risk is too high in relation
to the expected return.
• Investors might regard a strategy as unacceptable if they will be
expected to provide a large amount of additional investment
finance.
• Employees and investors might consider a strategy unacceptable if
they regard it as unethical.
Strategy Selection
1. Formal evaluation – financial and strategic
2. Enforced choice
3. Learning and experience