STRATEGIC

MANAGEMENT
 LONG-TERM
OBJECTIVES
• Performance goals of an
organization, intended to be
achieved over a period of five years
or more.
 TYPES OF STRATEGIES
• Business Strategy
• Operational Strategy
• Transformational Strategy
 BUSINESS STRATEGY
• plan of action designed to achieve
a particular goal or set of goals or
objectives.
 OPERATIONAL
STRATEGY
• Operations strategy is a guiding principle used to
plan, analyze, and execute a company’s operations.
Businesses use operations strategies to identify and
implement cost-effective processes for creating
and distributing products and services.
 TRANSFORMATIONAL
STRATEGY
• a transformational strategy significantly
changes an organisation’s direction,
performance or impact.
 INTEGRATION
STRATEGIES
• it provides the business an option to
have control over various processes
like competitors, suppliers, or
distributors.
 Horizontal Integration
• Businesses use horizontal strategy when
they’re facing competition. A horizontal
integration strategy is when a company
acquires the supply chain system of the
different/same industries that are operating at
the same level.
 VERTICAL
INTEGRATION
• Businesses also use vertical integration when
they’re facing competition. Vertical
integration allows the company to have
control over various stages of supply,
distribution, and production.
 INTENSITIVE
STRATEGIES
• Intensive strategies are those
strategies, which demand furthermore
intensive efforts to improve the
performance of existing products in
the market.
 3 TYPES OF INTENSITIVE
STRATEGIES
• MARKET PENETRATION
MARKET DEVELOPMENT
PRODUCT DEVELOPMENT
 MARKET
PENETRATION
• In this strategy, the organization tries
to enhance its market share through
greater marketing efforts for its
present products or services.
 MARKET
DEVELOPMENT
• Market development strategy is the kind
of intensive strategy in which the Business
Organization launches its existing
products in the new markets or
geographical areas.
 PRODUCT
DEVELOPMENT
• In this strategy, the organization tries to
improve its competitive position & sales
through improvement & modification in
its existing products.
 DIVERSIFICATION
STRATEGIES
• Diversification strategy is when a business
or a company proceed with the growth and
development and expand its business in
different markets and product areas.
 Defensive strategies
• Primary Purpose is to make possible attacks unattractive
or discourage competitors.
• It is a developed to protect market share, position and
profitability.
• It is a strategy that can be used to keep up top position in
local and existing market.
• This strategy is most successful to keep up the
customer’s confidence which no new competitor can
disturb.
 Type of Strategies

Retrenchment

DEFENSI
VE Divestiture
STRATEGI
ES
Liquidation
 Retrenchment Strategies
Cost & asset reduction to reverse declining sales & profit.

Guidelines
Failed to meet objectives & goals consistency; has distinctive
competencies
Firm is one of weaker competitors §Inefficiency, low profitability,
poor employee morale, pressure for stockholders
Strategic managers have failed
Rapid growth in size; major internal reorganization necessary
 Divestiture Strategies
Selling a division or part of an organization

Guidelines
Retrenchment failed to attain improvements
Division needs more resources than are available
Division responsible for firm’s overall poor performance
Division is a mis-fit with organization
Large amount of cash is needed and cannot be raised
through other sources
 Liquidation Strategies
Selling
Company’s assets, in parts, for their tangible worth

Guidelines
Retrenchment & divestiture failed
Only alternative is bankruptcy
Minimize stockholder loss by selling firm’s assets
Michael Porter’s Generic Strategies
Cost Leadership
Strategies

Differentiation
Strategies

Focus Strategies
 Generic Strategies
Cost Leadership
 In conjunction with differentiation
 Economies or diseconomies of scale
 Capacity utilization achieved
 Linkages w/ suppliers & distributors
Ways of ensuring total costs across value chain are lower than competitors’ total costs
1. Perform value chain activities more efficiently than rivals and control factors that drive costs
2. Revamp the firm’s overall value chain to eliminate or bypass some cost-producing activities
Can be especially effective when:
1. Price competition among rivals is vigorous
2. Rival’s products are identical and supplies are readily available
3. There are few ways to achieve differentiation
4. Most buyers use the product in the same way
5. Buyers have low switching costs
6. Buyers are large and have significant power
7. Industry newcomers use low prices to attract buyers
 Generic Strategies
Low Cost Producer Advantage
• Many price-sensitive buyers
• Few ways of achieving differentiation
• Buyers not sensitive to brand differences
• Large # of buyers w/bargaining power
Differentiation
• Greater product flexibility
• Greater compatibility
• Lower costs
• Improved service
• Greater convenience
• More features
Can be especially effective when:
1. There are many ways to differentiate and many buyers perceive the value of the differences
2. Buyer needs and uses are diverse
3. Few rival firms are following a similar differentiation approac
4. Technology change is fast paced and competition revolves around evolving product features
Focused Strategies
 Industry segment of sufficient size
Good growth potential
Not crucial to success of major competitors

Can be especially effective when:

1. The target market niche is large, profitable, and growing
2. Industry leaders do not consider the niche crucial
3. Industry leaders consider the niche too costly or difficult to meet
4. The industry has many different niches and segments
5. Few, if any, other rivals are attempting to specialize in the same
target segment
 Means for Achieving Strategies
Joint Venture/Partnering
 Two or more companies form a temporary partnership or consortium for purpose of capitalizing on some
opportunity
Cooperative Arrangements
 R&D partnerships
 Cross-distribution agreements
 Cross-licensing agreements
 Cross-manufacturing agreements
 Joint-bidding consortia
Mergers & Acquisitions
 Provide improved capacity utilization
 Better use of existing sales force
 Reduce managerial staff
 Gain economies of scale
 Smooth out seasonal trends in sales
 Gain new technology
 Access to new suppliers, distributors, customers, products, creditors
 First Mover Advantages

 Benefits a firm may achieve by entering a new market or

developing a new product or service prior to rival firms

Potential Advantages
Securing access to rare resources
 Gaining new knowledge of key factors & issues
 Carving out market share
 Easy to defend position & costly for rival firms to overtake
 Outsourcing

Business-process outsourcing (BPO)

 Companies taking over the functional operations of other
firms

Benefits
Less expensive
 Allows firm to focus on core business
 Enables firm to provide better services
 Strategic Management in Nonprofit and Governmental
Organization

Depend on outside financing

 Educational Institutions
 Medical Organizations Backward integration with
ambulance services
 Governmental Agencies and Departments Cannot
diversify into unrelated business or merge with other firm.
Strategic Management For Small Firm
In business, the term “strategic management” is often
used as synonymous with “strategic planning”. Strategic
planning is an important component of strategic
management in business organisations. But there are
other equally important components, and these include
strategic human resource management , and strategic
marketing. Therefore, to be clear, strategic management
for small businesses will involve a combination of the
above processes and activities