Grand strategies

Introduction
•The grand strategy of the company is also known as the
corporate strategy or the master strategy.
• It provides the general plan by which the company intends to
achieve its long-term goals.
• Companies which can have many product lines in various
stages of development can adopt any number of these grand
strategies.
•The grand strategy is concerned with the company's scope
and the direction in which it is headed.
•It is concerned with topics like what should be the growth
objective of the company and what strategy should it adopt to
achieve those objectives, what are various lines of business of
the company and how these businesses work in co-ordination
with each other.
Importance of Grand Strategy

1) Focus :
A well designed corporate strategy gives the company the
capability to direct its multiple resources to a single objective.
The corporate strategy thus brings the focus in the company.

2) Measurable Progress :
The strategy also provides the company a yardstick or benchmark
against which it can measure its progress or failure. The strategy
provides clarity to the company on what needs to be measured.
3) Long-Term Success :
The corporate strategy allows the company to manage
through periods of ups and downs. This makes it immune in
periods of economic downturn or market slowdowns.

Types of Grand Strategy:

There are four types of grand strategies, these are

as follows :

•Expansion Strategy
•Stability Strategy
•Retrenchment Strategy
•Combination Strategy
Expansion Strategies:

•The expansion strategies is a strategic option which is

vital for the survival of the organisation.

• This also helps the enterprise to speed up the growth

rate of sales, profits and market share by introducing
new products, entering new markets, utilizing new
technologies and developing effective managerial
competencies.
 Reasons to Pursue/Adopt Expansion Strategy
An organisation follows a growth strategy because of the following reasons :
1) Creates Strength :
Growth acts as a source of strength. Hence, a growing company is considered
successful while a company unable to expand its business is regarded as a
failure.
2) Necessary for Survival :
The strategy of growth is relevant in industries which are subject to frequent
changes in technology environmental conditions.
3) Employee Satisfaction :
Expansion strategy increases the motivation of top management. When an
organisation is able to achieve growth in a particular industry its employees
are also able realize their individual career growth.
4) Increases Productivity :
According to experience curve theory, over time with increasing size and
experience of an enterprise the productivity increases
 Types of Expansion Strategy

1. Concentration strategy
2. Diversification strategy,
3. Integration strategy
4. Internationalization strategy
5. Cooperation strategy
Diversification Strategy

Is a diversification strategy, the company enters into new lines

of business from existing lines of business.

calls for a new set of capabilities and competencies from

existing ones.

In this strategy, the organisation adds markets, products,

services or even modification in the production process to
existing ones.

In the diversification strategy, the company aims to add new

product or service to the existing one.
•The diversification strategy is a growth strategy.

•It involves a great improvement in the performance of the

organisation from the past levels in terms of both sales and
profits.

•Most organisations practice growth strategies in some form or

the other.

•This is because the investors and the management of the

company perceive growth strategies in a favorable manner.

• Even a growth in top line (sales) with a stable of declining

profit satisfies the investors of the cay.

•The assumption is an increase in the sales level will ultimately

lead to better profitability level for the company.
Retrenchment Strategy:

• Retrenchment is a corporate strategy that aims to

decrease the scale of operations of the company.

• It can also involve cutting down the expenditure of the

company so that it becomes financially viable.

• It can involve reducing the number of product lines or

businesses, withdrawing from certain geographical markets so
that the company becomes financially sustainable.
A retrenchment strategy therefore offers many strategic alternatives
to the company. These can be in the form of :

1. Turnaround Strategy
2. Divestment Strategy
3. Liquidation Strategy

Divestment Strategy :

• A company which has a very week industry position and

cannot turnaround its performance or become captive to another
company has no option but to shut operations and close down.
• It can sell its operation to another entity. In that
manner the shareholders of the company will get a good price
for their investment in the company.

• The advantage of selling out another company is that

the other company may have the resource and the competency
to turnaround the company and make it profitable.

Liquidation Strategy :

An unsuccessful company which has none of three

strategic options available has no other option but to go in for
liquidation or bankruptcy.
 Liquidation is better than a bankruptcy because in the
former case the management has some control whereas in the
latter case the entire control is vested with the courts.

Bankruptcy is the situation in which the management

of the company is handed over to the courts who then handle
the settlement of the company's debts and obligations.

This is done with a belief that the company will

emerge stronger than before once the debts have been settled.
 Joint Venture

A type of business arrangement in which more than two or

two parties agree to pool their resources for the purpose of
fulfilling a specific task which can be a new project or any
business activity.

All the participants in this venture are responsible for the

profits and losses.

Joint ventures, which actually run on a partnership basis

can take the form of any legal structure.