TYPES OF STRATEGIES

Demandante, Diarios, Marcelo, Roxas

 Learning Objectives

1 Identify and discuss eight characteristics of objectives and ten benefits of having clear objectives.

2 Define and give an example of eleven types of strategies.

3 Identify and discuss the three types of Integration Strategies.

Give specific guidelines when market penetration, market development, and product
4
development are especially effective strategies.
 Learning Objectives

5 Explain when diversification is an effective business strategy.

List guidelines for when retrenchment, divestiture, and liquidation are especially effective
6
strategies.

7 Identify and discuss Porter's five generic strategies.

Compare (a) cooperation among competitors, (b) joint venture and partnering, and (c)
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merger/acquisition as key means for achieving strategies
 Learning Objectives
Discuss tactics to facilitate strategies, such as (a) being a first mover, (b) outsourcing, and (c)
9
reshoring.

10 Explain how strategic planning offers in for-profit, not-for-profit, and small firms.
 Long-Term Objectives

• Represent the results expected from pursuing certain

strategies. Strategies represent actions to be taken to
accomplish long-term objectives.

• Are needed at the corporate,divisional, functional levels of

organization. They are important measure of managerial
performance.
 EIGHT DESIRED CHARACTERISTICS
OF OBJECTIVES

• Quantitative • Challenging
• Measurable • Hierarchical
• Realistic • Obtainable
• Understandable • Congruent accross departments
 1 Provide direction by revealing expectations.

2 Allow synergy

3 Assist in evaluation by serving standards.

Ten Benefits of 4 Establish Priorities

Having Clear 5 Reduce Uncertainty
Objectives
6 Minimize Conflicts

7 Stimulate exertion

8 aid in allocation resources

9 Aid in design of jobs

10 Provide basis for consistent decision making.

INTEGRATION
STRATEGIES
 INTEGRATION STRATEGIES

Forward integration and backward integration are sometimes collectively referred to as

vertical integration. Vertical integration strategies allow a firm to gain control over
distributors and suppliers, whereas horizontal integration refers to gaining ownership
and/or control over competitors.
Vertical and horizontal actions by firms are broadly referred to as integration strategies.
 Forward Integration
Involves gaining ownership or increased control over
distributors or retailers. Increasing numbers of
manufacturers (suppliers) are pursuing a forward integration
strategy by establishing websites to sell their products
directly to consumers.
 Backward Integration
It is a strategy of seeking ownership or increased control
of a firm's suppliers.
This strategy can be especially appropriate when a firm's
current suppliers are unreliable, too costly, or cannot meet
the firm's needs.
 Horizontal Integration
Seeking ownership of or control over a firm's competitors, horizontal
integration is arguably the most common growth strategy. Thousands
of mergers, acquisitions, and takeovers among competitors are
consummated annually. Nearly all these transactions aim for
increased economies of scale and enhanced transfer of resources and
competencies.
• Intensive Strategies

• Diversification Strategies

• Defensive Strategies
• Intensive Strategies
are those strategies, which demand further more intensive
efforts to improve the performance of existing products in
the market.

• Market Penetration
• Market Development
• Product Development
 MARKET PENETRATION
seeks to increase market share for present products or services in
present markets through greater marketing efforts.
 GUIDELINES THAT INDICATE MARKET
PENETRATION AS AN EFFECTIVE STRATEGY TO
PURSUE

industry sales increased

Unsaturated Increase in
current market have been economies of
usage rate
increasing scale
 MARKET
DEVELOPMENT
involves introducing
present products or
services into new
geographic areas.
 Guidelines that indicate market development as an effective
strategy to pursue

1. New channels of distribution

2. Successful at what it does.
3. Unsaturated markets exist.
4.Sufficient capital and human resources
to manage expanded operations.
5. Excess production capacity
6. Rapidly becoming global in scope.
 Product Development
- strategy that seeks increased sales by
improving or modifying present products or
services. It usually entails large R&D
expenditures.

Opportunities for product development strategies

are endless, given rapid technological changes
occurring daily.
 Guidelines that indicate product development as an effective
strategy to pursue

1. An organization has successful products that are in the maturity stage of

the product life cycle
2. Competes in an industry that is characterized by rapid technological
developments.
3. An organization competes in a high-growth industry.
4. Strong research and development capabilities
DIVERSIFICATION OF STRATEGIES
 The guidelines for when related diversification may be an
effective strategy are as follows:

1. An organization competes in a no-growth or a slow-growth industry.

2. Adding new, but related, products would significantly enhance the sales of current products.
3. New, but related, products could be offered at highly competitive prices.
4. New, but related, products have seasonal sales levels that counterbalance an organization’s
existing peaks and valleys.
5. An organization’s products are currently in the declining stage of the product’s life cycle.
Guidelines when unrelated diversification may be an especially
effective strategy:

1. Revenues derived from an organization’s current products or services would increase significantly by
adding the new, unrelated products.
2. An organization competes in a highly competitive or a no-growth industry, as indicated by low industry
profit margins and returns.
3. An organization’s present channels of distribution can be used to market the new products to current
customers.
4. An organization’s basic industry is experiencing declining annual sales and profits.
5. An organization has the opportunity to purchase an unrelated business that is an attractive investment
opportunity.
6. Existing markets for an organization’s present products are saturated.
MICHAEL PORTER’S FIVE
GENERIC STRATEGIES
 MICHAEL PORTER’S FIVE
GENERIC STRATEGIES

COST LEADERSHIP
Type 1: Low-Cost Strategy
offers products or services to a wide range of customers at the
lowest price available on the market.

Type 2: Best Value Strategy

offers products or ser- vices to a wide range of customers at the
best price-value available on the market.
 COST LEADERSHIP
STRATEGIES

TWO WAYS:

• Perform value chain activities more efficiently than

rivals and control the factors that drive the costs of
value chain activities.

2. Revamp the firm’s overall value chain to eliminate

or bypass some cost-producing activities.
 COST LEADERSHIP GUIDLINES

• Price competition among rival sellers is especially vigorous.

• Products of rival sellers are essentially identical and supplies are readily available from any of
several eager sellers.
• There are few ways to achieve product differentiation that have value to buyers.
• Most buyers use the product in the same ways.
• Buyers incur low costs in switching their purchases from one seller to another.
• Buyers are large and have significant power to bargain down prices.
• Industry newcomers use introductory low prices to attract buyers and build a customer base.
 MICHAEL PORTER’S FIVE
GENERIC STRATEGIES

DIFFERENTIATION

a strategy aimed at producing products and services

considered unique to the industry and directed at
consumers who are relatively price insensitive.
 DIFFERENTIATION GUIDLINES

• There are many ways to differentiate the product or service and many
buyers perceive these differences as having value.
• The buyer’s needs and uses are diverse.
• Few rival firms are following a similar differentiation approach.
• Technological change is fast paced and competition revolves around
rapidly evolving product features.
 MICHAEL PORTER’S FIVE
GENERIC STRATEGIES
FOCUS
Type 4: Low Cost Focus Strategy
offers products or services to a small range (niche group) of
customers at the lowest price available on the market.

Type 5: Best Value Focus Strategy

offers products or services to a small range of customers at the
best price-value available on the market.

Sometimes called focused differentation

MEANS FOR ACHIEVING
STRATEGIES
 MEANS FOR ACHIEVING
STRATEGIES

Cooperation among Competitors

Strategy that stress cooperation among competitors are being used

more. For collaboration between competitors to succeed, both firms
must contribute something distinctive, such as technology ,distribution,
basic research, or manufacturing capacity. But a major risk is that
unintended transfers of important skills or technology may occur at
organizational levels below where the deal was signed.
 MEANS FOR ACHIEVING
STRATEGIES

Joint Venture and Partnering

a popular strategy that occurs when two or more

companies form a temporary partnership or consortium for
the purpose of capitalizing on some opportunity.
 MEANS FOR ACHIEVING
STRATEGIES

Merger/Acquisition

Merger and acquisition are two commonly used ways to pursue

strategies. A merger occurs when two organizations of about equal size
unite to form one enterprise. An acquisition occurs when a large
organization purchases (acquires) a smaller firm or vice versa. If a
merger or acquisition is not desired by both parties, it is called a hostile
takeover, as opposed to a friendly merger.
 MEANS FOR ACHIEVING
STRATEGIES

Private-Equity Acquisitions

Private equity (PE) firms are acquiring and taking private

a wide variety of companies almost daily in the business
world.
Private equity firms buy companies and overhaul them to
earn a profit when the business is sold again.
TACTICS TO FACILITATE
STRATEGIES
FIRST MOVER ADVANTAGES

It refers to the benefits of a firm may achieve by entering new

market or developing a new product or service prior to a rival
firm.

To sustain the competitive advantage gained by being the first

mover, a firm needs to be a fast learner.
FIVE BENEFITS OF A FIRM BEING
THE FIRST MOVER
 OUTSOURCING AND RESHORING
• Outsourcing is when a firm moves a business function or activity to
external contractors who complete the function for less than the
firm’s internal cost. Some firms move all production overseas,
where manufacturing costs are lower, or simply outsource
component production.
 RESHORING
Reshoring is when outsourced functions are returned to the
location from which they were originally offshored. This may
follow concerns about declining productivity and quality or
increasing costs in overseas markets
THIRTEEN POTENTIAL BENEFITS OF
OUTSOURCING
STRATEGIC MANAGEMENT IN
NONPROFIT, GOVERNMENTAL,
AND SMALL FIRMS
 Nonprofit organizations are basically just like for-profit companies except for two major
differences: (1) nonprofits do not pay taxes and (2) nonprofits do not have shareholders to
provide capital. In virtually all other ways, these two types of organizations are like one another.

Compared to for-profit firms, nonprofit and governmental organizations may be totally

dependent on outside financing. Especially for these organizations, strategic management
provides an excellent vehicle for developing and justifying requests for needed financial support.
EDUCATIONAL INSTITUTIONS
• Educational institutions are more frequently using strategic-
management techniques and concepts.

• Richard Cyert, former president of Carnegie Mellon

University, said, “I believe we do a far better job of strategic
management than any company I know.”
 MEDICAL ORGANIZATION

Current strategies being pursued by many hospitals include creating home

health services, establishing nursing homes, and forming rehabilitation
centers. Backward integration strategies that some hospitals are pursuing
include acquiring ambulance services, waste disposal services, and
diagnostic services
GOVERNMENTAL AGENCIES AND DEPARTMENTS

Strategic-management concepts are generally required and thus widely used to enable
governmental organizations to be more effective and efficient.

Strategists in governmental organizations operate with less strategic autonomy than their
counterparts in private firms. Public enterprises generally cannot diversify into unrelated
businesses or merge with other firms.
 SMALL FIRMS

The strategic-management process is just as vital for small

companies as it is for large firms. From their inception, all
organizations have a strategy, even if the strategy just evolves from
day-to-day operations.
THANK YOU!