Grand strategies are a means to get to your ends – growth, profitability, etc. The more time that you spend researching and learning about your environment, your market and your business, the more clearly these come into focus for you. While there is always some uncertainty and some risk with any business decision, a strategic decision with the proper homework done is a pretty clear cut one.
According to Glueck there are basically four grand strategies alternatives:
Stability strategy implies continuing the current activities of the firm without any significant change in direction. If the environment is unstable and the firm is doing well, then it may believe that it is better to make no changes. A firm is said to be following a stability strategy if it is satisfied with the same market share, satisfied with the improvements of functional performance and the management does not want to take any risks that might be associated with expansion growth.
Two examples of stability strategy are:
EMTEL have been a stable company during the recent years, despite competition from orange. EMTEL has remain stable and have been on a going concern method
Phoenix beverages have also been using stability strategy the recent years because of good profit and good performance
In general, stability strategic can be very useful in the short run, but can be dangerous if followed for too long.
Growth strategies are the most widely pursued corporate strategies. Companies that do business in expanding industries must grow to survive. A company can grow internally by expanding its operations or it can grow externally through mergers, acquisitions, joint ventures or strategic alliances.
Growth strategies can be divided into three broad categories:
A. Intensive strategies
Without moving outside the organization’s current range of product and services it may be possible to attract customers by intensive advertising, and by realigning the product and the market options available to the organization.
There are three important intensive strategies:
Market penetration-seeks to increase market share for existing products in the existing markets through greater marketing efforts.
Market development-seeks to increase market share by selling the present products in the new market.
Product development-seeks to increase market share by developing new or improved products for present markets.
Integration basically means combining activities relating to the present activity of a firm. A company performs a number of activities to transform an input to output. These activities include right from the procurement of raw materials to the production of finished goods and their marketing and distribution to the ultimate customers.
Two types of integration:
Vertical integration- it involves gaining ownership or increased control over suppliers or distributors. Vertical integration is of two types:
Backward integration-involves gaining ownership of firm’s suppliers for example, a manufacturer of finished goods may take over the business of a supplier who manufactures raw materials, component parts and other inputs.
Forward integration-it involves gaining ownership or increased control over distributors or retailers.
Horizontal integration- this is a strategy seeking ownership or increase control over a firm competitor’s.
C. Diversification strategies
It is the process of adding new business to existing business of the company. In other words, diversification adds new products or markets in the existing ones. The diversification strategy is concerned with achieving a greater market from a greater range of products in order to maximize profits.
Types of diversifications:
Concentric diversification- adding to new but related business is called concentric diversification. It involves acquisition of businesses that are related to the acquiring firm in terms of technology, markets or product.
Conglomerate diversification- adding to new, but unrelated is called conglomerate diversification. The new will have no relationship to the company’s technology, products or markets.
Two examples of growth strategy are:
Merging of Mauritius telecom
Mauritius Telecom is a telecommunications and Internet service provider in Mauritius. Mauritius Telecom was founded in July 1992 by a merger between the former Overseas Telecommunications Services Ltd and Mauritius Telecommunication Services Ltd. As from that date, Mauritius Telecom became the major provider of voice, mobile, Internet and data communication services in Mauritius.
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In November 2000, France Telecom became the strategic partner of Mauritius Telecom by acquiring 40 percent of its shares. Following the partnership with France Telecom, Telecom Plus Ltd launched in 2002 broadband internet access which is branded under Wanadoo ADSL. By combining the technological and global strength of France Telecom, and the local and regional experience of Mauritius Telecom, the two companies have been able to offer innovative and useful technologies and launched in June 2006 the Multiplay IPTV services branded as My.T which enabled Mauritius to become among the first countries in the world to launch IPTV services.
True to its philosophy of being close to its customers, SBM was the first bank to establish branches in the rural areas, thereby establishing a national branch network. SBM is also rightly recognized for its lead in technology. It was the first bank in Mauritius to introduce the Europay-MasterCard-Visa (EMV) chip card technology, TopUp (mobile phone recharge) and Mobile Banking as well as the first eCommerce portal. The Bank has also introduced, under its brand name «SBM eSecure», enhanced security standards for internet transactions through the implementation of «Verified by Visa» and MasterCard «SecureCode» services. Besides, SBM is the preferred Visa partner in Mauritius. Using market insights and critical thinking, the Bank aims to continuously offer innovative products and services to meet the needs of its growing customer base.
Retrenchment / defensive strategies
A company may pursue retrenchment strategies when it has a weak competitive position in some or all of the products lines resulting in a poor performance.
In an attempt to eliminate the weaknesses that are dragging the company down, management may follow one or more of the following retrenchment strategies:
Turn around- a firm is said to be sick when it faces a severe cash crunch or a consistent downtrend in its operating profits. Such a firm becomes insolvent unless appropriate internal or external actions are taken to change financial picture of the firm.
Bankruptcy- this is a form of defensive strategy. It allows organization to file a petition in the court for legal protection to the firm in case the firm is not in a position to pay its debt.
Liquidation- it occurs when an entire company dissolves and its assets are sold. It is a strategy of last resort when there are no buyers for a business which want to be sold, the company may be wound up and its assets may be sold to satisfy debt obligations.
Divesture- selling a division or part of an organization is called divesture.
Examples of retrenchment/defensive strategies:
The Infinity Business Process Outsourcing (BPO) owes a sum of Rs 100 million to its creditors. This company has been bankrupt and did not pay his employees their salary due to a hunger protestation they finally got their right.
A firm may divest (sell) businesses that are not part of its core operations so that it can focus on what it does best. Eastman Kodak, Ford Motor Company, and many other firms have sold various businesses that were not closely related to their core businesses.
A company pursues a combination of two or more corporate strategies simultaneously. But a combination strategy can be exceptionally risky if carried out too far. No organization can afford to pursue all strategies that might benefit the firm. Difficult decision must be made. Priorities must be established. Organization like individuals have limited resources, so organizations must choose among alternative strategies.
Examples of combination strategy are:
Texas-based textile producer Cotton Incorporated uses a push/pull promotional strategy. They push to create customer demand through constantly developing new products and offering these products in stores; and pull customers towards these products through advertising and promotion deals.
Candico’s, the domestic confectionery company’s international expansion plan include a combination of organic and inorganic strategies, through strategic acquisitions and mergers, joint ventures or setting up independent manufacturing facilities in individual market.
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