Different types of strategies

1. Unit III

3. Corporate Level Strategies
Basically about decisions related to
 Allocating resources among the different businesses of
a firm
 Transferring resources from one set of businesses to
others
 Managing and nurturing a portfolio of businesses
 Corporate Level Strategies help to exercise the choice
of direction than an organization adopts

4. Strategic Alternatives
 Strategic alternatives revolve around the question of
whether to continue or change the business the
enterprise is currently in or improve the efficiency and
effectiveness with which the firm achieves its
corporate objectives in its chosen business sector
 Gleuck : 4 strategic alternatives
 Expansion
 Stability
 Retrenchment
 Any combination of these three

5. Expansion Strategies
 Reason
 Environment demands increase in pace of activity
 Psychological satisfaction for strategists from expansion
 Increasing size may lead to more control over market
vis-à-vis [in relation to] competitors
 Advantages from experience curve and scale of
operations may accrue

6. Expansion Strategies
 Expansion through Concentration
 Expansion through Integration
 Expansion through Diversification
 Expansion through Cooperation
 Expansion through Internationalization
 Expansion through Digitalization
 Growth is a way of life; Almost all organizations plan to
expand

7. Expansion through Concentration
 Simple
 Converging resources in one or more of a firm’s
businesses in terms of their respective customer needs,
customer functions, or alternative technologies - either
singly or jointly - in such a manner that expansion
results
 Known variously as intensification, focus or
specialization strategies or ‘stick to the knitting’
strategies

8. Expansion through Concentration
 Ansoff’s Product - Market Matrix

9. Expansion through Concentration
 Market Penetration
 Selling more products to the same market
 Focusing intensely on existing markets with its present
products
 Increasing usage by existing customers
 Maintain or increase market share of present products
 Restructure a mature market by driving out competitors
 Secure dominance in growth markets
 Eg. Air Deccan : Low-price, technology usage,
Outsourcing

10. Growth in Existing Product
Markets
 Increasing Market Share
 Increasing Product Usage
 Provide Reminder Communications
 Position for Regular or Frequent Use
 Make the Use Easier
 Provide Incentives
 Reduce Undesirable Consequences of Frequent Use
 Revitalize the Brand
 New Applications for Existing Product Users

11. Expansion through Concentration
 Market Development
 Selling same products to new markets
 Try attracting new users for existing products
 New markets : Geographic, Demographic
 Eg. Coir industry

12. Market Development Using
Existing Products
 Expanding Geographically
 Expanding into New Market Segments
 Usage
 Distribution Channel
 Age
 Attribute preference
 Application-defined market
 Evaluating Market Expansion Alternatives
 Is the market attractive?
 Do the resources exist and will exist to make the necessary commitment in the face
of uncertainties?
 Can the business be adapted to the new market?
 Can the assets and competencies that are at the heart of the business success be
transferred into the new business environment?

13. Expansion through Concentration
 Product Development
 Selling new products to the same markets
 Newer products in the existing markets by
concentration on product development
 Eg. Tourism in India : Ayurveda based medical
treatment destination

14. Product Development for Existing
Market
 Line Extensions
 Developing New-Generation Products
 Expand the Product Scope
 New Products for the Existing Markets

15. Expansion through Concentration
 Firm has high potential for growth and sufficiently
attractive for concentration to take place
 Internally strong enough to sustain expansion
 Have adequate funds to invest in additional resources
required for expansion to take place
 Able to develop new competencies required to develop
new products and markets
 First preference under expansion; familiar industry is
preferable than unknown ones

16. Expansion through Concentration
 Advantages
 Minimal organizational changes, so less threatening
 Master one or a few business and enable specialization
by gaining indepth knowledge
 Intense focusing of resources on a few businesses
 Managers face less problems dealing with known
situations
 Decision making process is under less strain as there is
high level of predictability

17. Expansion through Concentration
 Limitations
 Heavily dependent on one industry; adverse conditions
in an industry affect the firms if they are intensely
concentrated
 Factors such as product obsolescence, fickleness of
markets and emergence of newer technologies are
threats to concentrated firms
 Doing too much of a known thing; work becomes less
challenging and stimulating
 Large cash inflows are required to build assets

18. Expansion through Integration
 Combining activities related to the present activity of a
firm

19. Integration strategies
 Horizontal integration: When an organisation takes up the
same type of products at the same level of production or
marketing process
 Vertical integration: When an organisation starts making
new products that serve its own needs
 Partial Integration Strategies
 Taper integration strategies require firms to make a part
of their own requirements and to buy the rest from
outsiders.
 Quasi integration strategies firms purchase most of
their requirements from other firms in which they have an
ownership stake.

20. VERTICAL
INTEGRATION
FIRM IS ITS
OWN
CUSTOMER
FIRM
MARKETS
ITS OWN
PRODUCTS
HORIZONTAL
INTEGRATION
Same type of products at same
level of production or
marketing process
New products that serve the
organization’s own needs
ACQUISITION TAKE OVER

21. Horizontal Integration
 Results in bigger size
 Stronger competitive position
 Still remains in the same industry, serving the same
markets and customers through its existing products,
by the means of the same technologies
 Quite similar to mergers and acquisitions
 For small-scale industries, cooperative societies and
NGOs (small in size with limited impact), horizontal
integration strategy is innovative means of increasing
the size of the impact rather than merely augmenting
the physical size

22. Horizontal Integration - Benefits
 Economies of scale
 Economies of scope : 2 or more organizations using
the same resource base to produce variety of products
in the product range offered; better utilization of
resources
 Increased product differentiation : Product bundling
 Increased market power over suppliers and customers
 Replicating a successful business model of another
organization
 Reduction in industry rivalry

24. Horizontal Integration - Risks
 Little evidence - horizontal integration increases value
of an organization
 Horizontal integration increases size and attracts
provisions of Monopolies and Restrictive Trade
Practices Act
 Economies of scope may not necessarily arise.

25. Vertical Integration
 Organization starts making new products that serve
its own needs
 Two types :
 Backward Integration : Retreating to the source of raw
materials
 Forward Integration : Moves the organization ahead,
nearer to the ultimate customer

26. Vertical Integration Strategies
 Access to Supply or Demand
 Access to Supply
 Access to Demand
 Control of the Product System
 Entry into a Profitable Business Area
 Comprehensive services
 Distributor/Retailer
 Embedded services
 Integrated solution
 Risks of Managing a Different Business

27. Vertical Integration - Risks
 Increased costs of coordinating integration over
multiple stages of value chain
 Potential for either excess capacity or under-utilization
of resources
 Technological obsolescence due to relying on outside
manufacturers
 Loss of strategic flexibility owning to dependence on
outsiders
 Increased mobility and exit barriers
 Lack of information and feedback from suppliers and
distributors

28. Expansion through Diversification
 When new products are made for new markets
 Make new products or Serve new markets or do both
simultaneously
 Involves substantial change in business definition (in
terms of customer functions, customer groups or
alternative technologies of one or more of a firm’s
businesses)
 2 Alternatives :
 Related / Concentric Diversification
 Unrelated / Conglomerate Diversification

29. Related Technology Unrelated Technology
New Functions New Products
Firms is its own
customer
Vertical Integration
Same type of
product
Horizontal Integration
Similar type of
product
Marketing and technology
related diversification
Marketing related
concentric
diversification
New type of
product
Technology related
concentric diversification
Conglomerate
diversification
Expansion through Integration &
Diversification

30. Concentric Diversification
 Related to existing business definition of 1 or more of a
firm’s businesses either in customer groups, customer
functions or alternative technologies
 Advantages
 Enables Diversification from its original business
 Keeps the organization close to its original business in
terms of relatedness

31. Reasons for Concentric
Diversification
 Realizing Financial Synergies
 Realizing Marketing Synergies
 Realizing Operational Synergies
 Realizing Personnel Synergies
 Realizing Informational Synergies
 Realizing Managerial Synergies

32. Concentric Diversification
 3 types
 Marketing related concentric diversification (eg. A company
in sewing machine business diversifies into kitchenware
and household appliances, which are sold through a chain
of retail stores to family consumers. Common Distribution
Channel.
 Technology related concentric diversification (eg. Addition
of tomato ketchup to existing Maggi brand)
 Marketing and Technology related concentric
diversification (eg. Usha International has diversified into
home appliances like Juicer, Mixer, Geyser, Vaccuum
Cleaners and Washing Machines and Exhaust fans and tries
to exploit its distribution of network of dealers)

33. Conglomerate Diversification
 Taking up activities which are unrelated to the existing
business definition of any of its businesses
 Unfamiliar Technology; New set of customers
 Excess Capital over and above what is required; Invested
in sectors that generate more value for shareholders.
 Identify undervalued companies, managing the process of
acquisition, skill at turning around loss making
businesses, then sell them for higher price
 Eg. Aditya Birla group : Aluminium, BPO, Carbon black,
Cement, Chemicals, Copper, Fertilizers, Gas, Insulators,
Mining, Retail, Software, Sponge iron, Telecom and
Textiles

34. Reasons for Conglomerate
Diversification
 Spreading business risks
 Maximizing returns
 Leveraging competencies in corporate restructuring by
turning around loss making companies
 Stabilizing returns by avoiding economic upswings and
downswings through having stakes in different industries
 Taking advantage of emerging opportunities
 Migrating from businesses under threat
 Exercising personal choice by industrialists to create
industrial empires by owning businesses in diverse sectors

35. Risks of Diversification
 Complex strategy to formulate and implement
 Demand wide variety of skills
 Decreasing commitment to a single or few businesses
and diverting it to several of them at the same time
 Often does not result in promised rewards
 Increases administrative costs of managing,
integrating and controlling a wide portfolio of
businesses

36. Expansion through
Internationalization
 Marketing products or services beyond the domestic
or national market
 Context
 Technological developments : Reducing transportation
costs, improvement in communication technology,
policy induced trade liberalization lowering barriers to
international trade and investment

37. Porter’s Model of Competitive
Advantage of Nations

38. Diamond Determinants
 Factor conditions – raw materials, labour that a
country is endowed with
 Demand- nature and size of buyer needs in domestic
market
 Related and supporting industries – existence of
related and supporting industries
 Firm strategy, structure and rivalry – conditions in
the country that determine how firms are created and
nature of domestic competition

39. Four types of International
Strategies

40. Four types of International
Strategies
 International strategy – Transfer of products and services to
foreign markets where they are not available. Standardized
products in worldwide markets with not much differentiation –
low cost structure
 Multi domestic strategy – Customised products and services
according to local conditions – high cost structure
 Global strategy – low cost approach – standardised products
or services in a few chosen foreign markets or favourable
markets – undifferentiated products – competitive pricing
 Transnational strategy – combination of low cost and
differentiation

46. International Entry Modes
 Export entry
 Direct exports – no home country intermediaries
involved - distribution through direct agents/
branches in overseas markets
 Indirect exports – home country intermediaries
responsible for exporting the firm’s products

47. International Entry Modes
 Contractual entry
 Licensing (transfers knowledge, technology, patent, etc for
limited period of time for payment)
 Franchising (right to use business format (brand name) in
return for payment
 Technical agreements (technology transfers)
 Service contracts (technical support or expertise provision)
 Contract manufacturing
 Production sharing
 Turnkey operations (supply a facility that is ready to operate;
seller trains buyer in operations)
 Build-Operate-Transfer arrangement

48. International Entry Modes
 Investment entry
 Joint ventures and strategic alliances - cooperative
partnerships (we’ll discuss these under Expansion
through Cooperation)
 Independent ventures or wholly owned subsidiaries –
parent company holds 100% equity and is in full
control

49. International Entry Modes
 Born - Global Firms
 Business organization that, from or near their founding,
seek superior international performance from the
application of knowledge-based resources to the sale of
outputs in multiple countries
 Common among Indian Expatriates

50. Advantages of Internationalization
 Economies of scale – cost related
 Economies of scope – competencies and skills related
 Expansion and extension of markets
 Realising location economies
 Access to natural resources

51.  Higher risks
 Difficulty managing cultural diversity
 High bureaucratic costs – coordination and
communication
 Higher distribution costs
 Trade barriers
Disadvantages of
Internationalization

52.  Regionalization is semi-globalization strategy
 It is between extreme geographically fragmented markets and
complete integration
 5 Regionalization Strategies
 Home-base strategies (manufacturing in home country and export)
 Portfolio strategies (build-up or acquire a set of international
manufacturing facilities)
 Hub strategies (build-up network of hubs @ different locations,
providing shared resources and services and serving countries in the
regional markets)
 Platform strategies (maintaining inter-regional platforms providing
back-end activities)
 Mandate strategies (pursue economies of specialization through
inter-regional mandates that assign specific products or roles to
particular regions)
Regionalization Strategies

53. Bottom-of-Pyramid markets (BoP)
 A market characterized by people with very little income who
prefer to buy cheaper products or services in lesser quantities
and are not concerned about high quality or other
differentiation propositions
 Tactics for BoP markets
 Easy instalment payments
 Cost cutting (medical services cost in US & India)
 Small packaging (shampoo sachets instead of bottles)
 Pay-by-use pricing (paying a small amount at cyber café to
use computer and access internet)
 Direct distribution (directly buying agricultural products
from farmers)

55. Expansion through Cooperation
Cooperation
Mergers and
Acquisitions or
Take-overs
Joint Ventures
Strategic
Alliances
Simultaneous competition
and cooperation between
rival firms for mutual benefit

57. Merger
 Is a combination of two or more organizations in which one
acquires the assets and liabilities of the other in exchange
for share or cash or both
 For the firm that acquires it is an acquisition and for the
firm that is acquired it is a merger
OR
 Both organizations are dissolved and assets and liabilities
are combined and new stock is issued

58. Types of Mergers
 Horizontal Merger – when the merger is between firms in
the same business. Eg: footwear company with another
footwear company
 Vertical Merger- when the merger is between firms in
complementary businesses. Eg: footwear company with
a leather tannery
 Concentric Merger- When the merger is between firms
that are related in terms of the customer groups,
function or alternate technologies. Eg: footwear
company with a company making leather bags, purses
 Conglomerate Merger- When the merger is between
firms that are unrelated in terms of the customer
groups, function or alternate technologies. Eg:
footwear company with a pharmaceutical company

59. Reasons for Mergers and Acquisitions
(One is Buyer Org and other is Seller Org)
 Buyer Benefits
 Increase value
 Increase Growth rate and make
good investment
 Improve stability of earnings and
sales
 Balance / Complete / Diversify
product line
 Reduce competition
 Acquire a needed resource
quickly
 Avail tax benefits and
concessions
 Take advantages of synergy
 Seller Benefits
 Increase value
 Increase Growth rate
 Acquire resources to stabilize
operations
 Benefit from tax legislation
 Deal with top management
succession problem

60. Important issues in Mergers and
Acquisitions
 Strategic issues – careful analysis of the strategic
advantage and distinctive competencies of merging
firms to have positive synergistic effects
 Managerial issues
 Legal issues

61.  Financial issues
 Valuation of the business and shares of the target firm
 Tangible and intangible assets
 Industry profile- future prospects and earnings
 Stock exchange prices of shares, dividends paid, growth prospects, value
of assets, quality and integrity of top management, opportunity cost
assessment
 Sources of financing the mergers
 Own funds
 Borrowed funds
 Debentures, bonds, deposits, external commercial
borrowings, loan from financial institutions,
 Taxation after merger
 Carrying forward or set off of losses, unabsorbed depreciation, capital
gains tax, amortization of expenses
Important issues in Mergers and Acquisitions

62. 6-steps Method of Merger & Acquisition
State the objectives
Indicate how the objective is to be achieved
Assess managerial quality
Check compatibility of business styles
Anticipate and solve problems early
Treat people with dignity and concern

63. Disadvantages of Merger &
Acquisitions
 No real assets for society
 Interests of minority shareholders in not protected
 Reduces competition and facilitates monopolistic or
oligopolistic tendencies
 Increase in price
 Loss of jobs
 Organizational culture problems
 Hidden liabilities of target firms

64. Joint Ventures
 When two or more companies combine to form a
temporary partnership for a specified purpose
Reasons for Joint ventures
•When an activity is uneconomical for an organization to do
alone
•When the risk of the business has to be shared
•When distinctive competence of two or more organizations
can be brought together
•When setting up an organization is difficult because of import
quotas, tariffs, nationalistic political interest, cultural
roadblocks, legal and regulatory hurdles

65. Strategic Alliances
 3 necessary characteristics
 Two or more firms unite to pursue a set of agreed upon
goals but remain independent subsequent to the
formation of the alliance
 Partner firms share the benefits of the alliance and
control over the performance of assigned tasks
 Partner firms contribute on a continuing basis, in one
or more key strategic areas

66. Reasons for Strategic Alliances
 Entering New Markets
 Reducing manufacturing costs
 Developing and diffusing technology
Types of Strategic Alliances
 Procompetitive alliances (inter industry, vertical)
 Noncompetitive alliances (intraindustry & not rivals)
 Competitive alliance (rivals in cooperative agreement)
 Precompetitive alliance (different industries work on
well-defined activities)

67. Expansion through Digitalization
 Includes business, social sciences and technology
 Computerization, Electronization and Digitization are
supported by two other components of networking
and telecommunication that create merging of all
types of information into common digital form

68. Stability Strategies
 Reason
 Less risky, involves less changes and people feel
comfortable with things as they are
 Environment faced is relatively stable
 Expansion may be perceived as threatening
 Consolidation is sought through stabilizing after a
period of rapid expansion

69. Stability Strategies
 No change strategies
 Pause / Proceed with caution strategies
 Profit Strategies

70. Retrenchment Strategies
 Reason
 Management no longer wishes to remain in business
either partly or wholly, due to continuous losses and the
organization is becoming unviable
 Environment faced is threatening
 Stability can be ensured by reallocation of resources
from unprofitable to profitable businesses

71. Retrenchment Strategies
 Turnaround Strategies
 Divestment Strategies
 Liquidation Strategies

72. Combination Strategies
 Reason
 Organization is large and faces complex environment
 Organization is composed of different business, each of
which lies in a different industry, requiring a different
response

73. Combination Strategies
 Simultaneous Combination
 Sequential Combination
 Combination of simultaneous and sequential
strategies

76. Business Level Strategies
 Course of action adopted by an organization for each of
its businesses separately
Dynamic factors that determine the choice of a competitive
strategy
 Industry Structure
 Determined by threat of new entrants, threat of substitute
products or services, bargaining power of suppliers,
bargaining power of buyers and the rivalry among existing
competitors in the industry
 Positioning of firm in industry
 Competitive advantage
 Competitive scope (breadth of an organization’s target
within its industry)

77. Generic Business Strategies

78. Achieving Cost Leadership
 Accurate demand forecasting and high capacity
utilization
 Attaining economies of scale
 High level of standardization of products and offering
uniform service packages
 Aiming covering greater number of customer’s
requirements
 Investments in cost-saving technologies
 Withholding differentiation till it becomes absolutely
necessary

79. Achieving Differentiation
Incorporate features that
 Offer utility for the customer and match their
preferences
 Lower overall cost for the buyer
 Raise performance
 Increase buyer satisfaction in tangible / intangible ways
 Offer promise of a high quality product / service
 Enable customer distinctiveness from other customers
and enhance status & prestige
 Offer full range of product / service that customer
requires for need satisfaction

80. Achieving Focus Strategy
 Choosing specific niches by identifying gaps not
covered by cost leaders and differentiators
 Creating superior skills for catering to such niche
markets
 Creating superior efficiency for serving such niche
markets
 Achieving lower cost / differentiation as compared to
competitors in serving such niche markets
 Developing innovative ways in managing value chain
which is different from the prevalent ways in an
industry

81. Tactics for Business Strategies
 Timing Tactics (First Movers and Late Movers)
 When
 What
 Market Location Tactics
 Market Leaders
 Expanding total market
 Defending market share
 Expanding market share through enhancement of operational
effectiveness

82. Tactics for Business Strategies
 Market Location Tactics
 Market Challengers
 Frontal attack (product, price, promotion, distribution)
 Flank attack (on weak areas of opponent)
 Encirclement attack (grand move to capture market share)
 Bypass attack (attack easier markets and ignore opponent)
 Guerrilla attack ( small, intermittent attacks to demoralize
opponent organization's foothold)
 Market Followers
 Counterfeiter strategy (duplicate and sell in black market)
 Cloner strategy (emulate products, name and packaging)

83. Tactics for Business Strategies
 Market Location Tactics
 Market Followers
 Imitator strategy (copying some things while retaining others)
 Adapter strategy (adapting one’s own products to those of the
market leader and selling in different markets)
 Market Nichers
 Creating niches
 Expanding niches
 Protecting niches

85. Business Strategies
 Internationalization
 Business strategies of cost leadership, differentiation,
and focus at international level
 Leveraging national and organization specific
advantages
 Digitalization
 Digitalization and Competitive Advantage
 Digitalization and Cost Leadership
 Digitalization and Differentiation
 Digitalization and Focus

87. Process of Strategic Choice
 Focusing on strategic alternatives
 Analyzing the strategic alternatives
 Evaluating the strategic alternatives
 Choosing from among the strategic alternatives

88. Focusing on Strategic Alternatives
 Narrow down the choice to a manageable number of
feasible strategies
 Visualizing future and working backwards
 Gap Analysis
 Narrow or Wide Gap
 Importance
 Possibility of gap being reduced

91. Analyzing the Strategic Alternatives
Analysis on factors called as selection factors
 Objective factors – hard facts or data used to facilitate
a strategic choice
 Rational
 Normative
 Prescriptive
 Subjective factors – personal factors
 Personal judgment
 Collective factors
 Descriptive factors

92. Strategic Analysis (Tools &
Techniques)
 Corporate Portfolio Analysis
 GE Nine-cell Matrix
 Corporate Parenting Analysis
 SWOT Analysis
 Experience Curve Analysis
 Life cycle Analysis (Product Life Cycle)
 Industry Analysis (Porter’s 5 Forces Analysis)
 Strategic Groups Analysis (BCG Matrix, 7S framework)
 Competitor Analysis

94. Corporate Parenting Analysis
 Campbell, Goold and Alexander suggest 2 issues to be
addresssed
1. What businesses should a diversified corporation
own and why
2. What organizational structure, management
processes and philosophy will foster superior
performance from the corporation’s business units?

95. SWOT Analysis

96. Experience Curve Analysis

97. Product Life Cycle

98. Industry Analysis

99. Strategic Group Analysis
 BCG Matrix
 7S framework - used as an organizational analysis tool
to assess and monitor changes in the internal situation
of an organization

102. Competitor Analysis
 Purpose (Acc. To Porter)
 Determine each competitor’s probable reaction to the
industry and environmental changes
 Anticipate the response of each competitor to the
likely strategic moves by the other firms
 Develop a profile of the nature and success of the
possible strategic changes each competitor might
undertake

103. Strategic Choice
 Subjective Factors
 Considerations for Governmental policies
 Perception of Critical Success Factors (CSF) and
distinctive competencies
 Commitment to past strategic actions
 Strategist’s decision styles and attitude to risk
 Internal political considerations
 Timing and competitor considerations

104. Evaluating and Choosing the
Strategic Alternatives
 Consider both objective and subjective factors
 Assessment of alternatives under existing conditions
 Choose one or more strategies for implementation
 Blueprint strategic plan describing strategies and
conditions under which they would operate

105. Strategic Plan
 Also known as corporate, group or perspective plan
 Document which provides information regarding the
different elements of strategic management and the
manner in which an organization and its strategists
propose to put the strategies into action