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INTERNATIONAL STRATEGIC
MANAGEMENT
PROFESSOR: TATIANA VELEZ ANGEL
TYPES OF
STRATEGIES
TYPES OF STRATEGIES

                      Forward
                     Integration



  Vertical
Integration
 Strategies

                       Backward
                      Integration
FORWARD INTEGRATION




Control of the direct distribution of its products
BACKWARD
  INTEGRATION



Control of the suppliers
TYPES OF STRATEGIES

                      Market
                    Penetration



Intensive            Market
Strategies         Development



                     Product
                   Development
MARKET
          PENETRATION


  “Deals with enhancing the share of
   market by effective and innovative
strategies in order to make the present
 product more effective and attractive.”
MARKET
         DEVELOPMENT



“Deals with adding products in different
          geographic areas.”
PRODUCT DEVELOPMENT


“Deals with increasing the sales as well as
revenues by enhancing the quality of existing
products.”


“The quality of existing products can be easily
enhanced by adding different flavors in it .”
TYPES OF STRATEGIES

                         Concentric
                        Diversification



Diversification         Conglomerate
  Strategies            Diversification



                          Horizontal
                        Diversification
DIVERSIFICATION STRATEGIES

• Why Firms Diversify:

  – To grow
  – To more fully utilize existing resources and
    capabilities.
  – To escape from undesirable or unattractive
    industry environments.
  – To make use of surplus cash flows.
CONCENTRIC


“A company acquires or develops new products
 or services (closely related to its core business
    or technology) to enter one or more new
                     markets.”
HORIZONTAL



“Adding related or similar product/service lines
   to existing core business, either through
 acquisition of competitors or through internal
   development of new products/services.”
CONGLOMERATE



Firms pursue this strategy for several reasons:

   • Continue to grow after a core business has matured or
     started to decline.
   • To reduce cyclical fluctuations in sales revenues and
     cash flows.
CRUCIAL ROLE OF
                          MANAGERS
• Successful diversification strategies result from the ability of
  managers to develop skill and competency at MANAGING
  diversification.

• Managers must develop two important types of mental
  models:
  – Must have well-developed understandings of their firm’s
    diversity and relatedness that define their companies.
  – Must also have well-developed beliefs about how
    diversification should be managed in order to achieve
    synergies.
CRUCIAL ROLE OF
                      MANAGERS
• The “Learning Hypothesis”
  – Managers learn from trial and error.
     • They evaluate success of past strategic decisions.
     • These acquired beliefs become embedded in an
       organization’s routine operating procedures.
        – Usually difficult for rivals to imitate.
  – By engaging in a number of acquisitions over time,
    managers can come to develop an expertise about
    how the acquisition process should be managed.
CRUCIAL ROLE OF
                    MANAGERS

• Those firms with management teams that have more
  experience at managing diversification will enjoy higher
  performance than those firms that do not have that
  experience.
   – Evidence suggests that firm’s stock market performance is
     directly related to diversification experience (see exhibit on
     following slide).
TYPES OF STRATEGIES


                   Retrenchment




Defensive           Divestiture
Strategies



                    Liquidation
RETRENCHMENT
• A corporate-level strategy.
• Seeks to reduce the size or diversity of an
  organization's operations.
• Reduction of expenditures in order to become
  financially stable.
• Retrenchment is a pullback or a withdrawal
  from offering some current products or
  serving some markets.
DIVESTITURE
• Selling a division or part of an organization.

• Used to raise capital for further strategic
  acquisitions or investments.

• When firms try to focus on their core
  strengths, lessening their level of
  diversification.
LIQUIDATION
Selling all of a company’s assets, in parts, for
their tangible worth

Recognition of defeat.

Cease operating than to continue losing large
sums of money
SOURCES
All of the information which is on these slides was taken from:

http://www.businessdictionary.com/definition/concentric-diversification.html#ixzz1lYJM


www2.gsu.edu/~wwwsmg/BA8993week10.ppt


http://www.mba-tutorials.com/strategy/1112-intensive-strategies.html


http://www.investopedia.com/terms/f/forwardintegration.asp#ixzz1lYfXLCay

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Types of strategies

  • 3. TYPES OF STRATEGIES Forward Integration Vertical Integration Strategies Backward Integration
  • 4. FORWARD INTEGRATION Control of the direct distribution of its products
  • 5. BACKWARD INTEGRATION Control of the suppliers
  • 6. TYPES OF STRATEGIES Market Penetration Intensive Market Strategies Development Product Development
  • 7. MARKET PENETRATION “Deals with enhancing the share of market by effective and innovative strategies in order to make the present product more effective and attractive.”
  • 8. MARKET DEVELOPMENT “Deals with adding products in different geographic areas.”
  • 9. PRODUCT DEVELOPMENT “Deals with increasing the sales as well as revenues by enhancing the quality of existing products.” “The quality of existing products can be easily enhanced by adding different flavors in it .”
  • 10. TYPES OF STRATEGIES Concentric Diversification Diversification Conglomerate Strategies Diversification Horizontal Diversification
  • 11. DIVERSIFICATION STRATEGIES • Why Firms Diversify: – To grow – To more fully utilize existing resources and capabilities. – To escape from undesirable or unattractive industry environments. – To make use of surplus cash flows.
  • 12. CONCENTRIC “A company acquires or develops new products or services (closely related to its core business or technology) to enter one or more new markets.”
  • 13. HORIZONTAL “Adding related or similar product/service lines to existing core business, either through acquisition of competitors or through internal development of new products/services.”
  • 14. CONGLOMERATE Firms pursue this strategy for several reasons: • Continue to grow after a core business has matured or started to decline. • To reduce cyclical fluctuations in sales revenues and cash flows.
  • 15. CRUCIAL ROLE OF MANAGERS • Successful diversification strategies result from the ability of managers to develop skill and competency at MANAGING diversification. • Managers must develop two important types of mental models: – Must have well-developed understandings of their firm’s diversity and relatedness that define their companies. – Must also have well-developed beliefs about how diversification should be managed in order to achieve synergies.
  • 16. CRUCIAL ROLE OF MANAGERS • The “Learning Hypothesis” – Managers learn from trial and error. • They evaluate success of past strategic decisions. • These acquired beliefs become embedded in an organization’s routine operating procedures. – Usually difficult for rivals to imitate. – By engaging in a number of acquisitions over time, managers can come to develop an expertise about how the acquisition process should be managed.
  • 17. CRUCIAL ROLE OF MANAGERS • Those firms with management teams that have more experience at managing diversification will enjoy higher performance than those firms that do not have that experience. – Evidence suggests that firm’s stock market performance is directly related to diversification experience (see exhibit on following slide).
  • 18. TYPES OF STRATEGIES Retrenchment Defensive Divestiture Strategies Liquidation
  • 19. RETRENCHMENT • A corporate-level strategy. • Seeks to reduce the size or diversity of an organization's operations. • Reduction of expenditures in order to become financially stable. • Retrenchment is a pullback or a withdrawal from offering some current products or serving some markets.
  • 20. DIVESTITURE • Selling a division or part of an organization. • Used to raise capital for further strategic acquisitions or investments. • When firms try to focus on their core strengths, lessening their level of diversification.
  • 21. LIQUIDATION Selling all of a company’s assets, in parts, for their tangible worth Recognition of defeat. Cease operating than to continue losing large sums of money
  • 22. SOURCES All of the information which is on these slides was taken from: http://www.businessdictionary.com/definition/concentric-diversification.html#ixzz1lYJM www2.gsu.edu/~wwwsmg/BA8993week10.ppt http://www.mba-tutorials.com/strategy/1112-intensive-strategies.html http://www.investopedia.com/terms/f/forwardintegration.asp#ixzz1lYfXLCay