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Types of strategies


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Types of strategies

  3. 3. TYPES OF STRATEGIES Forward Integration VerticalIntegration Strategies Backward Integration
  4. 4. FORWARD INTEGRATIONControl of the direct distribution of its products
  5. 5. BACKWARD INTEGRATIONControl of the suppliers
  6. 6. TYPES OF STRATEGIES Market PenetrationIntensive MarketStrategies Development Product Development
  7. 7. MARKET PENETRATION “Deals with enhancing the share of market by effective and innovativestrategies in order to make the present product more effective and attractive.”
  8. 8. MARKET DEVELOPMENT“Deals with adding products in different geographic areas.”
  9. 9. PRODUCT DEVELOPMENT“Deals with increasing the sales as well asrevenues by enhancing the quality of existingproducts.”“The quality of existing products can be easilyenhanced by adding different flavors in it .”
  10. 10. TYPES OF STRATEGIES Concentric DiversificationDiversification Conglomerate Strategies Diversification Horizontal Diversification
  11. 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. 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. 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. 14. CONGLOMERATEFirms 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. 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. 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. 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. 18. TYPES OF STRATEGIES RetrenchmentDefensive DivestitureStrategies Liquidation
  19. 19. RETRENCHMENT• A corporate-level strategy.• Seeks to reduce the size or diversity of an organizations 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. 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. 21. LIQUIDATIONSelling all of a company’s assets, in parts, fortheir tangible worthRecognition of defeat.Cease operating than to continue losing largesums of money
  22. 22. SOURCESAll of the information which is on these slides was taken from: