This document discusses various integration, intensive, defensive, and generic business strategies. It defines forward, backward, and horizontal integration strategies as well as guidelines for when each may be applicable. Intensive strategies like market penetration, market development, and product development are defined along with related guidelines. Defensive strategies of retrenchment, divestiture, and liquidation are outlined. Finally, Michael Porter's five generic strategies of cost leadership, differentiation, and focus are explained.

1. Strategies in
Action
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2. Integration Strategies
 Forward integration
 involves gaining ownership or increased
control over distributors or retailers.
 Backward integration
 strategy of seeking ownership or increased
control of a firm’s suppliers.
 Horizontal integration
 a strategy of seeking ownership of or increased
control over a firm’s competitors.
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3. Forward Integration Guidelines
 When an organization’s present distributors
are especially expensive.
 When the availability of quality distributors is
so limited as to offer a competitive
advantage.
 When an organization competes in an
industry that is growing.
 When present distributors or retailers have
high profit margins.
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4. Backward Integration Guidelines
 When an organization’s present suppliers
are especially expensive or unreliable.
 When the number of suppliers is small and
the number of competitors is large.
 When the advantages of stable prices are
particularly important.
 When an organization needs to quickly
acquire a needed resource.
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5. Horizontal Integration Guidelines
 When an organization competes in a growing
industry.
 When increased economies of scale provide
major competitive advantages.
 When competitors are uncertain due to a lack of
managerial expertise.
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6. Intensive Strategies
 Market penetration strategy:
 seeks to increase market share for present
products or services in present markets
through greater marketing efforts.
 Market development:
 involves introducing present products or
services into new geographic areas.
 Product development strategy:
 seeks increased sales by improving or
modifying present products or services
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7. Market Penetration Guidelines
 When the usage rate of present customers
could be increased significantly.
 When the market shares of major competitors
have been declining while total industry sales
have been increasing.
 When increased economies of scale provide
major competitive advantages.
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8. Market Development Guidelines
 When new channels of distribution are available
that are reliable, inexpensive, and of good
quality.
 When an organization is very successful at what
it does.
 When new untapped or unsaturated markets
exist
 When an organization has excess production
capacity.
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9. Product Development Guidelines
 When an organization has successful products
that are in the maturity stage of the product life
cycle.
 When an organization competes in an industry
that is characterized by rapid technological
developments.
 When major competitors offer better-quality
products at comparable prices.
 When an organization competes in a high-
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10. Defensive Strategies
Retrenchment
 occurs when an organization regroups
through cost and asset reduction to reverse
declining sales and profits.
 also called a turnaround or reorganizational
strategy.
 designed to fortify an organization’s basic
distinctive competence.
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11. Retrenchment Guidelines
 When an organization is one of the weaker
competitors in a given industry.
 When an organization is plagued by
inefficiency, low profitability, and poor
employee morale.
 When an organization has grown so large so
quickly that major internal reorganization is
needed.
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12. Defensive Strategies
Divestiture
 Selling a division or part of an organization
 often used to raise capital for further strategic
acquisitions or investments.
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13. Divestiture Guidelines
 When an organization has pursued a
retrenchment strategy and failed to accomplish
needed improvements.
 When a division needs more resources to be
competitive than the company can provide.
 When a division is responsible for an
organization’s overall poor performance.
 When a division is a misfit with the rest of an
organization.
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14. Defensive Strategies
Liquidation
 selling all of a company’s assets, in parts, for
their tangible worth.
 can be an emotionally difficult strategy.
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15. Liquidation Guidelines
 When an organization has pursued both a
retrenchment strategy and a divestiture
strategy, and neither has been successful.
 When an organization’s only alternative is
bankruptcy.
 When the stockholders of a firm can minimize
their losses by selling the organization’s
assets.
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16. Porter’s Five Generic Strategies
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17. Michael Porter’s Five
Generic Strategies
1. Cost leadership
 This generic strategy calls for being the low
cost producer in an industry for a given level
of quality.
 The firm sells its products either at average
industry prices to earn a profit higher than
that of rivals, or below the average industry
prices to gain market share.
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18. Cost Leadership Guidelines
 When price competition among rival sellers is
especially vital.
 When most buyers use the product in the same
ways.
 When buyers gain low costs in switching their
purchases from one seller to another.
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19. Cost Leadership Strategies
To employ a cost leadership strategy
successfully, a firm must ensure that its
total costs across its overall value chain
are lower than competitors’ total costs.
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20. Cost Leadership Strategies
 Perform value chain activities more
efficiently than rivals and control the
factors that drive the costs of value chain
activities.
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21. Michael Porter’s Five
Generic Strategies
2. Differentiation
 A differentiation strategy calls for the
development of a product or service that offers
unique features that are valued by customers
and that products recognize to be better than or
different from the products of the competition.
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22. Differentiation Strategies
Differentiation strategy should be pursued
only after a careful study of buyers’ needs
and preferences to determine the more
differentiating features into a unique
product that meet the desired qualities.
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23. Differentiation Strategy
 Firms that succeed in a differentiation strategy
often have the following internal strengths:
 Access to leading scientific research.
 Highly skilled and creative product
development team.
 Strong sales team with the ability to
successfully communicate the perceived
strengths of the product.
 Corporate reputation for quality and
innovation.

24. Differentiation Guidelines
When there are many ways to differentiate
the product.
When buyer needs and uses are dissimilar.
When few rival firms are following a similar
differentiation approach.
When technological change is fast paced.
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25. Focus Strategy
 The focus strategy concentrates on a narrow
segment and within that segment attempts to
achieve either a cost advantage or
differentiation.
 A firm using a focus strategy often enjoys a high
degree of customer loyalty.
 Firms that succeed in a focus strategy are able to
tailor a broad range of product development
strengths to a relatively narrow market segment
that they know very well.

26. Focus Strategies
Successful focus strategy depends on an
industry segment that is of sufficient size,
has good growth potential, and is not
crucial to the success of other major
competitors.
Most effective when consumers have
distinctive preferences.
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27. Focus Strategy Guidelines
 When the target market segment is large,
profitable, and growing.
 When industry leaders do not consider the
market segment to be crucial to their own
success.
 When the industry has many different segments.
 When few, if any, other rivals are attempting to
specialize in the same target segment.
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28. 5. Stuck in the Middle?
Michael Porter argued that to be successful
over the long-term, a firm must select only
one of these three generic strategies.
 Otherwise, with more than one single
generic strategy the firm will be "stuck in
the middle" and will not achieve a
competitive advantage.

29. 5. Stuck in the Middle?
Porter argued that firms that are able to
succeed at multiple strategies often do so
by creating separate business units for
each strategy.
By separating the strategies into different
units having different policies and even
different cultures, a corporation is less
likely to become "stuck in the middle."
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30. 5. Stuck in the Middle?
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