This document discusses various grand strategies that firms can pursue, including stability strategies, growth strategies, retrenchment strategies, and combination strategies. It provides details on different types of strategies such as internal growth, concentration strategies, mergers and acquisitions, horizontal and vertical integration, joint ventures, turnaround strategies, and divestment strategies. Reasons for adopting each type of strategy and critical issues involved are also summarized.

1. Vikas Singh Sikarwar
MBA (Agribusiness)
20MBAAB030

2. “Strategic alternatives revolve around the question of
whether to continue or change the business enterprise is
currently in or improve the efficiency and effectiveness
with which the firm achieves itscorporateobjectives in its
chosen businesssector.”
The major four Grand Strategiesare:
Stability Strategy
Growth Strategies
Retrenchment Strategies
Combination Strategies

3. Stability Strategies: Some firms adopt stability
strategy instead of using growth strategies. Thisstrategy
can be of two types- maintenance of status quo and
sustainable growth.
Reasons adopting Stability Strategies: Satisfactory level of
Profit from current operations, less risk, lack ofinvestment
and managerial knowhow, executives- inertia for
change, operating in low growth orno-growth
strategy, small firms more focused on qualityand customer
service.

4. Growth Strategies: Toincrease profit, sales and/or
market share. Growth Strategies involve a significant
increase in performance objectives. These strategies are
adopted when firm remarkably broadens the scope of their
customer groups, customer functions and alternative
technologies either singly or in combination with each
other.
Internal Growth: Internal Growth is achieved through
increasing the firm’s production capacity, employeesand
sales.

5. Concentration Strategies: Concentrating on specific
customergroup, product or market, specific technology.
Strategic Alternativesavailable to the Firms Pursuing
Concentration Strategies
Focus on Customer:
Increase usage by presentcustomers
Increase purchase size or frequency
Improve product location
Expand product line (size, options,styles)

6. Attract Competitors Customer:
Increase promotionalefforts
Initiate pricecuts
Attract Nonusers of theproduct:
Advertise newuses
Offer special prices andpromotions
Increase product availability (new geographicuses)
Focus on Product:
Differentiate product from its competitors
Increase Rate of Product Obsolescence
Change Styles, Change options, Changecolors
Develop the new uses for the product
Improve productservicing

7. Focus onTechnology:
Develop new Equipment to improveefficiency
Develop newproducts
Final uses forby-products
Improvequality
Some Problems:
Putting all eggs in onebasket
Substitute product can make a firms product obsolete
Mayalso affected bydisruption in thesupplyof essential
and crucial raw material.

8. Why some firms Change from Concentration Strategies
Temptation of Diversification, Need-to meet short term
goals, Underestimation of present
opportunities, Impatienceto
grow, Overconfidence, Misjudging success requirements,
Pressure to use idle capacity, Siren songof Integration,
Dangers of pride
MergerStrategy: “ A merger is a combination of two or
more businesses in which one acquires the assets and
liabilitiesof theother in exchange forstock orcash or both.
Types of mergers: Horizontal, Vertical, Concentric and
Conglomerate

9. Reasons/Motives for merger: Availability of readymade
or built-in manufacturing facilities, well known brand or
brand loyalty, captive market share, loyal
customers, advanced technology, efficientdistribution
channel, financial soundnessetc.
Critical issues in Merger:
Strategic, Financial, Managerial, Legal issues
Takeover/ Acquisitions Strategy: Takeover is definedas
“The Attemptof one firm toacquireownership orcontrol
over another firm against the wishes of the latter’s
management.”

10. Advantages of Takeover:
Takeoverensure managementaccountability
Takeoverprovide easy growthopportunities
They create mobility of resources from oneactivity toanotheractivity.
They avoid gestation periodsand problems involved in new projects.
They provide thechanceof survival to the sick unitsand provide
alternatives to the disinvestmentstrategy.
Disadvantages of Takeover:
Professionalizationof management may be replaced by money power.
Takeoverdo notcreateany real assets to the society
They result in monopolyand concentrationof economic power
They aredetrimental to the society
Interestsof the minorityshareholdersare not protected

11. Horizontal Integration: Many companies expand bycreating
other firms in theirsame lineof business. The reasons are-
to increase market share, reduce cost of operationsand better
EOS, to get greater leverage to deal with the customers and
suppliers.
Conglomerate Diversification: Expanding by creating other
firms in different lineof business. Reasons forthis-
Putting eggs in different baskets, opportunity in other industry
is moreattractive than expansion in current business,

12. Vertical Integration: Backward and Forward Integration or
both
Advantage of Both: Suppliers? Customers?
Disadvantages of Both: Suppliers? Customers?
Joint Ventures: Joint ventures are partnerships in which two or
more firms carry out a specific project or corporate in a selected
areaof business. Ownershipof the firms remains unchanged.
Reasons for the formation of JV: Barrier to entry in some
thecountries, big size projectswheredifferent technical as
well as financial and other specialized core competencies
required.

13. Retrenchment Strategies: When a firms position isdisappointing
or, at the extreme, when its survival is at stake then retrenchment
strategies may beappropriate.
Retrenchment strategies include: Turnaround
strategies, Captive company strategy,divestment
strategy, transformation strategy and liquidationstrategy.
Turnaround Strategy: Turnaround means reverse the negativetrend.
Indicators of adopting TurnaroundStrategy
Incurring losses continuously, Decline demand for products
Increasing cash outflow and/ ordeclining cash inflow, declining sales
and declining market share, decliningproduction/
productivity, continuous problem of working capital, high rate of
employees turnover and employee job dissatisfaction, significant
decrease in market price of theshare.

14. Approaches of Turnaround Strategy: Surgical approachand
Human Resource Development (HRD) Approach:
Activities of Turnaround Process:
Diagnosing the problemaccurately
Understanding Customer, Product and Competition
Analyzing financial position, cost of capital and cost control etc.
Feedback of information to various decision areas and control
areas.
Takeupactivitiessystematically feedback and control the
deviations immediately through actionresearch

15. Captive Company Strategy: This strategy is pursued when a firm
sells the majorityof its products toonecustomer (wholesales/ dealer)
who in turn performs some of the functions normally done by an
independentfirm.
The major limitationof this strategy is that thecompany is limited by
the activities of itscaptor.
Transformation Strategy: A transformation occurs when a firm
makesa majorchange in its outlook and operations, usually including
moving from one kind of business toanother.
Companies may undertake this strategy when:
Returnson currentoperationsare lowerthen desired
Opportunities in otherareasareattractive
A strong flexible management teamexists
The firm hasa strong financial base to support its transformation

16. Divestment Strategy: Company Sells or ‘spinsoff’ one of its
business units under thedivestment strategy.
Causes for Adopting Divestment Strategy: High cash outflow
than inflow, competition, technological change, financial
position, divestment of unprofitablewings is necessaryas part of
the mergeragreement
Liquidation Strategy: This strategy involves closing down a
business organization and selling its assets. This is the last
alternative strategy as its consequence are severe. The
consequences include: loss of jobs of all employees and
termination of theopportunitiesof the firm. Adoption of this
strategy implies the total failureof the firm.

17. Combination Strategy or PortfolioRestructuring:
Thisstrategy is thecombination of stability, growth and
retrenchmentstrategies.
Combination strategies may involve implementationof
two or morestrategies.
This strategy is common for large scale organizations with
multiple units, diversified products and national or global
markets.