grand strategy

1. 1

2. 2
Differentiation
Low-cost
leadership
Focus

3. 3
1. Cost
Leadership
2. Differentiation
3 A. Cost Focus 3 B. Differentiation
FocusNarrow
Target
Broad
Target
DifferentiationLower Cost
Competitive
Advantage
Competitive Score

4. Generic Commodity Required Common
Organizational
Strategy Skills and Resources Requirements
Overall cost  Sustained capital investment  Tight cost control
leadership access to capital  Frequent,
detailed control reports
 Process engineering skills  Structured organization
and responsibilities
 Intense supervision of labour  Incentives based on
 Products designed for ease meeting strict quantitative
 Low-cost distribution system targets in manufacture
Differentiation  Strong marketing abilities  Strong coordination
 Product engineering among functions in R&D,
 Creative flare product development, and
marketing
4

5.  Strong capability in basic  Subjective measurement and
research incentives instead of
quantitative measures
 Corporate reputation for  Amenities to attract highly
quality or technological skilled labour, scientists, or
leadership creative people
 Long tradition in the industry
or unique combination of skills
drawn from other businesses
 Strong cooperation from
channels
Focus  Combination of the above  Combination of the above policies
policies directed at the directed at the regular strategic
particular strategic target target
5

6. Risks of Cost Leadership Risks of Differentiation Risk of Focus
Cost of leadership is not Differentiation is not The focus strategy is
sustained initiated
sustained:  Competitors imitate The target segment
 Competitors imitate:  Bases for differentiation becomes structurally
unattractive
 Technology changes becomes less imported to  Structure erodes
 Other bases for cost buyers  Demand disappears
leadership erode
Proximity in differentiation Cost proximity is lost Broadly targeted
is lost competitors overwhelm
the segment:
 The segment’s differences
from other segments narrow
 The advantages of a broad
line increase
Cost focusers achieve Differentiation focusers New Focusers sub-segments
even lower cost in segments achieve even greater the industry
differentiation in segments
6

7. 7
Keeping
ahead of the
field
Cost leadership
Raise barriers
Deter
competitors
Redefine scope
Divest
peripherals
Encourage
departures
Imitation at
lower cost Joint
ventures
Differentiati
on Focus
Differentiation
New
opportunities
Leade
r
Follower
Growth Maturity Decline
Strategic
position of
organizatio
n

8. 8
Consortia
Concentrated Growth
Market Development
Product Development
Innovation
Horizontal Integration
Vertical Integration
Concentric Diversification
Conglomerate Diversification
Turnaround
Divestiture
Liquidation
Bankruptcy
Joint Ventures
Strategic Alliances

9.  Involves focusing resources on the profitable growth of a
single product, in a single market, with a single dominant
technology
 Rationale - Firm develops and exploits its expertise in a
delimited competitive arena
 Determinants of competitive market success
◦ Ability to assess market needs
◦ Knowledge of buyer behavior
◦ Customer price sensitivity
◦ Effectiveness of promotion
9

10. 10
Firm’s industry is resistant to major technological
advancements
Firm’s targeted markets are not product saturated
Firm’s inputs are stable in price and quantity and available in
amounts and at times needed
Firm’s industry is stable
Firm’s competitive advantages are based on efficient
production or distribution channels
Success of market generalists

11.  Market development
◦ Consists of marketing present products, often with only
cosmetic modifications, to customers in related market
areas by
 Adding channels of distribution or
 Changing content of advertising or promotion
 Product development
◦ Involves substantial modification of existing products or
creation of new but related products
◦ Based on penetrating existing markets by
 Incorporating product modifications into existing
items or
 Developing new products connected to existing
products
11

12. Prof.SushilIITDSession-VI 12
Concentration: Increasing use of present products in present
markets
1. Increasing present customers’ rate of use:
a. Increasing size of purchase
b. Increasing rate of product obsolescence
c. Advertising other uses
d. Giving price incentives for increased use
2. Attracting competitors’ customers
a. Establishing sharper brand differentiation
b. Increasing promotional effort
c. Initiating price cuts
3. Attracting nonusers to buy the product
a. Inducing trial use through sampling, price incentives, and
so on
b. Pricing up or down
c. Advertising new uses

13. 13
Market Development: Selling present products in new markets
1. Opening additional geographic markets
a. Regional expansion
b. National expansion
c. International expansion
2. Attracting other market segments
a. Developing product versions to appeal to other
segments
b. Entering other channels of distribution
c. Advertising in other media

14. 14
Product Development: Developing new products for present markets
1. Developing new product features
a. Adapt (to other ideas, developments)
b. Modify (change color, motion, sound, odor, form, shape)
c. Magnify (stronger, loner, thicker, extra value)
d. Minify (smaller, shorter, higher
e. Substitute (other ingredients, process, power)
f. Rearrange (other patterns, layout, sequence, components)
g. Reverse (inside out)
h. Combine (blend, alloy, assortment, ensemble; combine
units, purposes, appeals, ideas)
2. Developing quality variations
3. Developing additional models and sizes (product
proliferation)

15. 15
Involves creating a new product life cycle,
thereby making similar existing products
obsolete

16.  Horizontal integration
◦ Based on growth via acquisition of one or more
similar firms operating at the same stage of the
production-marketing chain
◦ Involves eliminating competitors, providing
acquiring firm with access to new markets
 Vertical integration
◦ Involves acquiring firms
 To supply acquiring firm with inputs - backward integration
or
 Are customers for firm’s outputs - forward integration
16

17. 17
Acquisitions or mergers of suppliers or customer
businesses are vertical integrations
Acquisitions or mergers of competing
businesses are horizontal integrations
Textile producer
Shirt manufacturer
Clothing store
Textile producer
Shirt manufacturer
Clothing store

18. 18
Increase growth rate of firm
Investment is better use of funds than using them for
internal growth
Improve stability of earnings and sales
Balance or fill out product line
Diversify product line
Acquire a needed resource quickly
Achieve tax savings
Increase firm’s stock value
Increase efficiency and profitability

19.  Concentric diversification
◦ Involves acquisition of businesses related to
acquiring firm in terms of technology, markets, or
products
 Conglomerate diversification
◦ Involves acquisition of a business because it
represents a promising investment opportunity
◦ Primary motivation is profit pattern of venture
 Difference between the approaches
◦ Concentric diversification emphasizes commonality
whereas conglomerate diversification emphasizes
profits for each individual unit
19

20. 20
A grand strategy of cost reduction and asset
reduction by a company to survive and
recover from decline profit

21.  Divestiture strategy
◦ Involves selling a firm or a major component of a firm
◦ Reasons for divestiture
 Partial mismatches between acquired firm and parent
firm
 Corporate financial needs
 Government antitrust action
 Liquidation strategy
◦ Involves selling parts of a firm, usually for its tangible
asset value and not as a going concern
21

22.  Two approaches
◦ Liquidation - Involves complete distribution of a
firm’s assets to creditors, most of whom receive a
small fraction of amount owed
◦ Reorganization - Involves creditors temporarily
freezing their claims while a firm reorganizes and
rebuilds its operations more profitably
 Advantage of a reorganization bankruptcy
◦ Proactive option offering maximum repayment of a
firm’s debt in the future if a recovery strategy is
successful
22

23.  Joint venture
◦ Involves establishing a third company (child), operated
for the benefit of the co-owners (parents)
 Strategic alliance
◦ Involves creating a partnership between two or more
companies that contribute skills and expertise to a
cooperative project
 Exists for a defined period
 Does not involve the exchange of equity
 Consortia, Keiretsus, and Chaebols
◦ Defined as large interlocking relationships between
businesses of an industry
23

24. 24
1. Improve Business Focus
2. Access to World-Class Capabilities
3. Accelerated Reengineering Benefits
4. Shared Risks
5. Free Resources for Other Purposes