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8/10/2019 Chap1 Type of Strategy
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Introduction- StrategyWithout a strategy the organization is like a
ship without a rudder, going around in circles.
- Joel Ross and Michael Kami
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What is Strategy? Strategy means deciding where you want to
go and how to get there.
Strategy is a scientific and structuredresponse to leverage uncertainty.
Strategy can be defined as interpretative
planning, includes the determination andevaluation of alternative paths to an already
established mission and eventually choosing
the right alternatives.
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Strategy v/s Operational Efficiency Strategy
Operational Efficiency
Operational Efficiency becomes a necessary
condition, but is very far away from being
sufficient condition.
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What is Strategy? Strategy is managementsgameplanto
Attract and please customers
Stake out a market position
Conduct operations
Compete successfully
Achieve organizational objectives
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Levels of Strategy Corporate level Strategy
Structural and financial terms
Business Unit level Strategy
howcustomers needs can best be met
Profit-Centre concept
Functional level strategy
what is the role of particular department in
delivering the business unit strategy
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Levels of Strategy E.g. CPL
Corporate level Strategy: Giving quality drugs
at affordable price. Business Unit level Strategy:
Cadila pharma: Differentiation Strategy
Herbal (SBU) : Cost leadership Strategy
Functional level strategy:
R&D: providing drugs for life style related
diseases
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Strategy Alternatives Stability strategy
Growth/Expansion strategy
(1) Intensification strategyMarket penetration strategy
Market Development strategy
Product Development strategy(2) Diversification strategy
Horizontal Diversification
Vertical Diversification
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Strategy AlternativesHorizontal Diversification:
Concentric diversification
Conglomerate diversification
Vertical Diversification:
Forward Integration
Backward Integration
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Strategy Alternatives CombinationStrategy
M&A
J/VTakeover
Strategic Alliances
Retrenchment StrategyDivestment
Turnaround
Liquidation
Bankru tc
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Stability Strategy Stability: The firms stays with its current
business, products & markets and satisfied
with incremental growth.No fresh investment
safety and status quo-oriented strategy
e.g. Branded Cigarettes, Bata, Barbie dolls
Routes: Attracting non-consumers, customers of
competitors, increasing consumption.
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Market penetration strategy
Market penetration strategy: Existing products
in existing markets.
Route: Increasing capacityIncreasing MS thru penetrating further
e.g. Amway
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Product Development strategy
Product Development strategy: New products in
existing markets
Routs: changing the features of existing productchanging the quality of the product
developing new models
e.g. Air commandAir conditioner company
Singer Fashion Maker(decorative stitching
machine)
Close up, Maruti Swift
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Market Development Strategy
Market Development Strategy: Existing
product in new markets
Routes: Expanding the market territoryFinding new uses of the product
Creating new segment
e.g. Voltas Air conditioner( room AC- car
AC- railway coach, bus)
Gillete Turbo
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Intensification strategy
Nirmas Intensification strategy
Product development strategy
Nirma LimeLiril
Nirma BeautyLux
Nirma RoseBreeze
Market penetration strategy
To cater upper class segment investment of Rs. 380
cr.+ doubled the capacity and launched Nirma
super
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Horizontal Diversification
Horizontal Diversification : moving into more
than one industry; the new business usually
somehow relates to the existing one, althougha few conglomerates instead pursue a strategy
of unrelated diversification.
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Diversification Strategy
Concentric diversification(related
diversification) : When company produces a
new product which is related to its presentproduct OR acquires such a company
producing similar product
E.g. Usha Internationaljuicer, Mixer, Grinder, Iron, Toasters,
Geysers, room coolers, Vacuum cleaners,
Washing Machines, Exhaust fans
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Diversification Strategy
Conglomerate diversification(unrelated
diversification) : No connection between E
and N products. E.g. Reliance: Oil and gas, power generation,
capital market, Telecom, Textiles,
Entertainment
Godrej: Steel cupboards, Soaps, Furniture,
personal care.
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Vertical Integration
Vertical Integration :integrating business
along with your value chain both upstream
and downstream, so that one efficiently feedsthe other.
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Vertically Integrated
Diversification
Vertically Integrated Diversification: The firm
remains vertically within the same process
sequence. The firm dose not jump outside thevertically linked product- process chain.
Types: (1) Forward integration
(2) Backward integratione.g. Spinning- weaving- dyeingbleaching-
printing- folding
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Combination Strategy
Merger: Denotes the fusion of two or more
firms into one company
Acquisition: it is a transfer thru which onefirm buys up a part or whole of the assets of
another firm by paying compensation.
Takeover: It involves purchase of a portion orwhole of the equity of another firm resulting
in the transfer of effective control.
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Combination Strategy
Joint Venture: Two or more firms join
together, share the stake and float the
business. Strategic Alliance: Two or more firms arrive
at an agreement on certain issue of mutual
interest, no new firm is created, only workingagreements are agreed upon.
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Basically, a joint venture is when two or more companies make an
agreement to do business in one specific area. They can share the
insurance, shipping and liability costs and produce higher profits. It is
usually a short lived collaboration.
A merger is when two companies come together to form a singlecompany. They combine their respective resources. Sometimes there are
losses of jobs, but not all. Those decisions are specified in the merger
contract well in advance of the deal.
An acquisition is when one company is buying and taking over another. If
it is friendly, often the seller can stipulate who keeps their job and soforth. If it is unfriendly, the company taking over gets to make all the final
decisions. They cannot take away benefits already earned.