Strategic Management - Part 11 - Grand Strategies
May 28, 2009
Grand strategies are a means to get to your ends – growth, profitability, etc. The more time that you spend researching and learning about your environment, your market and your business, the more clearly these come into focus for you. While there is always some uncertainty and some risk with any business decision, a strategic decision with the proper homework done is a pretty clear cut one.
The major Grand Strategies are:
Concentrated Growth
In this strategy, a firm directs it resources to the profitable growth of a dominant product, in a dominant market, with a dominant technology
Market Development
This strategy consists of marketing present products, often with only cosmetic modifications, to customers in related market areas by adding channels of distribution or by changing the content of advertising or promotion
Product Development
This strategy involves the substantial modification of existing products or the creation of new, but related, products that can be marketed to current customers through established channels
Horizontal Integration
In this term strategy there is growth through the acquisition of one or more similar firms operating at the same stage of the production-marketing chain. Such acquisitions eliminate competitors and provide the acquiring firm with access to new markets
Vertical Integration
A company’s aim in this strategy is to acquire firms that supply it with inputs (such as raw materials) or are customers for its outputs (such as warehouses for finished products). When supplying firms are acquired, it is called Backward Vertical Integration. When output firms are acquired, it is called Forward Vertical Integration.
Concentric Diversification
This strategy involves the acquisition of businesses that are related to the acquiring firm in terms of technology, markets, or products. With this strategy, the selected new businesses possess a high degree of compatibility with the firm’s current businesses.
Conglomerate Diversification
In this strategy, a firm, particularly a very large one, plans acquire a business because it represents the most promising investment opportunity available. The principal concern of the acquiring firm is the profit pattern of the venture, rather than creating product-market synergy with existing businesses
Turnaround
This is a strategy used by a firm that is in trouble. Its managers believe that the firm can survive and eventually recover if a concerted effort is made over a period of a few years to fortify its distinctive competences. There are two basic forms 0f retrenchment: Cost Reduction and Asset Reduction
Divestiture
This strategy involves the sale of a firm or a major component of a firm.
Liquidation
In this strategy, the firm typically is sold in parts, only occasionally as a whole—but for its tangible asset value and not as a going concern.
In the next posting, we’ll focus on how to implement a strategy, taking a long-term plan and breaking it up into smaller steps.
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