Description
It explains types of strategy. It talks abut various levels of strategy and types like corporate, growth and stabilizing strategy along with external strategy. Retrenchment strategy is also covered.
Types of Strategies
By Devesh yadav
1
Strategy hierarchy
? Corporate strategy: 1) Growth strategy 2) Stability strategy 3) Retrenchment strategy ? Business unit strategy: 1) Cost leadership 2) Differentiation 3) Focus ? Functional strategy
LEVELS OF STRATEGY
4
Ch 5 -5
? Corporate-level strategy. ? Business-level strategy. ? Functional-level strategy.
CORPORATE STRATEGY
Corporate strategy is the general plan of major action by which a firm intends to achieve its longterm goals. Grand strategies fall into three general categories –
?Growth Strategy ?Stability strategy ?Retrenchment Strategy
Growth Strategy
Growth can be promoted internally by investing in expansion or externally by acquiring additional business divisions. Internal growth can include development of new or changed products or markets. For Example– Companies planning to go to Rural Markets.
Examples- Banks 1.
2. 3.
External growth typically involves diversification, which includes the acquisition of business that are related to current product lines or that take the corporation into new areas. For Example:– when came to India acquired
Stability strategy
Stability, sometimes called a Pause Strategy, means that the organization wants to remain the same size or grow slowly and in a controlled fashion. For example– sales service.. is Providing Better After-
Retrenchment Strategy
Retrenchment means that the organization goes through a period of forced decline by either shrinking current business units or selling off or liquidating entire businesses. Liquidation means selling off business unit for the cash value of the assets, thus terminating its existence. Divestiture involves the selling off of business that no longer seem central. Retrenchment is also called as downsizing.
Examples- At the time of recession
Business - Level Strategy
Michael Porter’s Generic Strategies
Cost Leadership Strategies (Low-Cost & Best-Value)
Differentiation Strategies
Focus Strategies (Low-Cost Focus & Best-Value Focus)
Porter’s Competitive Strategies
6-17
Competitive Strategies
? In finding its competitive edge within these five forces, Porter suggests that a company can adopt one of three strategies: ? Differentiation ? Cost leadership ? Focus.
Differentiation
? The organization may use advertising, distinctive product features, exceptional service, or new technology to achieve a product perceived as unique. ? The differentiation strategy can be profitable because customers are loyal and will pay high prices for the product.
Example –
&
Unique positioning of needs giving better values commanding better price.
Porter’s Competitive Strategies
Differentiation –
–Broad mass market –Unique product/service –Premiums charged –Less price sensitivity
6-21
Cost Leadership
? With a cost leadership strategy, the organization aggressively seeks efficient facilities, pursue cost reductions, and uses tight cost controls to produce products more efficiently than others than competitors. ? A low-cost position means that the company can undercut competitors’ prices and still offer comparable quality and earn a responsible profit. The low price acts as a barrier against new entrants and substitute products.
For example –
?
Nirma
•
Wal*Mart
Porter’s Competitive Strategies
Cost Leadership -?Low-cost competitive strategy ?Broad mass market ?Efficient-scale facilities ?Cost reductions ?Cost minimization
6-24
Focus
? With a focus strategy, the organization concentrates on a specific regional market or buyer group. ? For example – A detergent manufacturer may look for geographical focus
Porter’s Competitive Strategies
Cost-Focus –
?Low-cost competitive strategy ?Focus on market segment ?Niche focused ?Cost advantage in market segment
6-26
Risks of Generic Strategies
Risks of Cost Leadership Risks of Cost not sustained: Cost leadership is Leadership • Competitors imitate. Cost leadership is not • Technology changes. sustained: for cost • Other bases • leadership erode. imitate. Competitors Proximity in differentiation is lost. Cost focusers achieve even lower •cost in segments. changes. Technology
Risks of Differentiation Risks of Differentiation Differentiation is not sustained: • Differentiation is not Competitors imitate. • sustained: Bases for differentiation become less important to •buyers. Competitors imitate. Cost proximity is lost. Differentiation focusers achieve • Bases for differentiation even greater differentiation in become less important to segments.
• Other bases for cost leadership erode. Proximity in differentiation is lost.
buyers. •Cost proximity is lost. •Differentiation focusers achieve even greater differentiation in segments.
Risks of Focus The focus strategy is imitated: The target segment becomes The focus strategy is structurally unattractive: imitated: • Structure erodes. • • The target segment Demand disappears. Broadly targeted competitors becomes structurally overwhelm the segment: unattractive: • The segment’s differences from other segments narrow. • Structure erodes. • The advantages of a broad line increase. • Demand disappears. New focusers subsegment the industry.
Risks of Focus
•New focusers sub segment the industry.
6-27
Functional - Level Strategy
Functional strategies are the action plans adopted by major departments to support the execution of business-level strategy. Major organizational functions include marketing, production, finance, human resources, and research and development. Senior managers in these departments adopt strategies that are coordinated with the business-level strategy to achieve the organization’s strategic goals.
Functional/operational Strategies: ? Concern with org. internal resources and processes which effectively deliver the corporate and business strategic direction. ? Functional strategies are interrelated. ? Functional strategies e.g.: purchasing & materials management, production, finance, R&D, HR, IT, and marketing.
30
Prof. Dr. Majed El-Farra 2009
Chocolate Round
IMS Indore
doc_957464586.pptx
It explains types of strategy. It talks abut various levels of strategy and types like corporate, growth and stabilizing strategy along with external strategy. Retrenchment strategy is also covered.
Types of Strategies
By Devesh yadav
1
Strategy hierarchy
? Corporate strategy: 1) Growth strategy 2) Stability strategy 3) Retrenchment strategy ? Business unit strategy: 1) Cost leadership 2) Differentiation 3) Focus ? Functional strategy
LEVELS OF STRATEGY
4
Ch 5 -5
? Corporate-level strategy. ? Business-level strategy. ? Functional-level strategy.
CORPORATE STRATEGY
Corporate strategy is the general plan of major action by which a firm intends to achieve its longterm goals. Grand strategies fall into three general categories –
?Growth Strategy ?Stability strategy ?Retrenchment Strategy
Growth Strategy
Growth can be promoted internally by investing in expansion or externally by acquiring additional business divisions. Internal growth can include development of new or changed products or markets. For Example– Companies planning to go to Rural Markets.
Examples- Banks 1.
2. 3.
External growth typically involves diversification, which includes the acquisition of business that are related to current product lines or that take the corporation into new areas. For Example:– when came to India acquired
Stability strategy
Stability, sometimes called a Pause Strategy, means that the organization wants to remain the same size or grow slowly and in a controlled fashion. For example– sales service.. is Providing Better After-
Retrenchment Strategy
Retrenchment means that the organization goes through a period of forced decline by either shrinking current business units or selling off or liquidating entire businesses. Liquidation means selling off business unit for the cash value of the assets, thus terminating its existence. Divestiture involves the selling off of business that no longer seem central. Retrenchment is also called as downsizing.
Examples- At the time of recession
Business - Level Strategy
Michael Porter’s Generic Strategies
Cost Leadership Strategies (Low-Cost & Best-Value)
Differentiation Strategies
Focus Strategies (Low-Cost Focus & Best-Value Focus)
Porter’s Competitive Strategies
6-17
Competitive Strategies
? In finding its competitive edge within these five forces, Porter suggests that a company can adopt one of three strategies: ? Differentiation ? Cost leadership ? Focus.
Differentiation
? The organization may use advertising, distinctive product features, exceptional service, or new technology to achieve a product perceived as unique. ? The differentiation strategy can be profitable because customers are loyal and will pay high prices for the product.
Example –
&
Unique positioning of needs giving better values commanding better price.
Porter’s Competitive Strategies
Differentiation –
–Broad mass market –Unique product/service –Premiums charged –Less price sensitivity
6-21
Cost Leadership
? With a cost leadership strategy, the organization aggressively seeks efficient facilities, pursue cost reductions, and uses tight cost controls to produce products more efficiently than others than competitors. ? A low-cost position means that the company can undercut competitors’ prices and still offer comparable quality and earn a responsible profit. The low price acts as a barrier against new entrants and substitute products.
For example –
?
Nirma
•
Wal*Mart
Porter’s Competitive Strategies
Cost Leadership -?Low-cost competitive strategy ?Broad mass market ?Efficient-scale facilities ?Cost reductions ?Cost minimization
6-24
Focus
? With a focus strategy, the organization concentrates on a specific regional market or buyer group. ? For example – A detergent manufacturer may look for geographical focus
Porter’s Competitive Strategies
Cost-Focus –
?Low-cost competitive strategy ?Focus on market segment ?Niche focused ?Cost advantage in market segment
6-26
Risks of Generic Strategies
Risks of Cost Leadership Risks of Cost not sustained: Cost leadership is Leadership • Competitors imitate. Cost leadership is not • Technology changes. sustained: for cost • Other bases • leadership erode. imitate. Competitors Proximity in differentiation is lost. Cost focusers achieve even lower •cost in segments. changes. Technology
Risks of Differentiation Risks of Differentiation Differentiation is not sustained: • Differentiation is not Competitors imitate. • sustained: Bases for differentiation become less important to •buyers. Competitors imitate. Cost proximity is lost. Differentiation focusers achieve • Bases for differentiation even greater differentiation in become less important to segments.
• Other bases for cost leadership erode. Proximity in differentiation is lost.
buyers. •Cost proximity is lost. •Differentiation focusers achieve even greater differentiation in segments.
Risks of Focus The focus strategy is imitated: The target segment becomes The focus strategy is structurally unattractive: imitated: • Structure erodes. • • The target segment Demand disappears. Broadly targeted competitors becomes structurally overwhelm the segment: unattractive: • The segment’s differences from other segments narrow. • Structure erodes. • The advantages of a broad line increase. • Demand disappears. New focusers subsegment the industry.
Risks of Focus
•New focusers sub segment the industry.
6-27
Functional - Level Strategy
Functional strategies are the action plans adopted by major departments to support the execution of business-level strategy. Major organizational functions include marketing, production, finance, human resources, and research and development. Senior managers in these departments adopt strategies that are coordinated with the business-level strategy to achieve the organization’s strategic goals.
Functional/operational Strategies: ? Concern with org. internal resources and processes which effectively deliver the corporate and business strategic direction. ? Functional strategies are interrelated. ? Functional strategies e.g.: purchasing & materials management, production, finance, R&D, HR, IT, and marketing.
30
Prof. Dr. Majed El-Farra 2009
Chocolate Round
IMS Indore
doc_957464586.pptx