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2. Intensive Strategies
- Market Penetration Seeking increased market share for present products or services
in present markets through greater marketing efforts.
Guidelines
Current markets not saturated
Usage rate of present customers can be increased significantly
Market shares of competitors declining; industry sales increasing
Increased economies of scale provide major competitive advantage
Increase profit
- Market Development Introducing present products or services into new geographic area.
Guidelines
New channels of distribution – reliable, inexpensive, good quality
Firm is successful at what it does
Untapped/unsaturated markets / saturation of the current market
Excess production capacity
Basic industry rapidly becoming global
3. Diversification Strategies
Guidelines
When competition is tough
Distribution channels is there
Excess capacity
Slow MRT growth
Grand strategies mergers:
- Occurs when two organizations of about equal size unite to form one enterprise
Grand strategies acquisition:
- Occurs when a large organization purchases a smaller firm, or vice versa. (When
acquisition is not desired by both parties, it can be called take-over or hostile
take-over)
4. Defensive Strategies
- Retrenchment Regrouping through cost and asset reduction to reverse declining sales
and profit, reducing number of employees, closing managerial businesses.
Guidelines
Failed to meet objectives & goals consistency; has distinctive competencies
Firm is one of weaker competitors
Inefficiency, low profitability, poor employee morale, pressure for stockholders
Strategic managers have failed
Rapid growth in size; major internal reorganization necessary
If firm fail to capitalize external opportunities, minimize external threat or take
advantage of internal strengths, overcome internal weakness overtime.
2. Differentiation ( Type 3 )
A differentiation strategy should be pursued only after a careful study of buyers’ needs
and preferences to determine the feasibility of incorporating one or more differentiating
features into a unique product that features the desired attributes. A successful
differentiation strategy allows a firm to charge a higher price for its product and to gain
customer loyalty because consumers may become strongly attached to the
differentiation features. This strategy characterized by:
Greater product flexibility
Greater compatibility
Lower costs
Improved service
Greater convenience
More features
1- Grand strategies:
A. Integration strategies
1. Backward integration:
- Seeking ownership or increased control of firm’s suppliers (Acquisition of Suppliers)
2. Forward integration:
- Gaining ownership or increased control over distributors or retailers (Outlets)
3. Vertical integration:
- It is a strategy where a company expands its business operations into different steps
on the same production path.
4. Horizontal integration (Take-over / Acquisition) (Aggressive Strategy)
- Seeking ownership or increased control over competitors
B. Intensive strategy
5. Market penetration: (Aggressive Strategy)
- Increase market share for present products / services in present markets through greater
marketing efforts. (Increasing advertisement expenditure – offering extensive sales
promotions – increasing number of salespersons – Using celebrities)
6. Market development
- Introducing present product or service into new geographic areas.
7. Product / service development
- By adding New or Extra features to an existing product, seeking sales improvement.
C. Defensive strategies
8. Retrenchment (Cost Reduction / Economizing / Turn Around /
Reorganizational)
- It occurs when an organization regroups through cost and asset reduction to reverse
declining sales and profits.
9. Divestiture (partial liquidation)
- Selling a division or part of an organization.
10. Liquidation (Recognition of Defeat / Bankruptcy)
- Selling all of a company’s assets for their tangible worth.
11. Joint venture
Two companies form a partnership for the purpose of capitalizing on some opportunity.
- A+B=A or B (horizontal integration / take over)
- A+B=C (merger)
- A+B=A+B+C (joint venture)
D. Diversification strategies
12. Concentric diversification
- Adding new but related products or services to existing products in the same market.
13. Horizontal diversification
- Adding new product, unrelated products to present customers.
14. Conglomerate diversification
- New, unrelated, to any customer.
Generic strategies:
A- Cost Leadership (Type 1 and Type 2)
A primary reason for pursuing forward, backward and horizontal integration strategies is
to gain low-cost or best-value cost leadership benefits. But cost leadership generally must
be pursued in conjunction with differentiation. A number of cost elements affect the
relative attractiveness of generic strategies, including economies or diseconomies of scale
achieved, learning and experience curve effects, the percentage of capacity utilization
achieved, and linkages with suppliers and distributors.
- Ways of ensuring total costs across value chain are lower than competitors’ total
costs
Perform value chain activities more efficiently than rivals and control factors that
drive costs
Revamp the firm’s overall value chain to eliminate or bypass some cost producing
activities
- Can be especially effective when:
Price competition among rivals is vigorous
Rival’s products are identical and supplies are readily available
There are few ways to achieve differentiation
Most buyers use the product in the same way
Buyers have low switching costs
Buyers are large and have significant power
Industry newcomers use low prices to attract buyers
4. Differentiation ( Type 3 )
A differentiation strategy should be pursued only after a careful study of buyers’ needs and
preferences to determine the feasibility of incorporating one or more differentiating
features into a unique product that features the desired attributes. A successful
differentiation strategy allows a firm to charge a higher price for its product and to gain
customer loyalty because consumers may become strongly attached to the differentiation
features. This strategy characterized by:
Greater product flexibility
Greater compatibility
Lower costs
Improved service
Greater convenience
More features