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Grand strategy

Strategy Why Long term focus

Portfolio Analysis: BCG Matrix

Exhibit 511

INDUSTRY ATTRACTIVENESS

BUSINESS STRENGTH

Organizational Strategies occur on 3 levels: Grand, Business, and Functional A. Grand level strategies: - 1. Growth (a. concentration; b. diversification) - 2. Retrenchment - 3. Stability (status quo) - 4. Combination (multiple strategies)

Growth or expansion
Redefinition of business Efficiency Utilisation of resources motivation

When to follow
Options for expansion Future demand and costs Technological changes Competitors Supply and demand

1a. Growth through concentration concentrating on your existing specialization


i. market penetration aggressively targeting current markets with existing product specialties ii. market development/geographic expansion expanding into new markets- HUL, iii. market segmentation dividing existing markets iv. product development modify existing products, or develop new but related Products-textile

1b. Growth through diversification branching out into new areas


i. horizontal integration expanding across the general industry (e.g. Coke acquires Minutemaid). ii. vertical integration expanding into industries populated by suppliers/buyers (e.g. Ford buys steel plant). iii. conglomerate diversification expanding into unrelated industries (e.g. GM buys Hersheys candy). iv. joint venture expanding together with another company in order to diversity efficiently.

Diversification
Synergy Spread risks Utilization dominant

benefits
Combined operations Coordination Information relationships

2. Retrenchment
i. Turnaround downsizing existing company/divisions ii. Divestiture selling off existing divisions/subdivisions iii. Liquidation Chapter 11 bankruptcy

Approach of turnaround
Change of top management Market/ customer Revenue generating strategy Cost cutting Asset reduction

Y disinvestment
Part seling Better utilization Write off hidden loses Size Product portfolio Simplify Manage crisis

Harvest- reduction of assets

3. Stability - maintain status quo (e.g. continuous improvement) 4. Combination multiple use of strategies

Stability
Status quo Incremental improvements No redefinition of business Retention of core competencies Fear of loss of control

B. Business level strategies


1. Michael Porters Competitive Strategies: i. low cost (e.g. Wal-Mart)

ii. differentiation (Volvo/Mercedes) iii. focus (Pennys/Pea in a Pod) 2. Adaptive business level strategies:
a. prospecting b. defending c. analyzing

B. Business level strategies (contd)


3. Product life cycle i. introduction stage ii. growth stage iii. maturity stage iv. decline stage

Product Life Cycle: Starbucks

C. Functional level strategies


i. Marketing ii. Manufacturing

iii. Human resources


iv. Etc.

Fig. 8-5: Model of Grand Strategy Clusters


Rapid Market Growth
Reformulation of concentrated growth Horizontal integration Divestiture Liquidation

Concentrated growth
Vertical integration Concentric diversification

Strong Competitive Forces

I
Concentric diversification Conglomerate diversification Joint ventures

II
Turnaround or retrenchment Concentric diversification Conglomerate diversification Divestiture Liquidation

IV III

Weak Competitive Forces

Slow Market Growth

Fig. 8-4: Grand Strategy Selection Matrix


Overcome Weakness

Internal (redirected resources within the firm)

Turnaround or retrenchment Divesture Liquidation


I II
IV III

Vertical integration Conglomerate diversification

Concentrated growth Market development Product development Innovation

Horizontal integration Concentric diversification Joint venture

External (acquisition or merger for resource capability)

Maximize Strengths

Seven S Model of Implementation


STRATEGY SKILLS
STRUCTURE

SHARED VALUES

STAFF

SYSTEMS

STYLE

Seven S Model
1. 2.

3. 4.

5.

6.

7.

Strategy Plan or course of action leading to the allocation of firms resources to reach identified goals. Structure The ways people and tasks relate to each other. The basic grouping of reporting relationships and activities. The way separate entities of an organization are linked. Shared Values The significant meanings or guiding concepts that give purpose and meaning to the organization. Systems Formal processes and procedures, including management control systems, performance measurement and reward systems, and planning and budgeting systems, and the ways people relate to them. Skills Organizational competencies, including the abilities of individuals as well as management practices, technological abilities, and other capabilities that reside in the organization. Style The leadership style of management and the overall operating style of the organization. A reflection of the norms people act upon and how they work and interact with each other, vendors, and customers. Staff Recruitment, selection, development, socialization, and advancement of people in the organization.