8/6/2019 Alternative Strategies

1/32

Corporate LevelGeneric strategies

Alternative StrategiesWhich business (es) the company

shall be in?

8/6/2019 Alternative Strategies

2/32

Generic strategies Portfolio strategy Applicable to strategic business units

When they confront the question of the

business (es) they shall be in

8/6/2019 Alternative Strategies

3/32

4 Alternative strategies

Stability

Expansion

Defence and

Combination

8/6/2019 Alternative Strategies

4/32

Stability strategy / Neutral strategy

Whether the co., should continue in the

existing business? Affirmative Co., is doing reasonably well in that

business

But no scope for significant growth

Strategy to be adopted is stability

8/6/2019 Alternative Strategies

5/32

Jauch & Glueck observe when ?

1. Firm continues to serve the customers in

the same product or service, market,and functional sectors as defined in its

business definition or in very similar

sectors

8/6/2019 Alternative Strategies

6/32

Stability strategy-when?

2. Its main strategic decisions focus on

incremental improvement of functionalperformance

8/6/2019 Alternative Strategies

7/32

Stability strategy It is not do nothing strategy

It may involve incremental improvements

Requires adoption of appropriate

competitive strategies to remain successful

in the business

Have to make offensive and defensivemoves vis--vis competitors

8/6/2019 Alternative Strategies

8/32

Long term stability strategy Requires investment , R&D and innovation

Business definition remains the same

Do the same thing strategy endeavours

to do the-same thing better

8/6/2019 Alternative Strategies

9/32

Stability strategy Challenge?

Maintain the current position

8/6/2019 Alternative Strategies

10/32

Stability strategy Industries? Regulated industries :

Beverages

Tobacco products etc.,

Family dominated small and medium

companies prefer stability strategy

8/6/2019 Alternative Strategies

11/32

Reasons for stability strategy? 1. Co., is doing fairly well and it is hopeful

of the same in future

2. Family dominated or private co., may notlike to expand its businesses

(a) to dilute the control

(b) if effective supervision is not possible byfamily members

8/6/2019 Alternative Strategies

12/32

Reasons for stability strategy?

3. The feeling that sticking to the knownbusiness is always better and safe

4. The co., may not have the resources andcapabilities for expansion

5. The company may not want to take therisks of growth and expansion

8/6/2019 Alternative Strategies

13/32

Reasons for stability strategy

6. The co., which has core competence in

the existing business does not wanttake the risk of losing sufficient attention

to the current business by going for

diversification

8/6/2019 Alternative Strategies

14/32

Reasons for stability strategy

7. The mgmt does not have the mindset of

a strategist to analyse theenvironmental opportunities and seize

the opportunities

8/6/2019 Alternative Strategies

15/32

Growth strategy?

Should the co., increase the level of

activities in the current business and / orenter new business(es) affirmative

A growth ( expansion) strategy is called for

8/6/2019 Alternative Strategies

16/32

Growth strategy when?

Enters new business ( including functions)

or markets

Effects major increase in its current

business

8/6/2019 Alternative Strategies

17/32

Reasons for growth strategy

1.The current business is perceived having nofuture

2. The current business is unstable or volatile innature

3.The current business does not fully utilize theavailable resources and capabilities

8/6/2019 Alternative Strategies

18/32

Reasons for growth strategy 4. Need for spreading the business risks

5. In some cases expansion is a retaliatorymove.

When a company in another business

enters the firms business the firm retaliatesby entering the other companys business .

8/6/2019 Alternative Strategies

19/32

Reasons for growth strategy 6. To imitate the growth strategies of

competitors

7. Result of urge to grow 8. to increase market share or gain

dominance

9. to exploit the environmental opportunities

8/6/2019 Alternative Strategies

20/32

Retrenchment strategies / defensive

strategy When?

It drops product line (s) market (s), marketsegment (s) or function (s)

Focuses on functional improvements orreversing certain deteriorating trends

8/6/2019 Alternative Strategies

21/32

Retrenchment strategy - Reasons 1. Certain divisions / product lines /products

/market segments / functions are not profitable

2. Profit from a business is less than the targetrate

3. To focus on its core business

4. The company is too diversified / scattered thateffective management is not possible

8/6/2019 Alternative Strategies

22/32

Retrenchment strategy -

Reasons

5. Co., has serious financial problem

So that the funds obtained by divestiturecan be used for strengthening other

businesses

8/6/2019 Alternative Strategies

23/32

Retrenchment strategy -

Reasons

6. Certain current business does to confirm

to the co., philosophy / ethics

7. The co., is confronted with deteriorating

performance indicator

8/6/2019 Alternative Strategies

24/32

Defensive strategies

Divestiture

Liquidation

Becoming a captive and

Turnaround

8/6/2019 Alternative Strategies

25/32

Divestiture strategy when?

Di *vest ment

A Co., sells or divests itself of a business or

part of business Because of loss

Less than target rate of return

Urgency to mobilize funds

Managerial problems or

Redefinition of the business of thecompany

8/6/2019 Alternative Strategies

26/32

Liquidation

When an entire co., is sold or dissolved

Reasons for divestiture also be reasons forliquidation

When there are no buyers for a Co., thatwants to be sold, its assets may be soldand Co., may be wound up

8/6/2019 Alternative Strategies

27/32

Becoming a captive ( Kept in

under restraint) A firm becomes a captive of another firm

when it subjects itself to the decision of the

other firm in return for a guarantee

that a certain amount of the captives

product will be purchased by the other firm

8/6/2019 Alternative Strategies

28/32

Turnaround strategy

Involve:

Mgmt measures designed to reversecertain negative trends and

to bring the firm back to normal health andprofitability

8/6/2019 Alternative Strategies

29/32

Combination strategy- When? When it adopts more than one grand

strategy i.e.,

Stability Growth and

Retrenchment simultaneously or

sequentially

8/6/2019 Alternative Strategies

30/32

Reasons for Combination strategy

Existence of a combination of reasons for

any two

Or more of the other three generic

strategies

8/6/2019 Alternative Strategies

31/32

Combination strategy Co., adopts any of the following:

1. Stability and growth strategies

2. Stability and retrenchment strategies

3.Growth and retrenchment strategies

4.Growth ,retrenchment and stability

strategies

8/6/2019 Alternative Strategies

32/32

Combination strategy

Results from environmental changes and

redefinition of the business