grand strategies, 402, sachin patil, mba ii, nmu, (40)

8/9/2019 Grand Strategies, 402, Sachin Patil, MBA II, NMU, (40)

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Grand strategies.

Submitted By:

Sachin Patil,

MBA II, NMU, (40)


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Corporate Level Strategies

Concentrated Growth

Acquisitions

Vertical Integration

Backward Integration

Forward Integration

Full Integration

Taper Integration

Horizontal Integration

Strategic Alliance

Diversification

Concentric Diversification

Conglomerate DiversificationTurnaround

Divestiture

Liquidation

Bankruptcy

Companies adopt a long-term perspective while

formulating a corporate-level strategy.

Corporate Level Strategy is used for:

1. Businesses or industries that the company shouldcompete in

1. Value creation activities that the company shouldperform in those businesses

1. Methods to enter or leave businesses or industries inorder to maximize its long-run profitability


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Grand Strategies:

It helps in making decisions related toallocating resources among thedifferent businesses of a firm,

transferring resources from one set ofBusiness to others and managing andnurturing a portfolio of Business insuch a way that the overall corporate

objectives are achieved.


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4 types of Grand strategies:

Stability strategies:

It is adopted when there is an attempt

at an incremental improvement of itsfunctional performance by marginallychanging the one or more of itsbusiness in terms of their respective

customer group, customer function andalternative technologies. No Change Strategies. Profit Strategy. Pause/Proceed with caution Strategy


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Contd

Expansion strategies:

It is followed when an organization

aims at high growth by substantiallybroadening the scope of one or moreof its businesses in terms of theircustomer groups, customer functions

and alternative technology.


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Contd

Retrenchment Strategies:

It is followed when anorganization aims at a

contraction of its activitiesthrough substantial reduction orelimination of the scope of one ormore of its businesses in terms of

their respective customer group,customer function and alternativetechnologies.


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Contd

Combination Strategies:

It is followed when an organization

adopts a mixture of stability, expansionand retrenchment either at the sametime in different businesses or atdifferent times in the same businesses

with the aim of improving itsperformance.


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Vertical Integration is a strategy for increasing or decreasing operationsbackward into an industry that produces inputs for the company orforward into an industry that distributes the companys products.

Types of Vertical Integration

Backward Vertical Integration

Forward Vertical Integration

Full Integration Taper Integration

FinalAssembly

In-houseDistributers

In-houseComponentPartsManufacturing

Raw Material

Out-sideDistributers

Out-sideSupplier

BackwardIntegration

Forward

Integration

FullIntegration

TaperInt

egration

EXPANSION BY INTEGRATION:-


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Horizontal Integration ( Merger) :-

It is process of acquiring or merging with industrycompetitors in an effort to achieve the competitiveadvantages that come with large scale and scope.

Manufacturing Car(3 lakhs 1 lakhs)

Manufacturing Car(3 lakhs 10 lakhs)

Manufacturing Car (25lakhs 10 lakhs)

In-houseDistributers

In-house ComponentParts Manufacturing

Raw material


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EXPANSION BY ACQUISION:-

It is an agreement between two firms where one firm buys another firm

with the intent of more effectively using a core competence by making theacquired firm a subsidiary within its portfolio business

Reasons for Acquisitions

Increased Market Share Overcome Barriers to Entry

Lower Cost and Risk ofNew Product Development

Diversification

Reshaping its competitiveScope

Problems with Acquisitions

Integration Difficulties Inadequate evaluation ofworth

Cash Crunch

Overly Diversified

Too Large to manage


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EXPANSION BY DIVERSIFICATION:-

It is a strategy adopted by the firms to acquire new firms to

expand its product base and to maximize its revenue. There aretwo types of diversifications Concentric Diversification &Conglomerate Diversification

Motivating factors for Diversification

Increase the firms stock value Increase the growth rate of the firm

Better utilization of firms resources

Improve the stability of the firm

Balance or fill out the product line

Diversify the product line

Acquired the needed reasons


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As per this strategy firm are acquired or new ventures are madethat are related to the acquiring firm in terms of technology,market or products. Hence the acquired business possess a highdegree of compatibility with the firms current business.

Conglomerate Diversification

As per this strategy firm are acquired which are not related tothe acquiring firm in terms of technology, market or

products. The firms engage in this kind of activity as theytake this as the most promising investment opportunity.


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(Retrenchment) DIVESTURE:-

This strategy involves the sale of a firm or a major component

of a firm.

Reasons for Divestiture Hurdles in Divestiture

Partial mismatched betweenacquired firm & parent firm

Corporate financial needs

Government antitrust actions

Finding a buyer who is willing to pay apremium above the value of a goingconcerns fixed assets


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(Retrenchment) LIQUIDATION:-

As per this strategy the firm sells its parts at tangible assetvalue and not as a going concern.

What's for the business?

It minimizes the losses of all the stakeholders.

It gives the business a scope to gain greatest possiblereturn and cash conversation so that it can relinquishits market share.


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(Retrenchment) TURNAROUND:-

This strategy involves a concerted effort over a period of time

to fortify a firms distinctive competencies and returning it toprofitability.

Major Steps in Turnaround process

v Change in Managementv Cost Reduction

v Asset Reduction


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COMBINATION STRATEGY:-

Mixture of Stability, Expansion or Retrenchment strategies

Applied either simultaneously or sequentially

No any organization can survive by adopting single purestrategy.


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Modernization Strategy:-

Technology is used as strategic tool to increaseproduction and productivity.

To reduce cost.

Company aims to gain competitive and strategicstrength.


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Which Strategy to adopt?

M d l f d t t l t


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Rapid Market Growth

Slow Market Growth

WeakCompetitive

position

StrongCompetitive

position

Concentrated Growth



Reformulation of concentric growth Horizontal Integration

Divestiture

Liquidation

Turnaround or Retrenchment


Conglomeratic Diversification

Divestiture

Liquidation


Conglomeratic Diversification

Joint Venture

Model of grand strategy clusters

grand strategies, 402, sachin patil, mba ii, nmu, (40)

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