Types of stretegies

Types of Strategies Defined and exemplified in Table, alternative strategies that an enterprise could pursue can be categorized into thirteen actionsforward integration, backward integration, horizontal integration, market penetration, market development, product development, concentric diversification, conglomerate diversification, horizontal diversification, joint venture, retrenchment, divestiture, and liquidationand a combination strategy. Each alternative strategy has countless variations. For example, market penetration can include adding salespersons, increasing advertising expenditures, coopering, and using similar actions to increase market share in a given geographic area. A Comprehensive Strategic-Management Model Alternative Strategies Defined and Exemplified Strategy Definition Example Forward Integration Gaining ownership or increased control over distributors or retailers General Motors is acquiring 10 percent of its dealers. Backward Integration Seeking ownership or increased control of a firm's suppliers Motel-8 acquired a furniture manufacturer. Horizontal Integration Seeking ownership or increased control over competitors Hilton recently acquired Promos. Market Penetration Seeking increased market share for present products or services in present markets through greater marketing efforts

Ameritrade, the online broker, tripled its annual advertising expenditures to $200 million to convince people they can make their own investment decisions. Market Development Introducing present products or services into new geographic area Britain's leading supplier of buses, Henlys PLC, acquires Blue Bird Corp., North America's leading school bus maker. Product Development Seeking increased sales by improving present products or services or developing new ones Apple developed the G4 chip that runs at 500 megahertz. Concentric Diversification Adding new, but related, products or services National Westminister Bank PLC in Britain buys the leading British insurance company, Legal & General Group PLC. Conglomerate Diversification Adding new, unrelated products or services H&R Block, the top tax preparation agency, said it will buy discount stock brokerage Olde Financial for $850 million in cash. Horizontal Diversification Adding new, unrelated products or services for present customers The New York Yankees baseball team is merging with the New Jersey Nets basketball team.

Joint Venture Two or more sponsoring firms forming a separate organization for cooperative purposes Lucent Technologies and Philips Electronics NV formed Philips Consumer Communications to make and sell telephones. Retrenchment Regrouping through cost and asset reduction to reverse declining sales and profit Singer, the sewing machine maker, declared bankruptcy. 81 Divestiture Selling a division or part of an organization Harcourt General, the large U.S. publisher, selling its Neiman Marcus division. Liquidation Selling all of a company's assets, in parts, for their tangible worth Ribol sold all its assets and ceases business. Integration Strategies: Forward integration, backward integration, and horizontal integration are sometimes collectively referred to as vertical integration strategies. Vertical integration strategies allow a firm to gain control over distributors, suppliers, and/or competitors. Forward integration strategy refers to the transactions between the customers and firm. Similarly, the function for the particular supply which the firm is being intended to involve itself will be called backward integration. When the firm looks that other firm which may be taken over within the area of its own activity is called horizontal integration. Benefits of vertical integration strategy: Allow a firm to gain control over: . Distributors (forward integration) . Suppliers (backward integration) . Competitors (horizontal integration) Forward integration: Gaining ownership or increased control over distributors or retailers Forward integration involves gaining ownership or increased control over distributors or retailers. You can gain ownership or control over the distributors, suppliers and Competitors using forward integration.

Guidelines for the use of integration strategies: Six guidelines when forward integration may be an especially effective strategy are: . Present distributors are expensive, unreliable, or incapable of meeting firms needs . Availability of quality distributors is limited . When firm competes in an industry that is expected to grow markedly . Organization has both capital and human resources needed to manage new business of distribution . Advantages of stable production are high . Present distributors have high profit margins When your present distributors are expensive and you think that without affecting the quality of the goods you have to carry own the operations, forward integration is advisable. Similarly, if distributors are unreliable, they can not deliver with a sustained degree of timeliness or they are not in a proper way to meet the needs of the firm, forward integration is advisable. Availability of quality distributors is limited or it is difficult to get the quality of goods, then this need for a quality distributor, forward integration is best alternative. Suppose you have two industries, computers and mobile telephone which are progressing tremendously, it is advisable to think of forward integration due to the changing environment of the business. Organization has both capital and human resources needed to manage new business of distribution. A firm has all the basic elements to run the business safely in that case forward integration is best alternate. For stable production, stable supply is necessary. If you think that present distributors are charging high mark up, you may do that operation your self in order to avoid the mark up charges. It is advisable that firm itself involve in the operations. By gaining control, stability will be more and profitability will be enhanced. When an organization's present distributors are especially expensive, or unreliable, or incapable of meeting the firm's distribution needs When the availability of quality distributors is so limited as to offer a competitive advantage to those firms that integrate forward When an organization competes in an industry that is growing and is expected to continue to grow markedly; this is a factor because forward integration reduces an organization's ability to diversify if its basic industry falters When an organization has both the capital and human resources needed to manage the new business of distributing its own products When the advantages of stable production are particularly high; this is a consideration because an organization can increase the predictability of the demand for its output through forward integration When present distributors or retailers have high profit margins; this situation suggests that a company profitably could distribute its own products and price them more competitively by integrating forward Backward Integration Seeking ownership or increased control of a firms suppliers Both manufacturers and retailers purchase needed materials from suppliers. Backward integration is a strategy of seeking ownership or increased control of a firm's suppliers. This strategy can be especially appropriate when a firm's current suppliers are unreliable, too costly, or cannot meet the firm's needs.

Guidelines for Backward Integration: Six guidelines when backward integration may be an especially effective strategy are: . When present suppliers are expensive, unreliable, or incapable of meeting needs . Number of suppliers is small and number of competitors large . High growth in industry sector . Firm has both capital and human resources to manage new business . Advantages of stable prices are important . Present supplies have high profit margins When an organization's present suppliers are especially expensive, or unreliable, or incapable of meeting the firm's needs for parts, components, assemblies, or raw materials 83 When the number of suppliers is small and the number of competitors is large When an organization competes in an industry that is growing rapidly; this is a factor because integrative-type strategies (forward, backward, and horizontal) reduce an organization's ability to diversify in a declining industry When an organization has both capital and human resources to manage the new business of supplying its own raw materials When the advantages of stable prices are particularly important; this is a factor because an organization can stabilize the cost of its raw materials and the associated price of its product through backward integration When present supplies have high profit margins, which suggests that the business of supplying products or services in the given industry is a worthwhile venture When an organization needs to acquire a needed resource quickly