CHAPTER 5: STRATEGIES IN ACTION Intensive Strategies- are thought about when a company
struggles to make better its competitive position.
Long-term objectives There are requirements to apply for Intensive - corresponds to the outcome anticipated from Strategies, namely: putting into practice certain strategies. - Necessary at the different levels of the ➢ Market Penetration organization namely: - is a strategy to amplify market share for • Corporate current products or services in current • Divisional market through much more marketing • Functional efforts. - They are vital determinants of managerial - includes increasing the number of performance. salespersons, increasing advertising cost, giving widespread sales promotion items, or Strategies- stand for the actions to be carried out to growing publicity efforts. achieve long-term objectives. 4 Strategies to increase Market Penetration Objectives & Strategies- must be consistent, generally from two to five years. 1. Price adjustments - one of the common market penetration Objectives strategy. - ought to be quantitative, quantifiable, realistic, - through reducing prices, the company comprehensible, challenging, hierarchical, expects to make more sales volume by reachable, and congruent. increasing the number on units bought and - Lay down organizational priorities and fuel hard create appealing prices to consumers when work and achievement. contrasted to the competition. INTEGRATION STRATEGIES 2. Increased Promotion Integration- is a familiar matter for companies that are - Companies may decide to increase market owners of more than single business. penetration through greater promotional efforts. Strategic Integration- combines the strategies of a - may launch an advertising campaign to company’s different business units to divide resources generate greater brand awareness or and give much return on investment for the whole implement a short-term promotion with a organization. finite ending date. Vertical Integration 3. More distribution channels- a company can try - the extent with which a business unit is to increase market penetration by increasing the incorporated with its suppliers and buyers. methods it uses to get products into the hands of - enables companies to acquire a larger share of consumers and be more readily available the total product value added and to benefit 4. Product improvements- making product from service activities like shipping and improvements can be used to make new interest distribution that get higher returns than in an idle product or to present an additional production. benefit when using it. Suppliers-are usually called upstream from the Market Development organization. - involves launching current products or services into Buyers- are called downstream from organization. new geographic areas or new sets of market. Vertical Integration includes the ff: - means the company does not launch new or modified ➢ Forward Integration-refers to acquiring products rather the products continue to be the same ownership or bigger control over former except there are additional new markets that would distributors or retailers through opening outlets enter into new geographical areas. on the main location. Product Development ▪ Franchising - a strategy that tries to improve its competitive - is an effective way of carrying out position and sales through improvement and forward integration. modification of its existing products. - could speedily since cost and - Is a significant means for business to remain opportunities are stretch among competitive and continue to appeal to the numerous individuals. shifting needs of current customers. ➢ Backward Integration There are strategies for effective product - a strategy of becoming an owner or development, namely: increasing control of a company’s former ➢ Customer needs- a classic strategy for product suppliers. development is simply focusing on customer - can be chiefly suitable once a company’s needs. present suppliers become undependable, ➢ Brand extension- is a familiar strategy for new too expensive, or cannot satisfy the product development. company’s needs. ➢ Technology ➢ Horizontal Integration - companies can make use of technology to - a strategy of becoming an owner of or more strategically identify opportunities. control over a company’s former - Obsolescence of products and service could competitors. be avoided with new ways available through - often consists of the practice of acquisition technology. and/or merging with other business organizations in similar industry to attain organizational objectives. Diversification Strategies Liquidation 2 Common Types of Diversification Strategies - selling all of a company’s assets, in parts, for their • Related- when their value chains have tangible worth competitively valuable cross-business strategic - recognition of defeat and consequently can be fits. an emotionally difficult strategy. • Unrelated- when their value chains are too 5 GENERIC STRATEGIES BY PORTER different that no competitively valuable cross- Generic Strategy- a common approach of positioning a business relationships are present. company within an industry. Most of the companies prefer related diversification The most popular set of generic strategies came from the strategies because of the ff: initial ideas of Professor Michael Porter of the Harvard ▪ Competitively valuable expertise, technological Business School. know-how, or other capabilities are transferred ❖ Cost Leadership from one company to another. - emphasizes producing standardized ▪ The related activities of separate business are products at a very low per unit cost for combined into a single operation to attain lower consumers who are price-sensitive. costs. - one of the characters of cost leaders is the ▪ Common use of a well-known brand name is ability to charge low prices and still make a taken as an advantage. profit. ▪ In order to create competitively valuable There are two alternative type of cost leadership resource strengths and capabilities there is cross- strategies namely: business collaboration. 1. Type I is a low-cost strategy that offers products Diversification- makes sense only to the extent strategy or services to a brand range of customers at the acting individually. lowest price available on the market. Related Diversification- is a strategic change in which the 2. Type 2 is a best-value strategy that offers company moves its core industry into other industries products or services to a broad range of that are related to the core industry. customers at the best price-value obtainable on 2 Dimensions of Relatedness the market. • the degree to which the new industry is related NOTE: Remember that for a resource to be valuable, it to the core industry must be either rare, hard to imitate, not easily • the other more important is the degree to which substitutable and organized. the company operates at the same center of 2 Ways to do in order to use CL Strategy effectively gravity in the new industry 1. The company must effectively execute its value chain - An appreciation for the degree of activities and try to organize those factors that relatedness is needed to estimate the contribute to increase in costs along the chain. amount of strategic change that is being 2. Overhaul the value chain of the company by removing attempted. or avoiding those activities that increase costs. Unrelated Diversification- strategy favors capitalizing on When employing a cost leadership strategy: a portfolio of business that are capable of delivering ▪ a company must not to use aggressive price cuts excellent financial performance in their respective that their own profits become low or industries, rather than striving to capitalize on value nonexistent. chain strategic fits among the business. ▪ must be watchful on value chain advancements Defensive Strategies- are management tools that can be that may destroy the competitive advantage of used to fend off an attack from a potential competitor. the company. Retrenchment Some of the evidences of a successful cost leadership - happens when an organization reorganizes its strategy are high efficiency, low overhead, non- activities by reducing its assets and costs due to acceptance of waste, serious screening of budget declining sales and profits. requests, wide spans of control, rewards linked to cost - Sometimes called turnaround or reorganizational control, and broad employee involvement in cost strategy, retrenchment is intended to strengthen an containment efforts. organization’s basic distinctive competence. ❖ Differentiation 7 Activities that are part in Retrenchment Strategy - is a strategy designed at making unique products and services in the whole industry for • Selling of building and lands for raising certain price-insensitive consumers. cash for the business - hard or expensive for rivals to copy are the • The product lines are cut back most valuable differentiation bases. • The marginal businesses that are not lucrative are - Product development is a good strategy for stopped down carrying out differentiation. • The obsolete factories are stopped down Evidence of a successful differentiation: • The production and other processes of the business organization are automated • More product flexibility • The number of employees are trimmed down • More compatibility • The expenses of the business are controlled in a • Reduced costs successful manner • Better service • Lower maintenance costs Divestiture • More convenience or added features - Selling a division or part of an organization Special features that could differentiate one’s product: - often used to raise capital for further strategic acquisitions or investments. • Better service • Availability of spare parts when needed • Engineering design • Product performance • Useful life of the product • Gas mileage • User friendliness For a differentiating strategy have to be: • effective • differentiating features have to be time consuming • Cost too expensive • basically too troublesome for competitors to equal ❖ Focus - concentrate on particular niche markets with products and services that fulfill the unique needs of small groups of consumers. - A winning focus strategy is dependent on an industry segment that is of adequate size, has good growth possibility, and not vital to the success of other key competitors. 2 Alternative types of focus strategies 1. Type 4 is a low-cost focus strategy that offers products or services to a small niche group of customers of the lowest price available on the market. 2. Type 5 is a best-value focus strategy that offers products or services to a small niche group of customers at the best price-value available on the market.