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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.

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