GRAND STRATEGIES Introduction Corporate-level strategists have a tremendous amount of both freedom and respons ibility.

The numerous decisions required of these managers can be overwhelming c onsidering the potential consequences of incorrect decisions. In a bid to overco me the above, any organisation must have a corporate strategy otherwise called g rand or master strategy to set direction and the purpose for the organisations f unctions to follow and to obtain competitive advantage. Corporate strategies add ress the entire strategic scope big picture of the firm including issues such as w hich product or service to deal in, markets to compete and in which geographic r egions to operate. Definition of Strategy According to (Lussier ,2009:98), a strategy is a set of analytic techniques for understanding and influencing a firms position in the market place in terms of customer satisfaction, competition, successful operations and realization of or ganizational objectives . Meaning of a Grand Strategy A grand strategy is a comprehensive approach that is viewed by the organization as necessary for the accomplishment of its mission and the achievement of its pr eferred future. In other words, a Grand strategy, or as is otherwise called mast er or business strategy provides basic direction for strategic actions and is th e basis of coordinated and sustained efforts directed towards achieving long-ter m business objectives.( Pearce,2005:251) Figure Showing the Different Levels of Strategy Source (Lussier, 2009:98) The diagram above shows that the three different levels of strategy; corporate/g rand, business and functional are largely related and none can operate without t he other. Corporate strategy is broad encompassing the business as a whole. Busi ness strategy focuses on the tactics that make the business successful whereas t he functional strategies are the operational methods for implementing the tactic s. Options /Grand Strategies that a Firm can Use to Achieve Long Term Growth There are three major options and or categorizations of grand strategies availab le to a firm wanting to achieve long term growth. These include: firstly those t hat involve efforts to expand business operations (growth strategies), secondly those that maintain the status quo (stability strategies) and lastly those that decrease the scope of business operations (defensive strategies). In addition to the three categories mentioned above, some authors have come up with the fourth option which is; corporate combinations (Lussier, 2009:113). The figure below is a diagrammatical representation of the four different optio ns mentioned above. Figure Showing the Different Options of Grand Strategy Source: (Lussier, 2009: 113) Having looked at the diagrammatical representation above, we now move on to desc ribe the options in relation to a firm wanting to achieve long term growth, pa ying attention to the level of risks each is likely to contain. 1) Growth Strategies These are usually designed to expand an organization's performance basing on ext ernal options through acquisitions and divestitures or internally focused throug h product development quality improvement; increase in company size, revenues an d operations. For a firm to remain on the growth path it must, first focus on protecting the existing business, secondly, further penetration into the existing market segmen ts with existing products and or upgrades, thirdly, extend the business through creation of new products for existing and new segments and last but not least di versify into new markets with new products. Growth strategies are generally healthy in nature but they can give a misguided picture of the firms cash flow. When the growth is unprofitable the firm will be unable to meet its debt obligations and this will not only lead to increased int

erest costs but also the overall cost of capital rendering it unable to pursue f urther growth opportunities. Typical growth strategies involve one or more of the following; concentration st rategy, integration strategy and diversification strategy. a) Concentration strategy: According to (Pearce, 2005:253) this is also called t he protect or build strategy and is the most frequently applied in business. With this strategy the firm achieves greater market penetration by becoming highly ef ficient at servicing its market with a limited product line, using single techno logy. Most firms utilize this strategy so as to develop and fully exploit their expert ise hence limiting or eliminating competitors dealing in the same product market . If Africana Clays for instance utilized this strategy by concentrating on one product say Maxpans, one market and with single technology, it could gain compet itive advantage over its more diversified competitors like Uganda Clays in produ ction skill, marketing know-how, customer sensitivity and reputation in the mark et place. The major risks of concentration include: incase a firm slackens, its growth rat e may become difficult sustain. Similarly achieving high profit may be hard and incase of change in customer needs or technological innovation or product substi tution, the firm may completely be thrown out of business. Other risks include vulnerability to opportunity costs that may arise as a resul t of focusing on a specific product market while ignoring other options that cou ld utilize the firms resources more profitably. Additionally, concentration on si ngle technology and product market can also deter the firms chances to explore ne w or growing product markets that offer better cost benefit tradeoffs. b) Market development strategy; This focuses on improving the market and involve s marketing of the firms existing products with cosmetic modifications to custom ers in related market areas through new channels of distribution and or by alter ing the advertising content. Similarly, a firm may implement the market developm ent strategy by identifying new uses as well new markets for the existing produc ts. Using the example Unilever Uganda, this strategy was applied by introducing Blue band spread and new improved lifebuoy soap. This strategy has high risk as it involves high costs in terms of promotion, and yet the market for a given pro duct may fail(Ibid, 2005:253). c) Product development strategy; This arises whenever there is a limitation in i ncreasing the firms level of operations in terms of growth or size of the market, organizational limitations or better opportunities in other areas. Product deve lopment may be internal implying that the organizations strategic managers decide to grow the business by acquiring the necessary assets (people, buildings and m achinery from within other than sourcing from outside. The risks associated with this option are lower as compared to others. The majo r one being the possibility of losing opportunities incase competitors move fast in counteracting the actions, the other is that of the high costs involved in b ringing up a new product (Ibid, 2005:254). d) Innovation; This comes as a result of the ever changing industrial and custo mer needs that call for periodic changes and improvements in products on offer. Usually, the aim behind this strategy is creating a new product lifecycle so as to render any similar existing products obsolete. The level of risk for this opt ion is often high and the failure rate may rise up to eighty nine (89) percent e specially for commercial products (Ibid,2005:255). e) Integration Strategy: This may either be horizontal or vertical integration. Horizontal integration on one hand involves the amalgamation of firms at the sa me level of growth. With this strategy, a firm grows through acquisition of anot her or similar firms operating at the same production level. The major reason be hind a horizontal integration is to beat competition and access new markets for the acquiring firm (Upendra, 2005:238). Vertical integration on the other hand is when a firm attempts to expand the sco pe of its current operations by undertaking business activities formerly perform ed by one of its suppliers (backward integration) for instance a school uniform manufacturer acquires a textile producer or by undertaking business activities p

erformed by a business in its channel of distribution (forward integration) like a uniform manufacturer merging with a clothing store. The major advantages asso ciated with vertical integration are the firms ability to gain control over the r aw material source and ease the procurement and administrative procedures. Both the vertical and horizontal integration have increased risks. Horizontally integrated firms face the risks of increased commitment to a single business whi le vertically integrated firms suffer risks that are a result of expansion of th e company, loss of flexibility as a result of large investments, costs and expen ses due to the increased capital and overhead expenditure and administrative com plexities (Ibid, 2005:238). f) Diversification strategy: This strategy entails a firm moving into different markets or adding different products to its mix or even engaging in a number of businesses. If the products or markets are related to existing product or servic e offerings, the strategy is called concentric or related diversification. If ex pansion is into products or services unrelated to the firm s existing business, the diversification is called conglomerate or unrelated diversification. Divers ification is usually aimed at increasing; growth, the stock value and efficiency / profitability among others. The risk associated with this option is high as ma jority of the acquisitions by both the conglomerate and concentric diversificati on often fail to realize the intended results (Pearce, 2005:264). 2) Stability Strategies When a firm is satisfied with its current rate of growth and profits, it may dec ide to use a stability strategy. This strategy is essentially a continuation of existing strategies. Such strategies are typically found in industries having re latively stable environments and performance. The firm is often making a comfort able income operating a business that they know, and see no need to make the psy chological, human resource and financial investment that would be required to un dertake a growth strategy. When a firm continuously uses this strategy it risks being thrown out of business by competitors if they can come up with new ideas and are able to penetrate the market (Upendra, 2005:240). 3) Defensive Strategies This strategy is usually employed by firms facing negative trends in terms of de clining profits, production inefficiencies, economic recessions and innovative b reak throughs by competitors. The strategies here are directed towards putting b ack the firm onto course and ensuring that it does not completely loose out. The alternatives/options under this strategy include; harvest, retrenchment, turnar ound, divestiture, bankruptcy and liquidation and each is explained below: a) Harvest: In this strategy the firm opts to harvest that is obtain new technolog y and sells off the old before its value is completely written off. The sole pur pose for this action is to avert deteriorating performance as a result of old te chnology. An example here is UCB (Uganda commercial bank) now Stanbic Bank that carried out the harvest strategy by selling off the numerous branches that wer e spread throughout the whole country .The biggest risk with this strategy is th e high costs of researching and acquiring the new technology (Upendra,2005:243 ). b) Retrenchment; This strategy is usually adopted when a firm is facing poor per formance as a consequence of organizational inefficiencies that result into fina ncial problems, public criticism, economic uncertainty and general economic rece ssion. Here the strategy involves a reduction in the scope of a corporation s ac tivities, which also generally necessitates a reduction in number of employees, sale of assets associated with discontinued products or service lines, possible restructuring of debt through bankruptcy proceedings, elimination of low margin customers and in the most extreme cases, liquidation of the firm. The sole aim o f retrenchment is to rejuvenate the firm (Ibid, 243). c) Turn around: Firms usually pursue this strategy by undertaking a temporary re duction in operations in an effort to make the business stronger and more viable in the future. These moves are popularly called downsizing or rightsizing. The hope is that going through a temporary belt-tightening will allow the firm to pu rsue a growth strategy at some future point. The strategy usually involves cost and asset reduction. Managers reduce costs by reducing staff, leasing rather tha

n buying equipment, reducing marketing expenditures or Research and development. Assets are also often sold to free up cash for new initiatives. In some cases a ssets are sold and then leased back by the company from the purchaser of the ass et. Once costs are reduced and assets have been sold to generate cash a positive growth or diversification strategy must be implemented to complete the turnarou nd. A good example here is Warid Telecom Company which started with many custom er service centres in all major towns but has since embarked on engaging region al franchises and reducing staff, all aimed at cutting costs (Lussier, 2009: 12 0) d) Divestiture: A divestment decision occurs when a firm decides to sell one or more of the businesses in its corporate portfolio. Typically, a poorly performin g unit is sold to another company and the money is reinvested in another busines s within the portfolio that has greater potential. A good example is the Chrysle r Corporation which divested several of its major businesses so as to protect it s mission as a domestic automobile manufacturer. e) Bankruptcy involves legal protection against creditors or others allowing the firm to restructure its debt obligations or other payments in a way that tempor arily increases cash flow. Such restructuring allows the firm time to attempt a turnaround strategy. For example, since the airline hijackings and the subsequen t tragic events of September 11, 2001, many of the airlines based in the U.S. fi led for bankruptcy to avoid liquidation as a result of thwarted demand the for air travel and rising fuel prices. Similarly, at least one airline asked the co urts to allow it to permanently suspend payments to its employee pension plan to free up positive cash flow. e) Liquidation is the most extreme form of defensive strategy. It involves sell ing off parts of the business or occasionally the whole of its tangible asset bu t not as a going concern. Under this strategy, the owners or strategic managers m ajor intention is to minimize the loss to the stake holders of the firm. A good example here is Dairy Corporation that liquidated its assets for a higher cash stock value as compared to the market value. At this stage a firm has no future; employees are released, buildings and equipment are sold, and customers no long er have access to the product or service. This is a strategy of last resort and one that most managers work hard to avoid. 4) Combination Strategies According to (Bakunda, 2001:138) with combination strategies, a firm continuousl y applies several of the above strategies simultaneously or sequentially. A firm like Roofings Limited may for instance stabilize in some areas, expand in others and retrench the unprofitable operations to raise money for expanding the profi table ones. Similarly, a firm may vary its strategies overtime depending on its stage in life cycle by say starting with expansion in the introduction and growt h stages, stabilize at maturity and then retrenches in the decline stage. This s trategy is ideal for big multiple SBU firms in periods of economic transition. Corporate combinations may also be implemented through newly popularized grand s trategies that include joint ventures, strategic alliances, and consortia. Conclusion In reality there is no best or worst of the strategies. A strategy may not neces sarily be superior to another in all circumstances and a combination of them may be effective and have the potential to improve performance depending on the pre vailing conditions and the company objective. A firm should therefore not select any strategy randomly but it must first take into consideration its objective a nd the circumstances it is undergoing.

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