Strategies

are defined as visions, plans , policies and

culture of the organization over a long period of time.
Strategic decisions involve future of the firm.

Strategies

cannot be viewed as static but reassessed

and re formulated continuously.

1.

2.

3.

Corporate strategy: 1) growth strategy, 2)

stability strategy, 3) retrenchment strategy.
Business unit strategy: 1) cost leadership, 2)
differentiation, 3) focus, 4) mixed.
Functional strategy.

Prof. Dr. Majed El-Farra 2009

Types of Strategies
A Large Company

Corp
Level

Division Level

Functional Level

Operational Level

Ch 5 -3

Types of Strategies
company

A small Company
Functional Level

Operational Level

Ch 5 -4

Top level management formulate for overall

organization
The question at the corporate level we should
answer when design strategies: In what industry
should we be operating?
It depends on the outcome of SWOT analysis.
Corporate strategy include growth, corporate
restricting and retrenchment.
Prof. Dr. Majed El-Farra 2009

Growth strategies:
They result increase in sales, market share and profit: the types:
Internal growth: Increase internal capacity of organization
without acquiring other firms.
Conglomerate Diversification: Acquiring unrelated business.
Merger: Two roughly similar size firms combine into one. To
benefit of synergy.
Strategic alliance: Temporary partnerships

Prof. Dr. Majed El-Farra 2009

The change in a broad set of actions and decisions, e.g.,

changing relationships and organization of work.
The aim of restructuring is to improve effectiveness.
Restructuring could be growth, stability or retrenchment.
This depends on why we use it.

Prof. Dr. Majed El-Farra 2009

Types:

1- Turnaround:
Eliminating unprofitable outputs, pruning/cutting
assets, reducing size of work force, rethinking
firms products lines and customer groups.
2- Divestment: sell one of business units
3- Liquidation: last resort strategy

Prof. Dr. Majed El-Farra 2009

Strategies in Action

Vertical Integration Strategies

Forward integration
Backward integration
Horizontal integration

Prof. Dr. Majed El-Farra 2009

Strategies in Action
Forward
Integration
Defined
Gaining

ownership
or increased
control over
distributors or
retailers
10

Example
General

Motors is
acquiring 10% of its
dealers.

Prof. Dr. Majed El-Farra 2009

Strategies in Action
Backward
Integration
Example
Defined

Motel

8 acquired a
furniture manufacturer.

Seeking

ownership
or increased
control of a firms
suppliers
12

Prof. Dr. Majed El-Farra 2009

Strategies in Action
Horizontal
Integration
Defined
Seeking

ownership
or increased
control over
competitors
14

Example
Palestinian

Islamic Bank
acquired Cairo-Amman
Bank Islamic transaction
branch.

Prof. Dr. Majed El-Farra 2009

Strategies in Action

Diversification Strategies
Concentric diversification
Conglomerate diversification
Horizontal diversification

23

Prof. Dr. Majed El-Farra 2009

Strategies in Action
Concentric
Diversification
Example

Defined
Adding

new, but
related, products or
services

24

National

Westminister
Bank PLC in Britain
bought the leading British
insurance company, Legal
& General Group PLC.

Prof. Dr. Majed El-Farra 2009

Strategies in Action
Conglomerate
Diversification
Example

Defined
Adding

new,
unrelated products
or services

26

Consultant

Construction
Engineering acquired
Bisects factory.

Prof. Dr. Majed El-Farra 2009

Strategies in Action
Horizontal
Diversification
Example

Defined
Adding

new,
unrelated products
or services for
present customers
28

The

El-Awda Co. provide

ice-cream product to
present customer

Prof. Dr. Majed El-Farra 2009

Stability strategy
This is a strategy of no change.
Neither there is significant strategies nor there is threat.
Firm makes small adjustments in sales and profit.
A short term strategy.

18

Strategies in Action
Defensive Strategies

30

Joint venture
Retrenchment
Divestiture
Liquidation

Prof. Dr. Majed El-Farra 2009

Strategies in Action
Retrenchment
(turnaround)
Example

Defined
Regrouping

through cost
and asset reduction to
reverse declining sales
and profit. Sometimes it
is called turnaround or
reorganizational strategy.
33

company sold off a land

and 4 apartments to raise
cash needed. It introduce
expense effective control
system.

Prof. Dr. Majed El-Farra 2009

Strategies in Action
Joint Venture
Example

Defined
Two

or more
sponsoring firms
forming a separate
organization for
cooperative
purposes
31

Lucent

Technologies and
Philips Electronic NV
formed Philips Consumer
Communications to make
and sell telephones.

Prof. Dr. Majed El-Farra 2009

Strategies in Action
Divestiture

Defined
Selling

a division or
part of an
organization

35

Example
Harcourt

General, the
large US publisher, is
selling its Neiman Marcus
division.

Prof. Dr. Majed El-Farra 2009

Strategies in Action
Liquidation

Example

Defined
Selling

all of a
companys assets, in
parts, for their
tangible worth
37

El-Ameer

Block factory
sold all its assets and
ceased business.

Prof. Dr. Majed El-Farra 2009

Michael Porters Generic Strategies

Cost Leadership Strategies
(Low-Cost & Best-Value)

Differentiation Strategies

Focus Strategies
(Low-Cost Focus &
Best-Value Focus)

Ch 5 -39

Prof. Dr. Majed El-Farra 2009

Here

we answer the question:

How should we compete in the chosen industry?
Cost leadership
Differentiation (real or perceived).
Mixed
Focus

40

Prof. Dr. Majed El-Farra 2009

Porters Competitive Strategies

Competitive Strategy -Low cost

Differentiation
Direct competition
Focus on niche

6-42

Prof. Dr. Majed El-Farra 2009

Porters Competitive Strategies

Generic Competitive Strategies -Lower Cost strategy

Greater efficiencies than competitors

Differentiation strategy
Unique/superior value, quality, features, service

6-43

Prof. Dr. Majed El-Farra 2009

Porters Competitive Strategies

6-45

Prof. Dr. Majed El-Farra 2009

Striving to be the low-cost producer in an industry can

be especially effective when the market is composed
of many price-sensitive buyers,
when there are few ways to achieve product
differentiation,
when buyers do not care much about differences
from brand to brand, or
when there are a large number of buyers with
significant bargaining power.
Ch 5 -49

Prof. Dr. Majed El-Farra 2009

Differentiation is aimed at producing

products that are considered unique. This
strategy is most powerful with the source of
differentiation is especially relevant to the
target market

Ch 5 -52

Prof. Dr. Majed El-Farra 2009

Porters Competitive Strategies

Differentiation
Broad mass market
Unique product/service
Premiums charged
Less price sensitivity

6-51

Prof. Dr. Majed El-Farra 2009

Common organizational requirements for a

successful differentiation strategy include
strong coordination among the R&D and
marketing functions and substantial amenities
to attract scientists and creative people.

Ch 5 -54

Prof. Dr. Majed El-Farra 2009

Focus strategies are most effective when the niche

is profitable and growing, when industry leaders are
uninterested in the niche, when industry leaders feel
pursuing the niche is too costly or difficult, when the
industry offers several niches, and when there is little
competition in the niche segment.

Ch 5 -56

Prof. Dr. Majed El-Farra 2009

Porters Competitive Strategies

Cost-Focus
Low-cost competitive strategy
Focus on market segment
Niche focused
Cost advantage in market segment

6-57

Prof. Dr. Majed El-Farra 2009

Porters Competitive Strategies

Differentiation Focus
Specific group or geographic market focus
Differentiation in target market
Special needs of narrow target market

6-58

Prof. Dr. Majed El-Farra 2009

Functional/operational

Strategies:
Concern with org. internal resources and
processes which effectively deliver the corporate
and business strategic direction.
Functional strategies are interrelated.
Functional strategies e.g.: purchasing & materials
management, production, finance, R&D, HR, IT,
and marketing.

61

Prof. Dr. Majed El-Farra 2009