Académique Documents
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Strategy Formulation
• Environment Analysis
• Organizational Appraisal
» Internal Environment,OB,Competency,
» Methods 7 Techniques for Organizational Appraisal
Expansion Strategy
Stability Strategy
Retrenchment Strategy
Combination Strategy
Example :-
•Chocolate manufacturer expands customer group to include middle
aged and old people
•Stockbroker firm offers personalized financial services to small
investors apart from dealing in shares and debentures.
•Printing firm changes from traditional letter press printing to desk-top
publishing http://macy.ba.ttu.edu/5491/week8/Week 8 Strategy.ppt Slide #6 3-18
Stability Strategy
Example :-
• Packaged tea company provides special services to institutional buyers
in order to encourage bulk buying.
•A copier machine company provides better after sales service to
existing customers.
• A steel company modernizes its http://macy.ba.ttu.edu/5491/week8/Week
plants to improve efficiency and
8 Strategy.ppt Slide #7 3-18
Retrenchment Strategy
Example :-
• A Pharmaceutical firm pulls out from retail selling to concentrate on
institutional selling & reduce sales force.
•A corporate hospital decides to focus only specialty treatment than
general treatment.
http://macy.ba.ttu.edu/5491/week8/Week 8 Strategy.ppt Slide #8 3-18
Corporate Growth Strategy
• Expansion Strategy :- Followed by organization with aim for high
growth
Concentration
Integration
Diversification
Cooperation
Internationalization
Digitalization
•Stability Strategy :- Adopted to improve functional performance
•No change strategy
•Profit Strategy
•Pause/Proceed with caution strategy
http://macy.ba.ttu.edu/5491/week8/Week 8 Strategy.ppt Slide #9 3-18
Corporate Growth Strategy
Retrenchment Strategy :- Followed by Organization with an aim to
contraction of activities.
•Divestment,Liquidation
• Compulsory winding up
•Voluntary Winding up
•Winding Up under court supervision
International Concentration
Organizational
Growth
Product(s)
Product-Market Product
Exploitation Development
Customers
INCREASING RISK
Sell more in
Sell new products in
existing Markets
existing markets
MARKETS
MARKET
EXTENSION DIVERSIFICATION
INCREASING RISK
Sell more in
existing Markets
MARKETS
New
INCREASING RISK
Sell more in
existing Markets
MARKETS
MARKET
EXTENSION
Achieve higher
New
sales/market
share of existing
products in new
markets
INCREASING RISK
Sell more in
Sell new products in
existing Markets
existing markets
MARKETS
MARKET
EXTENSION
Achieve higher
New
sales/market
share of existing
products in new
markets
http://macy.ba.ttu.edu/5491/week8/Week 8 Strategy.ppt Slide #24
PRODUCT DEVELOPMENT
• Least risky of all four strategies
• This involves taking an existing product and
developing it in existing markets
– E.g. Coca-Cola. This has been developed to have
vanilla, lime, cherry and diet varieties (amongst
others) in the SOFT DRINKS market
INCREASING RISK
Sell more in
Sell new products in
existing Markets
existing markets
MARKETS
MARKET
EXTENSION DIVERSIFICATION
Example:-
• Shoe Manufacturer---Bigger Shoe manufacturer
• Cat food + Dog Food---Animal Feed Industry
Upstream Downstream
FIGURE
9.1
http://macy.ba.ttu.edu/5491/week8/Week 8 Strategy.ppt Slide #32
Stages in the Raw-Material-to-Consumer
Value Chain in the Personal Computer
Industry
Intermediate
Raw materials Assembly Distribution End user
manufacturer
FIGURE
9.2
http://macy.ba.ttu.edu/5491/week8/Week 8 Strategy.ppt Slide #33
Vertical Integration
• Integration backward into supplier functions
– Assures constant supply of inputs.
– Protects against price increases.
• Integration forward into distributor functions
– Assures proper disposal of outputs.
– Captures additional profits beyond activity costs.
• Integration choice is that of which value-
adding activities to compete in and which are
better suited for others to carry out.
FIGURE
9.4
http://macy.ba.ttu.edu/5491/week8/Week 8 Strategy.ppt Slide #35
Creating Value Through Vertical
Integration
• Advantages of a vertical integration
strategy:
– Builds entry barriers to new competitors by
denying them inputs and customers.
– Protects product quality through control of
input quality and distribution and service of
outputs.
– Improves internal scheduling (e.g., JIT
inventory systems) responses to changes in
demand.
Product Distribution
Similarities Related Channels
Diversification
Similar Customer
Technology Use
• Two Types
– Related Businesses
– Unrelated Businesses