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GRAND STRATEGIES

Grand Strategies often called master or business strategies provide basic direction of strategic actions. They are the basis of coordinated and sustained efforts directed toward achieving long- term business objectives.

Grand strategies indicate the time period over which the long- range objectives are to be achieved. Thus a grand strategy can be defined as a comprehensive general approach that guides a firms major actions. The fifteen principal grand strategies are (1) Concentrated Growth, (2) Market Development, (3) Product Development, (4) Innovation, (5) Horizontal Integration, (6) Vertical Integration, (7) Concentric Diversification, (8) Conglomerate Diversification, (9) Turnaround, (10) Divestiture, (11) Liquidation, (12) Bankruptcy, (13) Joint Ventures, (14) Strategic Alliance, and (15) Consortia
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Concentrated Growth is the strategy of a firm that directs its resources to the profitable growth of a single product, in a single market, with a single dominant technology. The main rationale for this approach sometimes called a market penetration or concentration strategy, is that the firm thoroughly develops and exploits its expertise in a delimited competitive arena.

Concentrated growth strategy lead to enhanced performance. The ability to assess market needs, knowledge of buyer behavior, customer price sensitivity, and effectiveness of promotion are characteristics of concentrated growth strategy.

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Market Development commonly ranks second only to concentration as the least risky of the 15 grand strategies. It consists of marketing present products, often with cosmetic

modifications, to customers in related market areas by adding channels of distribution or by changing the content of advertising or promotion.
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Product Development involves the substantial modifications of existing products or the creation of new but related products that can be marketed to current customers through established channels. The product development strategy is often adopted either to prolong the life cycle of current products or to take the advantage of a favorite reputation or brand name. The idea is to attract satisfied customers to new products as a result of their positive experience with the firms initial offerings. Innovation- In many industries, it has become increasingly risky not to innovate. Both consumer and industrial markets expect periodic changes and the improvements in the products offered. As a result, some firms find it profitable to make innovation as their grand strategy. The underlying rationale of the grand strategy of innovation is to create a new product life cycle and thereby make similar existing products obsolete. Thus, this strategy differs from the product development strategy of extending an existing products life cycle. Horizontal Integration- When the firms long term strategy is based on growth through the acquisition of one or more similar firms operating at the same stage of production- marketing chain, its grand strategy is called horizontal integration. Such acquisitions eliminate competitors and provide the acquiring firms with access to new markets. Vertical Integration- When a firms grand strategy is to acquire firms that supply it with inputs (such as raw materials) or are customers for its output (such as

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warehouses for its finished products), vertical integration is involved. For example, if a shirt manufacturer acquires a textile producer- by purchasing its common stock, buying its assets, or exchanging ownership interest- the strategy is vertical integration. In this case, it is backward vertical integration since the acquired firm operates at an earlier stage of production- marketing process. If the shirt manufacturer had merged with a clothing store, it would have been forward vertical integration- the acquisition of a firm near to the ultimate consumer.
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Concentric Diversification- Grand strategies involving diversification represent distinctive departure from a firms existing base of operations, typically the acquisitions or internal generation (spin-off) of a separate business with synergistic possibilities counterbalancing the strengths and weakness of two businesses. For example, Head Skinitially sought to diversify into summer sporting goods and clothing to offset the seasonality of its snow business. Conglomerate Diversification- Occasionally a firm, particularly a large one, plans to acquire a business because it represents the most promising investment opportunity available. This grand strategy is commonly known as conglomerate diversification. The principal concern, and often the sole concern, of the acquiring firm is the profit pattern of venture. Unlike concentric diversification, conglomerate diversification gives little concern to creating product- market synergy with existing business. What such conglomerate diversifiers as ITT, Textron, American Brands Litton, U. S. Industries seek is financial synergy. Turnaround- For any one of the large number of reasons, a firm can find itself with declining profits. Among these reasons are economic recessions, production inefficiencies, and innovative breakthrough by competitors. In many cases,

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strategic managers believe that such a firm can survive and eventually recover if a concerted effort is made over a period of few years to fortify its distinctive competence. This grand strategy is known as turnaround. Cost reduction and asset reduction are normally associated with turnaround strategy.
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Divestiture- A divestiture strategy involves the sale of a firm or the major component of a firm. Sara Lee Corp (SLE) provides a good example. Andrew Yule Company of Kolkata is also an example of divestiture in India. Liquidation- When liquidation is the grand strategy, the firm typically is sold in parts, only occasionally as a wholebut for its tangible asset value and not as a going concern. In selecting liquidation, the owners and strategic managers of a firm are admitting failure and recognize that this action is likely to result in great hardships to themselves and their employees. For these reasons, liquidation usually is seen as least attractive of grand strategies. As a long term strategy, however, it minimizes the losses of all the firms stakeholders. Bankruptcy- When the firms financial position have shown an unabated decline in revenue for a considerable period, expenses have increased rapidly, and it is becoming difficult and at times impossible to pay the dues of the suppliers and others, customers are switching to the competitors; the company asks the court for reorganization bankruptcy. ventures- Occasionally two or more capable firms lack a necessary component for success in a particular competitive environment. The solution was a set of joint ventures, which are commercial companies created and operated for the benefits of co-owners (parents). These cooperative arrangements provided for both the funds needed

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to build the infrastructure and operations (processing) and marketing capacities needed to profitably handle the markets and customers.
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Strategic Alliances are distinguished form of joint ventures because the companies involved do not take an equity position in one another. In many instances, strategic alliances are partnerships that exist for a defined period during which partners contribute their skills and expertise to a cooperative project. For example, one partner provides manufacturing capabilities while a second partner provides marketing expertise. Many times, such alliances are undertaken because the partners want to learn from one another with an intention to be able to develop in-house capabilities to supplant the partners when the contractual arrangement between them reaches its termination date. Consortia are defined as large interlocking relationships between businesses of an industry. In Japan such consortia are known as keiretsus, in South Korea as cheaebols. In Europe, consortia projects are increasing in number and its success rate.

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