4/18/2015

TYPESOFSTRATEGIES:DiversificationStrategiesConglomerateDiversificationStrategicManagementBusinessManagement

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TYPESOFSTRATEGIES:DiversificationStrategies,ConglomerateDiversification

StrategicManagement
MGT603

C o m p u ter S ci en ce

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VU
Lesson21
TYPESOFSTRATEGIES

E arth S ci en ces

Objectives:
Thislecturebringsstrategicmanagementtolifewithmanycontemporaryexamples.Sixteentypesof

E n g i n eeri n g
English

strategiesaredefinedandexemplified,includingMichaelPorter'sgenericstrategies:costleadership,
differentiation,andfocus.Guidelinesarepresentedfordeterminingwhendifferenttypesofstrategiesare

Fo rm al S ci en ces

TableofContents:

1. NATUREOFSTRATEGICMANAGEMENT:I

mostappropriatetopursue.Anoverviewofstrategicmanagementinnonprofitorganizations,governmental

Heal th S ci en ces

2. KEYTERMSINSTRATEGICMANAGEMEN

agencies,andsmallfirmsisprovided.Afterreadingthislectureyouwillbeabletoknowabout:

Man ag em en t

TypesofStrategies

Marketi n g

Diversificationstrategies

Mas s C o m m

3. INTERNALFACTORS&LONGTERMGOA

4. BENEFITSOFSTRATEGICMANAGEMENT

5. COMPREHENSIVESTRATEGICMODEL:M

DiversificationStrategies

Natu ral S ci en ces

6. CHARACTERISTICSOFAMISSIONSTATE

DiversificationStrategies

Po l i ti cal S ci en ce
S o ci al S ci en ces

7. EXTERNALASSESSMENT:TheNatureofa

8. KEYEXTERNALFACTORS:EconomicForc

9. EXTERNALASSESSMENT(KEYEXTERNA

S i teMap

10. TECHNOLOGICALFORCES:Technologyba

Li n ks

11. INDUSTRYANALYSIS:Globalchallenge,Th

12. IFEMATRIX:TheInternalFactorEvaluation

Concentric

13. FUNCTIONSOFMANAGEMENT:Planning,

Diversification

14. FUNCTIONSOFMANAGEMENT:Customer

15. INTERNALASSESSMENT(FINANCE/ACCO

Diversification
Strategies

Conglomerate

16. ANALYTICALTOOLS:ResearchandDevelo

Diversification

17. THEINTERNALFACTOREVALUATION(IF

18. TYPESOFSTRATEGIES:TheNatureofLon

Horizontal

19. TYPESOFSTRATEGIES:HorizontalIntegra

Diversification

20. TYPESOFSTRATEGIES:IntensiveStrategi

21. TYPESOFSTRATEGIES:DiversificationStr

22. TYPESOFSTRATEGIES:GuidelinesforDiv

23. STRATEGYFORMULATIONFRAMEWORK
Therearethreegeneraltypesofdiversificationstrategies:concentric,horizontal,andconglomerate.Overall,

24. THREATSOPPORTUNITIESWEAKNESSE

diversificationstrategiesarebecominglesspopularasorganizationsarefindingitmoredifficulttomanage
diversebusinessactivities.Inthe1960sand1970s,thetrendwastodiversifysoasnottobedependenton

25. THESTRATEGICPOSITIONANDACTION

anysingleindustry,butthe1980ssawageneralreversalofthatthinking.Diversificationisnowonthe
retreat.

26. THESTRATEGICPOSITIONANDACTION

ConcentricDiversification
Addingnew,butrelated,productsorservices

28. BOSTONCONSULTINGGROUP(BCG)MA

27. BOSTONCONSULTINGGROUP(BCG)MA

29. GRANDSTRATEGYMATRIX:RAPIDMARK

Addingnew,butrelated,productsorservicesiswidelycalledconcentricdiversification.Anexampleofthis
strategyisAT&Trecentlyspending$120billionacquiringcabletelevisioncompaniesinordertowire

30. GRANDSTRATEGYMATRIX:Preparationo

AmericawithfastInternetserviceovercableratherthantelephonelines.AT&T'sconcentricdiversification
strategyhasledthefirmintotalkswithAmericaOnline(AOL)aboutapossiblejointventureormergerto

31. THENATUREOFSTRATEGYIMPLEMENT
32. RESOURCEALLOCATION

provideAOLcustomerscableaccesstotheInternet.

33. ORGANIZATIONALSTRUCTURE:Divisiona
GuidelinesforConcentricDiversification

34. RESTRUCTURING:Characteristics,Results

Fiveguidelineswhenconcentricdiversificationmaybeaneffectivestrategyareprovidedbelow:

35. PRODUCTION/OPERATIONSCONCERNS

Competesinnoorslowgrowthindustry

36. MARKETSEGMENTATION:DemographicS

Addingnew&relatedproductsincreasessalesofcurrentproducts

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37. MARKETSEGMENTATION:ProductDecisio

38. FINANCE/ACCOUNTINGISSUES:DEBIT,U
39. RESEARCHANDDEVELOPMENTISSUES

40. STRATEGYREVIEW,EVALUATIONANDC
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TYPESOFSTRATEGIES:DiversificationStrategiesConglomerateDiversificationStrategicManagementBusinessManagement

41. PORTERSUPPLYCHAINMODEL:Theactiv
StrategicManagement
MGT603

VU

42. STRATEGYEVALUATION:Consistency,The

New&relatedproductsofferedatcompetitiveprices

43. REVIEWINGBASESOFSTRATEGY:Measu

Currentproductsareindeclinestageoftheproductlifecycle

44. MEASURINGORGANIZATIONALPERFOR

Strongmanagementteam

45. CHARACTERISTICSOFANEFFECTIVEEV

ConglomerateDiversification
Addingnew,unrelatedproductsorservices
Addingnew,unrelatedproductsorservicesiscalledconglomeratediversification.Somefirmspursue
conglomeratediversificationbasedinpartonanexpectationofprofitsfrombreakingupacquiredfirmsand
sellingdivisionspiecemeal.
GuidelinesforConglomerateDiversification
Fourguidelineswhenconglomeratediversificationmaybeaneffectivestrategyareprovidedbelow:
Decliningannualsalesandprofits
Capitalandmanagerialtalenttocompetesuccessfullyinanewindustry
Financialsynergybetweentheacquiredandacquiringfirms
Exitingmarketsforpresentproductsaresaturated
HorizontalDiversification
Addingnew,unrelatedproductsorservicesforpresentcustomersiscalledhorizontaldiversification.This
strategyisnotasriskyasconglomeratediversificationbecauseafirmalreadyshouldbefamiliarwithits
presentcustomers.
GuidelinesforHorizontalDiversification
Fourguidelineswhenhorizontaldiversificationmaybeanespeciallyeffectivestrategyare:
Revenuesfromcurrentproducts/serviceswouldincreasesignificantlybyaddingthenewunrelated
products
Highlycompetitiveand/ornogrowthindustryw/lowmarginsandreturns
Presentdistributionchannelscanbeusedtomarketnewproductstocurrentcustomers
Newproductshavecountercyclicalsalespatternscomparedtoexistingproducts
DefensiveStrategies
Inadditiontointegrative,intensive,anddiversificationstrategies,organizationsalsocouldpursue
retrenchment,divestiture,orliquidation.

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StrategicManagement
MGT603

VU

DefensiveStrategies

Retrenchment
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TYPESOFSTRATEGIES:DiversificationStrategiesConglomerateDiversificationStrategicManagementBusinessManagement

Defensive

Divestiture

Strategies
Liquidation

Retrenchment
Retrenchmentoccurswhenanorganizationregroupsthroughcostandassetreductiontoreversedeclining
salesandprofits.Sometimescalledaturnaroundorreorganizationstrategy,retrenchmentisdesignedto
fortifyanorganization'sbasicdistinctivecompetence.Duringretrenchment,strategistsworkwithlimited
resourcesandfacepressurefromshareholders,employees,andthemedia.Retrenchmentcanentailselling
offlandandbuildingstoraiseneededcash,pruningproductlines,closingmarginalbusinesses,closing
obsoletefactories,automatingprocesses,reducingthenumberofemployees,andinstitutingexpense
controlsystems.
GuidelinesforRetrenchment
Fiveguidelineswhenretrenchmentmaybeanespeciallyeffectivestrategytopursueareasfollows:
Firmhasfailedtomeetitsobjectivesandgoalsconsistentlyovertimebuthasdistinctivecompetencies
Firmisoneoftheweakercompetitors
Inefficiency,lowprofitability,pooremployeemoraleandpressurefromstockholderstoimprove
performance.
Whenanorganization'sstrategicmanagershavefailed
Veryquickgrowthtolargeorganizationwhereamajorinternalreorganizationisneeded
Whenanorganizationhasgrownsolargesoquicklythatmajorinternalreorganizationisneeded

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