Professional Documents
Culture Documents
ASSIGNMENT – 2
BY:GAUTAM C.N
REG NO:08BMC08141
Grand Strategies
Strategy Formulation is a strategic planning or long range-planning. This process
is primarily analytical, not action oriented. This process involves scanning
external and internal environmental factors, analysis of the strategic factors and
generation, evaluation and selection of the best alternative strategy appropriate
to the analysis.
1. Stability strategy
The basic approach is ‘maintain present course: steady as it goes.’
In an effective stability strategy, companies will concentrate their resources
where the company presently has or can rapidly develop a meaningful
competitive
advantage in the narrowest possible product-market scope consistent with the
firm’s resources and market requirement's.
2. Growth/Expansion Strategies
A growth strategy is one that an enterprise pursues when it increases its level of
objectives upward in significant increment, much higher than an exploration of its
past achievement level. The most frequent increase indicating a growth strategy is
to raise the market share and or sales objectives upward significantly.
If we look at the corporate performance in the recent years, we find how the
various organizations have grown both in terms of sales and profit as well as
assets. For example: Reliance Industries Limited, Nirma Limited.
Organizations may select a growth strategy to increase their profits, sales and/
or market share. They also pursue growth strategy to reduce cost of production per
unit. Growth Strategies involve a significant increase in performance objectives.
These strategies are adopted when firms remarkably broadens the scope of their
customer groups, customer functions and alternative technologies either singly or
in combination with each other.
1. Turnaround Strategies
Turn around strategies derives their name from the action involved that
is reversing a negative trend. There are certain conditions or indicators
which point out that a turnaround is needed for an organization to
survive. They are:
2. Divestment Strategies
A divestment strategy involves the sale or liquidation of a portion of
business, or a major division. Profit centre or SBU. Divestment is
usually a part of rehabilitation or restructuring plan and is adopted
when a turnaround has been attempted but has proved to be
unsuccessful. Harvesting strategies a variant of the divestment
strategies, involve a process of gradually letting a company business
wither away in a carefully controlled manner
Reasons for Divestment
• The business that has been acquired proves to be a mismatch and
cannot be integrated within the company. Similarly a project that proves
to be in viable in the long term is divested
• Persistent negative cash flows from a particular business create
financial problems for the whole company, creating a need for the
divestment of that business.
• Severity of competition and the inability of a firm to cope with it may
cause it to divest.
• Technological up gradation is required if the business is to survive but
where it is not possible for the firm to invest in it. A preferable option
would be to divest
• Divestment may be done because by selling off a part of a business
the company may be in a position to survive
• A better alternative may be available for investment, causing a firm to
divest a part of its unprofitable business.
• Divestment by one firm may be a part of merger plan executed with
another firm, where mutual exchange of unprofitable divisions may take
place.
• Lastly a firm may divest in order to attract the provisions of the MRTP
Act or owing to oversize and the resultant inability to manage a large
business.