Professional Documents
Culture Documents
strategies because they require intensive effort if a firms competitive • Retrenchment Strategies
position with existing product is to improve. A retrenchment grand strategy is followed when an organization aims at a
Market Penetration: It involves selling more products to the same contraction of its activities through substantial reduction or the elimination of the
market by focusing intensely on existing markets with its present scope of one or more of its businesses in terms of their respective customer
products, increasing usage by existing customers and increasing groups, customer functions, or alternative technologies either singly or jointly in
market share and restructures a mature market by driving out order to improve its overall performance. E.g: A corporate hospital decides to
competitors. focus only on special treatment and realize higher revenues by reducing its
Example commitment to general case which is less profitable.
• Mach 3 fare and lovely sache Divestiture Strategies
Market Development: It involves selling the same products to new A divestment strategy involves the sale or liquidation of a portion of business, or a
markets by attracting new users to its existing products. Market major division. Profit centre or SBU. Divestment is usually a part of rehabilitation
development can be geographic wise and demographic wise. or restructuring plan and is adopted when a turnaround has been attempted but has
Example proved to be unsuccessful.
• Gul Ahmed brought new product by the idea Reasons for Divestment
Product Development: It involves selling new products to the
same markets by introducing newer products in existing markets. •The business that has been acquired proves to be a mismatch and cannot be
E.g.: K & N has distribution all over Pakistan. Previous deal with integrated within the company.
chicken now Kabab, Nuggets and now even necks of chicken for
customer. •Persistent negative cash flows from a particular business create financial
Advantages Of Concentration Strategies problems for the whole company, creating a need for the divestment of that
• Involves minimal organizational changes and is less business.
threatening
•
liquidation strategy, which involves closing down a firm and selling its assets. It is
Factors such as product obsolescence, fickleness of considered as the last resort because it leads to serious consequences such as loss
market, emergence of newer technologies are threat of employment for workers and other employees, termination of opportunities
to concentrated firm. where a firm could pursue any future activities and the stigma of failure E.G.
.
•
the work less challenging.
It may lead to cash flow problems • Low Cost Leadership Strategies: Low cost leadership strategies
are based on a firm’s ability to offer a product or service at a lower
• Integration strategies are of two type’s vertical and cost than its rivals. When a firm is able to build a substantial cost
horizontal integration. advantage over other competitors it can pass on its benefits to
customers and gain a large market share. This requires being the
• Vertical Integration: when an organization starts overall low-cost provider of the products or services (e.g., Costco,
among retail stores, and Hyundai, among automobile
making new products that serve its own needs
vertical integration takes place. Vertical integration manufacturers).
could be of two types Back ward and forward Some conditions that tend to make this strategy an attractive choice are:
integration. • The industry's product is much the same from seller to seller
• Backward integration means moving back to the • The marketplace is dominated by price competition, with highly
source of raw materials while forward integration price-sensitive buyers
moves the organization nearer to the ultimate
customer. • There are few ways to achieve product differentiation that have
Generally when firms vertically integrate they do so in a complete much value to buyers
manner that is they move backward or forward decisively resulting • Most buyers use product in same ways -- common user
in a full integration but when a firm does not commit it fully it is requirements
possible to have partial vertical integration strategies too. Two such • Switching costs for buyers are low
partial vertical integration strategies are ‘taper’ integration and • Buyers are large and have significant bargaining power
‘quasi’ integration. Taper integration requires firms to make a part • L
of their own requirements and to buy the rest from outsiders.
Through quasi integration strategies firm purchase most of their
requirements from other firms in which they have an ownership
• Differentiation Strategies: When firm appeal to a broad cross-
section of the market through offering differentiating features that
stake. make customers willing to pay premium prices, e.g., superior
• Horizontal Integration: when an organization takes
technology, quality, prestige, special features, service, convenience
(examples are Nordstrom and Lexus). Success with this type of
up the same type of products at the same level of strategy requires differentiation features that are hard or expensive
production or marketing process, it is said to follow a for competitors to duplicate.
strategy of horizontal integration. When a luggage Some conditions that tend to favor differentiation strategies are:
company takes over its rival luggage company, it is
horizontal integration. Horizontal integration strategy
may be frequently adopted with a view to expand
• There are multiple ways to differentiate the product/service that
buyers think have substantial value
geographically by buying a competitors business, to • Buyers have different needs or uses of the product/service
increase the market share or to benefit from
economics of scale. • Product innovations and technological change are rapid and
• Backward Integration: Pakistan dependent on
•
competition emphasizes the latest product features
Not many rivals are following a similar differentiation strategy
India Brazile Australia and Iran for iron ore. Local
•
rate 15 Dollar international rate 70 Dollar.
K & N has established hatcheries for raw material
• Focus Strategies: Focus strategies aim to sell good or services to
narrow or specific target market, niche or segment. Focus builds
• Forward Integration: Gul Ahmed in addition to
competitive advantage through high specialization and
concentration of resources in a given niche.
production is becoming retailer itself. Philosophy is Firms can build focus in one of the two ways. Focused Cost Leadership and
to integrate new generation. Focused Differentiation.
• Horizontal Integration: Dalda purchased Tullo.
Focused cost Leadership: A market niche strategy, concentrating on a narrow
customer segment and competing with lowest prices, which, again, requires
• Diversification Strategies There are two categories,
having lower cost structure than competitors
Focused Differentiation: a second market niche strategy, concentrating on a
concentric and conglomerate diversification. narrow customer segment and competing through differentiating features e.g., a