DIRECTIONAL TYPES SUB-TYPES
STRATEGY
Vertical Growth
*can be achieved by taking
over a function previously
provided by a supplier or by a
distributor
CONCENTRATION
* on the current product line(s) Horizontal Growth
in one industry *by expanding its operations
into other geographic locations
and/or by increasing the range
of products and services
offered to current markets.
Growth Strategy
*Expand the
company’s activities. Concentric
* A firm has a strong
competitive position but
industry attractiveness is low.
DIVERSIFCATION
* into other product lines in
other industries
USE TO ORGANIZATION EXAMPLES
This may be done in order to
reduce costs, gain control over a
scarce resource, guarantee
quality of a key input, or obtain
access to potential customers.
P&G has been introducing into China a
steady stream of popular American brands,
It introduces successful products such as Head & Shoulders, Crest, Olay, Tide,
from one part of the world to Pampers, and Whisper. By 2007, it had 6,300
other regions. employees in China and the extensive
distribution network it needed to prosper in
the world’s fastest growing market.
The firm attempts to secure
strategic fit in a new industry
where the firm’s product
knowledge, its manufacturing
capabilities, and the marketing
skills it used so effectively in
the original industry can be put
to good use. In some way: they
possess some common thread.

Conglomerate
* industry is unattractive and
that the firm lacks outstanding
abilities or skills that it could
easily transfer to related
products or services in other
industries
Strategic managers who adopt
this strategy are primarily
concerned with financial
considerations of cash flow or
risk reduction. This is also a
good strategy for a firm that is
able to transfer its own excellent
management system into less-
well-managed acquired firms.

Conceived as a temporary This was the strategy Dell followed after its
Pause/proceed-with- strategy to be used until the growth strategy had resulted in more growth than
environment becomes more it could handle. Selling personal computers by
caution strategy
hospitable or to enable a mail enabled Dell to under-price competitors, but
* a timeout—an opportunity to it could not keep up with the needs of a $2 billion,
rest before continuing a growth company to consolidate its
5,600-employee company selling PCs in 95
or retrenchment strategy resources after prolonged rapid countries. Dell did not give up on its growth
growth strategy; it merely put it temporarily in limbo
until the company was able to hire new managers,
improve the structure, and build new facilities.
Stability Strategy No-change strategy The relative stability created by
* continuing its * a decision to do nothing new— the firm’s modest competitive
current activities a choice to continue current position in an industry facing
without any operations and policies for the little or no growth encourages
significant change in foreseeable future. the company to continue on its
direction. current course, making only
small adjustments for inflation
in its sales and profit objectives.

Profit strategy An attempt to artificially

*is a decision to do nothing new support profits when a
in a worsening situation but company’s sales are declining
instead to act as though the by reducing investment and
company’s problems are only short term discretionary
temporary. expenditures

Turnaround strategy
*emphasizes the improvement
of operational efficiency and is
probably most appropriate when
a corporation’s problems are
pervasive but not yet critical
Captive company
*strategy involves giving up
independence in exchange for
security
Retrenchment
Strategy
* reduce the
company’s level of Sell-out strategy/
activities. Divestment
*If a corporation with a weak
competitive position in an
industry is unable either to pull
itself up by its bootstraps or to
find a customer to which it can
become a captive company, it
may have no choice but to sell
out
Bankruptcy/Liquidation
Strategy
*Bankruptcy involves giving up
management of the firm to the
courts in return for some
settlement of the corporation’s
obligations. Liquidation is the
termination of the firm
Industries have been able to
improve their performance by
cutting costs and expenses and
by selling off assets.
Offering to be a captive company to
one of its larger customers in order
to guarantee the company’s
continued existence with a long-
term contract. In this way, the
corporation maybe able to reduce
the scope of some of its functional
activities, such as marketing, thus
significantly reducing costs.
Management can still obtain a good
price for its shareholders and the
employees can keep their jobs by
selling the entire company to
another firm. The hope is that
another company will have the
necessary resources and
determination to return the
company to profitability
When the industry is unattractive
and the company too weak to be
sold as a going concern,
management may choose to convert
as many saleable assets as possible
to cash, which is then distributed to
the shareholders after all
obligations are paid.