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Types of strategies
Intensive strategies:
Market penetration
Market development
Product development
Diversification
Related diversification
Unrelated diversification
Defensive strategies
Retrenchment
Divestiture
Liquidation
Vertical Integration
Vertical Integration is a means of
co-ordinating the different
stage of industry chain when
bilateral trading is not
beneficial
Backward
Integration
Ch 5 -5
Horizontal
Integration
3. HORIZONTAL
INTEGRATION
Similar
Businesses
Acquired
2. Forward
Toward the Customer
A. Forward Integration
Forward integration involves gaining ownership or
increased control over distributors or retailers.
Franchising is an effective means of implementing forward
integration. There is a growing trend for franchisees to buy
out their part of the business from their franchiser.
B. Backward Integration
Backward integration is a strategy of seeking ownership or
increased control of a firms suppliers. This strategy can be especially
appropriate when a firms current suppliers are unreliable, too costly, or
cannot meet the firms needs.
C. Horizontal Integration
Horizontal integration refers to a strategy of seeking
ownership of or increased control over a firms competitors.
One of the most significant trends in strategic
management today is the increased use of horizontal integration
as a growth strategy.
Mergers, acquisitions, and takeovers among competitors
allow for increased economies of scale and enhanced transfer of
resources and competencies.
Presentation on
Intensive strategies/ Ansoff's
product / market matrix
Ansoff's Matrix
This matrix was developed by Igor Ansoff.
The Ansoff Matrix was first published in
the Harvard Business Review in 1957, and
has given generations of marketers and
small business leaders a quick and simple
way to develop a strategic approach to
growth.
Ansoffs Matrix
Existing
Existing
PRODUCTS
MARKET
PENETRATION
INCREASING RISK
PRODUCT
DEVELOPMENT
Sell new products in
existing markets
MARKETS
MARKET
EXTENSION
New
Achieve higher
sales/market
share of existing
products in new
markets
DIVERSIFICATION
Sell new products in
new markets
INCREASING RISK
Sell more in
existing Markets
New
Existing
Existing
PRODUCTS
MARKET
PENETRATION
MARKETS
New
INCREASING RISK
INCREASING RISK
Sell more in
existing Markets
New
1. Market penetration
Market penetration is where the company gains market share.
Market penetration is the name given to a growth strategy
where the business focuses on selling existing products into
existing markets.
Increasing the market share of an existing product or
promoting new product through price cuts, extensive
advertising, high discounts, etc.
The main aim of the strategy:
To maintain or increase share of the current market with current
product.
To share dominance of a growth market or restructure a mature market
by driving out competition.
Existing
Existing
PRODUCTS
MARKET
PENETRATION
MARKETS
MARKET
EXTENSION
New
Achieve higher
sales/market
share of existing
products in new
markets
INCREASING RISK
INCREASING RISK
Sell more in
existing Markets
New
2. Market development
Market development is the name given to
a growth strategy where the business
seeks to sell its existing products into new
markets.
It requires changes in marketing strategies
e.g. new distribution channels, different
pricing policy, new promotional strategy to
attract different types of customers.
It involves:
Entering new markets or segments with existing
products.
Normally requires some product development and
capability development.
Selling the same products to different people .
Generating new markets, new segments, new
customers,.
Entering overseas markets.
of
Existing
Existing
PRODUCTS
MARKET
PENETRATION
MARKETS
MARKET
EXTENSION
New
Achieve higher
sales/market
share of existing
products in new
markets
INCREASING RISK
PRODUCT
DEVELOPMENT
Sell new products in
existing markets
INCREASING RISK
Sell more in
existing Markets
New
3. Product development
Product development is the name given to a
growth strategy where a business aims to
introduce new products into existing markets.
This strategy may require the development of
new competencies and requires the business to
develop modified products which can appeal to
existing markets.
E.g. Coca-Cola developed to have vanilla, lime,
cherry and diet varieties (amongst others) in the
SOFT DRINKS market
Associated dilemmas
Existing
Existing
PRODUCTS
MARKET
PENETRATION
INCREASING RISK
PRODUCT
DEVELOPMENT
Sell new products in
existing markets
MARKETS
MARKET
EXTENSION
New
Achieve higher
sales/market
share of existing
products in new
markets
DIVERSIFICATION
Sell new products in
new markets
INCREASING RISK
Sell more in
existing Markets
New
4. Diversification
Diversification is the name given to the
growth strategy where a business markets
new products in new markets.
Diversification means:
New product sold to new markets
New products for new customers.
Unrelated Diversification
Features of unrelated diversification
Growth in products and markets that are completely new.
Development beyond the present industry into products
and markets which bear little relation to the present
product market mix.
Related Diversification
This is development beyond present product market but
still within the broad of the industry.
Markets and products share some commonality with
existing products.
Therefore it builds on assets or activities which the firm
has developed.
Related diversification can also be seen as synergistic
diversification since it involves harnessing existing
product market knowledge.
This closeness can reduce the risks associated with
diversification
E.g. banks developing insurance products.
Presentation on
Defensive strategies
A.
Retrenchment
Retrenchment occurs when an organization regroups
through cost and asset reduction to reverse declining sales
and profits.
Sometimes called a turnaround or reorganizational strategy,
retrenchment is designed to fortify an organizations basic
distinctive competence.
Retrenchment can entail selling off land and buildings, pruning
product lines, closing marginal businesses, closing obsolete
factories, automating processes, reducing the number of
employees, and instituting expense control systems.
B. Divestiture
Selling a division or part of an organization is called divestiture.
Divestiture often is used to raise capital for further strategic acquisitions or
investments.
Divestiture can be used to rid an organization of businesses that are
unprofitable, that require too much capital, or that do not fit well with the firms
other activities.
Divestiture has become a very popular strategy as firms try to focus on
their core strengths, lessening their level of diversification.
Historically firms have divested their unwanted or poorly performing
divisions, but the global recession has witnessed firms simply closing such
operations
C. Liquidation
Selling all of a companys assets, in
parts, for their tangible worth is called
liquidation. Liquidation is recognition of
defeat and consequently can be an
emotionally difficult strategy.
Thank you