(1)Business
strategy
The plans and actions that firms devise to
compete in a given product/market scope a business strategy.
It can be:
Competitive
– battling against all competitors for advantage which includes Low-cost
leadership, Differentiation and Focus strategies;
Ex-Staples
Cooperative – working
with one or more competitors to gain advantage against other competitors which
is also known as Strategic alliances.
Ex-British Airways has followed a
cooperative strategy by forming an alliance with American
Airlines
(2)Corporate
strategy
Corporate strategy describes a company’s overall direction in
terms of its general attitude toward growth and the management of its various
businesses and product lines. Ex-Cadbury
Schweppes
Typed as-
(a)Directional-The
firm’s overall orientation toward growth, stability, or retrenchment
Growth- follow
in expansion. Ex-Microsoft. Typed as-
*(i)Concentration- If a company’s current product lines have real
growth potential, concentration of resources on those product lines makes sense
as a strategy for growth. It includes-
a)Horizontal
growth-It is a strategy of seeking ownership of or increased control over a
firm’s competitors. Ex- Sun, SMART
b)Vertical
growth-is the degree to which a firm owns its upstream suppliers and its
downstream buyers. Ex- Ford, Tesco
*(ii)Diversification-companies begin thinking about
diversification when their growth has plateaued and opportunities for growth in
the original business have been depleted.
a)Concentric/Related
diversification-when a business expands its activities into product lines
that are similar to those it currently offers. Ex-Quebec an aircraft company
b)Conglomerate/Unrelated
diversification-A form of diversification when the business
adds new or unrelated product lines
and penetrates new markets. Ex-General electric
Stability- A corporation may choose stability over growth by continuing its current activities
without
any significant change in direction. Typed as
*(i)Pause or proceed with
caution strategy- In effect,
a time out or an opportunity to rest before continuing a growth or retrenchment
strategy.
*(ii)No change strategy- a decision to do nothing new (a choice
to continue current operation and policies for the foreseeable future
*(iii)Profit strategy-The
profit strategy is an attempt to artificially support profits when a company’s
sales are declining by reducing investment and short term discretionary
expenditures. Rather than announcing the company’s poor position to
shareholders and the investment community at large
Retrenchment-A company
may pursue retrenchment strategies when it has a weak competitive position in
some or all of its product lines resulting in poor performance-sales are down
and profits are becoming losses. Typified as:
(i)Turnaround strategy- Emphasizes the improvement of
operational efficiency and is probably most appropriate when a corporation’s
problems are pervasive but not yet critical. Example: Xerox. It includes-
a)Contraction-
cutting the size and cost of the
products/services a company offering
b)Consolidation-reducing unnecessary
overhead and make functional activities cost justified.
(ii)Captive strategy-Strategy
of giving up the independence in exchange for security and for avoiding the
collapse. Example- Nokia sold its maximum share to Microsoft
(iii)Divergent/Divestment-It is the
easiest strategy. The process of selling out the whole company. But before
doing this, two factors must have to consider-
#Ensuring job for the
existing employees
#Paying out all the
investor and shareholder.
(iv)Sell out strategy:This strategy is resorted to when a
company has a weak competitive position in its industry. It can be taken -
ü
When a company pull itself up by its boot straps
ü
Find new customer to which it can become a
captive company
(vi)Liquidation: It is the termination of a firm’s business
operations. Can be taken when:
#Resources are
scanty #Profit
prospects dimmed
(v)Bankruptcy: Involves
giving up management of the firm to the courts in return for some settlement of
the corporation’s obligations
