Strategies for Success: Understanding Generic, Grand, and Focus Strategies

Generic & Grand
Strategies
(SBU & Corporate Level Strategies)
Dr. Prashant Kalaskar

Unit 3: Syllabus
3.1: Generic Competitive Strategies: Meaning of
Generic Competitive Strategies, Low Cost,
Differentiation & Focus, When to use which
Strategy.
3.2: Grand Strategies: Stability, Growth (Diversification
Strategies, Vertical Integration Strategies, And
Mergers Acquisition & Take Over Strategies,
Strategic Alliance & Collaborative Partnerships),
Retrenchment-Turnaround, Divestment Strategies,
Liquidation & Outsourcing Strategies.

Introduction
Today, companies face their toughest competition
ever.
Companies trying to deliver more value than their
competitors to win the same customers.
Companies must also understand their
competitors, identify and analyze their
strategies to position themselves in such a way
as to gain the greatest possible competitive
advantage against competitors in the
marketplace

Strategy Formulation
To Achieve the Vision, Goals & Objectives
organizations need to formulate Strategies.
Strategy formulation takes place at 3 levels;
1) Corporate Level Strategy Formulation: where the
top level management will take the strategic
decisions & allocate the resources accordingly.
(Grand Strategies)
2) Business (SBU) Level Strategy Formulation:
Where the Middle level Management (Heads of
individual SBU’s) takes strategic decision &
allocate resources accordingly (Generic
Strategies)

Grand Strategies
Various strategies decided at corporate level may be-
Expansion Strategy
Stability Strategy
Retrenchment Strategy
Then individual business formulate their own
stratgeies so as to achieve the objectives set at
corporate level.
Use of BCG matrix for rellocation of resources

Generic Strategies
Michael E. Porter has suggested 3 strategic tools
for the for the development of strategic
advantage & to win over competition.
1) Porters 5 Forces of Competition for Industry
Environment Analysis
2) Value Chain Analysis for effective delivery of
value to the customers
3) Generic Strategies for creation of competitive
advantages over competitors.

Generic Strategies
Porter suggested 3 generic strategies to compete
in the environment of competition.
Company adopts any one of these 3 strategies, on
the basis of-
The entry point of the firm relative to the
industry’s life cycle.
Its present position & the internal resource
capabilities
The structure of the industry (5 Forces)

Industry Life Cycle

ILC & Strategic Implications

Business Level Strategy
Business-level strategy: an integrated
and coordinated set of commitments
and actions the firm (Business Unit)
uses to gain a competitive advantage
by exploiting core competencies in
specific product markets

Generic Strategies
Michael Porter has suggested three general types
of positioning strategies to achieve competitive
advantage.
These three generic strategies are defined along
two dimensions: strategic scope and strategic
strength.
Strategic scope looks at the size and composition
of the market you intend to target.
Strategic strength is a supply-side dimension and
looks at the strength or core competency of the
firm.

3 Generic Strategies
Low-cost
leadership
FocusDifferentiation

3 Generic Strategies
Target Scope
Advantage
Low Cost
Product
Uniqueness
Broad
(Industry Wide)
Cost Leadership
Strategy
Differentiation
Strategy
Narrow
(Market
Segment)
Focus
Strategy
(low cost)
Focus
Strategy
(differentiation)

Generic Strategies
• Overall cost leadership
– Low-cost-position relative to a firm’s peers
– Manage relationships throughout the entire
value chain
• Differentiation
– Create products and/or services that are
unique and valued
– Non-price attributes for which customers will
pay a premium

Generic Strategies
• Focus strategy
– Narrow product lines, buyer segments, or
targeted geographic markets
– Attain advantages either through
differentiation or cost leadership

Examples
• Companies pursuing an overall cost leadership
strategy
– McDonalds
– Wal-Mart
• Companies pursuing a differentiation strategy
– Harley Davison
– Apple
• Companies pursuing a focus strategy
– Rolex
– Lamborghini

Low Cost Leadership Strategy
The theme of the firm’s strategy is to achieve lower
costs than rivals
The firm’s products should have the features and
services that buyers consider essential
This approach will be most successful if the firm can
achieve a cost advantage that is difficult for rivals to
copy or match
Low-cost leadership means low overall costs, not just low
manufacturing or production costs!

Cost Leadership Strategy
An integrated set of actions designed to produce
or deliver goods or services at the lowest cost,
relative to competitors with features that are
acceptable to customers
– relatively standardized products
– features acceptable to many customers
– lowest competitive price
Ex- Toyota, are very good not only at producing high quality
autos at a low price, but have the brand and marketing skills to
use a premium pricing policy.

Cost Leadership Strategy
Cost saving actions required by this strategy:
– building efficient scale facilities
– tightly controlling production costs and
overhead
– minimizing costs of sales, R&D and service
– building efficient manufacturing facilities
– monitoring costs of activities provided by
outsiders
– simplifying production processes

Overall Cost Leadership
• Experience curve
– refers to how business “learns” to lower
costs as it gains experience with production
processes
– with experience, unit costs of production
decline as output
increases in most
industries

Wal-Mart’s Approach to
Manage Its Value Chain
Pursue global procurement of some items and centralize most
purchasing activities
Optimize the product mix and achieve greater sales turnover
Install security systems and store operating procedures that
lower shrinkage rates
Negotiate preferred real estate rental and leasing rates with real
estate developers and owners of its store sites
Manage and compensate its workforce to yield lower labor
costs

When Does a Low-Cost
Strategy Work Best?
Price competition is vigorous
Product is standardized and there are lots of
sellers
There are not many ways to differentiate that
have value to buyers
Buyers find it easy to switch to other sellers.
Buyers are large and therefore have
significant bargaining power

Example of Overall Cost Leadership
India’s largest steel company Tata Steel, the cost
leader in the steel manufacturing sector owns
raw material assets such as coal and limestone
mines through joint ventures or completely,
with the assets spread across countries such as
Australia, Oman and Mozambique. Tata Steel
has largely been able to withstand raw material
price ﬂuctuations due to captive iron ore mines.

Example of Overall Cost Leadership
Reliance Industries has become a global leader in
various business activities based on innovation
and cost by achieving more efficient production
arising from experience and economies of scale,
innovation in production methods, and
deferential Low-Cost Access to Productive
Inputs.

Differentiation
The Differentiation can be attained on the basis of
• Prestige or brand image
• Technology
• Innovation
• Features
• Customer service

Differentiation
• Firms may differentiate along several
dimensions at once
• Successful differentiation requires integration
with all parts of a firm’s value chain
• An important aspect of differentiation is speed
or quick response
• There is also the chance that any differentiation
could be copied by competitors

Types of Differentiation
Unique taste – Dr. Pepper
Multiple features – Microsoft Windows and Office
Wide selection and one-stop shopping – Home Depot,
Amazon.com
Superior service - FedEx, Ritz-Carlton
Spare parts availability – Caterpillar
Engineering design and performance – Mercedes, BMW
Prestige – Rolex
Product reliability – Johnson & Johnson
Quality manufacture – Toyota
Technological leadership – 3M Corporation
Top-of-line image – Ralph Lauren, Starbucks,

Differentiation Strategy

Focus
• Focus strategy involves concentrating on a-
• Particular customer type
• Product line
• Geographical area
• Channel of distribution
• Niche market

Focus
Focus strategy is that the firm is better able to
serve its limited segment than competitors
serving a broader range of customers
Firms may thus be able to differentiate
themselves based on meeting customer needs
through differentiation or through low costs
and competitive pricing for specialty goods

Focus
• Cost focus
– firm strives to create a cost advantage in its
target segment
• Differentiation focus
– firm seeks to differentiate in its target market

Focus: Improving Competitive
Position
• Focus
– Creates barriers of either cost leadership or
differentiation, or both
– Used to select niches that are least
vulnerable to substitutes or where
competitors are weakest

Examples of Focus Strategies
Animal Planet and History Channel
• Cable TV
Porsche
• Sports cars
Cannondale
• Top-of-the line mountain bikes
Enterprise Rent-a-Car
• Provides rental cars to repair garage customers

Grand Strategies/Master Strategies
Corporate Level Strategies
Corporate Strategies provides basic direction to
the whole organization, whether a small unit or
a diversified multi business unit.
Small units will have objective to maximize
profitability ( by excelling in their core competency).
Multi-business organization maximizing
profitability along with better management of
units on long run, by allocating resources from
one unit to other. (along with D.F.Abels 3 dimensions)

Objectives of Grand Strategies
• To achieve long-term prosperity, strategic
planners commonly establish long-term
objectives in seven areas:
Profitability
Productivity
Employee Relations
Competitive Position-
Technological Leadership
Employee Development
Public Responsibility

Reasons for adopting Diff.
Corporate Strategies
– Expansion Strategy:
- Environment is full of growth opportunities
- For motivating organizational peoples
- Big size company can control market as well
customer.
- Advantage of experience curve as well
economies of scale.
– Stability Strategy:
- Risk is less, less change in Internal/External
Environment
- Growth opportunity in environment is stable
- A time for better consolidation before & after
expansion Dr. Prashant Kalaskar

Reasons for adopting Diff.
– Retrenchment Strategy:
- The environment is threatening
- When the change in management becomes
necessary
– Combination Strategy:
- When organization is large & faces complex
environment
- The large organization is having presence in
different industries, hence requires different
responses

– Growth (Expansion)
•The company makes aggressive attempts to
increase its size (volume) through increased sales.
– Stability
•The company attempts to hold and maintain its
present size or position to grow slowly.
– Turnaround and retrenchment
•An attempt to reverse a declining business as
quickly as possible.
•The divestiture or liquidation of assets.
– Combination
•A corporation may pursue growth, stability, and
turnaround and retrenchment for its different
lines of business or areas of operations.

Classification of Grand Strategies
Grand Strategy
Growth
(aggressively expand
size)
Stability
(remain the same
or grow slowly)
Turnaround and
Retrenchment
(reverse a negative trend
and cut back)
Combination
(mix of other three)
Growth Strategies
6) Digitalization- Expansion through digitalization
Growth Strategies
1) Concentration—expand existing line(s) of business
2) Integration—expand forward and/or backward within line(s) of business
(Horizontal/Vertical)
3) Diversification—add related and/or unrelated products
(Concentric/Conglomerate)
4) Cooperation- Expansion through Cooperation
5) Internationalization- Expansion through internationalization
6) Digitalization- Expansion through digitalization

Grand Strategy
Growth
size)
Stability
(remain the same
or grow slowly)
Turnaround and
Retrenchment
(reversing a negative
trend and cut back)
Combination
Stability Strategy-
1) No Change Strategy
2) Pause/Proceed with caution strategy
3) Profit Strategy

Grand Strategy
Growth
size)
Stability
(remain the same
or grow slowly)
Turnaround and
Retrenchment
(reverse a negative trend
and cut back)
Combination
Retrenchment Strategies
1) Turnaround Strategy
2) Divestment Strategy
3) Liquidation Strategy
Retrenchment Strategies
1) Turnaround Strategy
2) Divestment Strategy
3) Liquidation Strategy

Expansion (Growth) Strategies
– Concentration
•The organization grows aggressively in its
existing line(s) of business.
– Integration
•The organization enters a new line or lines of
business related to its existing one(s).
– Diversification
•The organization goes into a
•related (concentric diversification) or
•unrelated (conglomerate diversification) line of
products.

Expansion (Growth) Strategies
Mergers
Acquisitions
Joint Ventures
Strategic Alliances
Takeovers
(Expansion thro’ Cooperation)

Grand Strategies
• Grand strategies, often called Master or
Business Strategies, provide basic direction
for strategic actions
• - Indicate the time period over which long-run
objectives are to be achieved
• Any one of these strategies could serve as the
basis for achieving the major long-term
objectives of a single firm
• Firms involved in multiple industries,
businesses, product lines, or customer groups
usually combine several grand strategies

Expansion Thro’ Concentration
• Concentrated growth is the strategy of the
firm that directs its resources to the profitable
growth (Increasing Sales) of a dominant
product, in a dominant market, with a
dominant technology
• Concentrated growth strategies lead to
enhanced performance (Work Extra &
Efficiently)
• Specific conditions favors concentrated
growth
• The risks and rewards vary

Type of Expansion thro’
Concentration
The expansion through Concentration can be
achieved by either for following ways-
Market Development
Product Development
Innovation (New Product Development)
• Concentration is providing varieties in the
available product segment, so as to provide a
basketful product to chose one, as per the
need.

Expansion thro’ Concentration
• Market Development
– Consists of marketing of present products,
often with only cosmetic modifications, to
customers in related market areas by
Adding channels of distribution or
Changing content of advertising or
promotion
Frequently, changes in media selection,
promotional appeals, and distribution are
used to initiate this approach-
Product launch in New Market

• Product development involves the substantial
modification of existing products or the
creation of new but related products that can
be marketed to current customers through
established channels
Examples:
• Ponds or Fair & Lovely Product Range
• Cadbury Dairy Milk Range
• Typewriter to Computers,

Innovation
• These companies seek to reap the initial high
profits associated with customer acceptance of
a new or greatly improved product
• Then, rather than face stiffening competition
they search for other original or novel ideas
• The underlying rationale of the grand strategy
of innovation is to create a new product life
cycle and thereby making similar existing
products obsolete (Ex- Ipod, Ipad)

Innovation
Innovation in
Technology
to upgrade
the product

Others ways for Expansion
• Increasing present customers’ rate of use:
a. Increasing size of purchase (5 lit pack of Cooking Oil)
b. Advertising other uses (Ex: Navaratna Tel)
c. Giving price incentives for increased use/purchase (Buy
3+1 Free)
• 2. Attracting competitor’s customers
– a. Establishing sharper brand differentiation: (25% Moisture)
– b. Increasing promotional effort (Daag Acche Hai-Surf Excel)
– c. Initiating price cuts
• 3. Attracting nonusers to buy the product
– a. Inducing trial use through sampling, price incentives, and
so on
– b. Pricing up or down
– c. Advertising new uses

Others ways for Expansion

Expansion thro’ Integration
• Horizontal integration
– Based on growth via acquisition of one or more
similar firms operating at the same stage of the
production-marketing chain
– Involves eliminating competitors, providing acquiring
firm with access to new markets
• Vertical integration
– Involves acquiring firms
•To supply acquiring firm with inputs - backward
integration or
•customers for firm’s outputs - forward integration

Vertical & Horizontal Integration
Textile producer
Shirt manufacturer
Clothing store
Textile producer
Shirt manufacturer
Clothing store
Acquisitions or mergers of suppliers or customer businesses are vertical
integrations
Acquisitions or mergers of competing businesses are horizontal
integrations

Vertical Integration
• When a firm’s grand strategy is to acquire firms
that supply it with inputs (such as raw materials)
or are customers for its outputs (such as
retailers/sellers for finished products), Vertical
integration is involved
• The main reason for backward integration is the
desire to decrease the dependability of the supply
or increase quality of the raw materials used as
production inputs
• Example- A Woolen company merging with a
company manufacturing sophisticated machines
required for processing of Looms to produce terry
wool or Woolen Tops Dr. Prashant Kalaskar

Why Horizontal Integration
Economies of scale - achieved by selling more of the
same product, for example, by geographic
expansion.
Economies of scope - achieved by sharing resources
common to different products. Commonly referred
to as "synergies.“
Increased market power (over suppliers and
downstream channel members)
Reduction in the cost of international trade by
operating factories in foreign markets.

Examples of Vertical Integration
Google recently acquired mobile-device maker
Motorola Mobility and introduced smart phones
(Moto G) and planning for television set-top boxes.
Reliance has entered the oil and natural gas sector,
along with retail sector. Reliance now has a complete
vertical product portfolio from oil and gas production,
refining, petrochemicals, synthetic garments and
retail outlets.
Hardware itself is not typically manufactured by
Apple, but is outsourced to contract manufacturers
such as Foxconn or Pegatron who build Apple's
branded products to Apple's specifications.

Why Vertical Integration
• Internal gains
• Lower transaction costs
• Synchronization of supply and demand along
the chain of products
• Lowers uncertainty and higher investment
• Ability to monopolize market throughout the
chain by market foreclosure
• Strategic independence (especially if important
inputs are rare or highly volatile in price)

Problems of Vertical Integration
Internal losses
• Higher coordination costs
• Higher monetary and organizational costs of
switching to other suppliers/buyers
• Weaker motivation for good performance at the
start of the supply chain since sales are
guaranteed and poor quality may be blended
into other inputs at later manufacturing stages

Expansion Through Diversification
Diversification is the process by which any company
grow further by entering in to some new business
segment
The entry in to new business my be a business
related to earlier business or unrelated to earlier
business
Types:
1) Concentric Diversification
2) Conglomerate Diversification

Concentric Diversification
• Concentric diversification involves the acquisition
of businesses that are related to the acquiring firm
in terms of technology, markets, or products
• With this grand strategy, the selected new
businesses possess a high degree of compatibility
with the firm’s current businesses
• The ideal concentric diversification occurs when
the combined company profits increase the
strengths and opportunities and decrease the
exposure to risk and weaknesses
• Examples-
• Marketing-(Kitchenware-Sewing Machine)
• Technology-Raincoat company produces Rainy
shoes, Rubber Gloves) Dr. Prashant Kalaskar

Conglomerate Diversification
• Occasionally a firm, particularly a very large one, plans
acquire a business because it represents the most
promising investment opportunity available.
• This grand strategy is commonly known as
conglomerate diversification.
• The principle concern of the acquiring firm is the
profit pattern of the venture
• Unlike concentric diversification, conglomerate
diversification gives little concern is to create product-
market synergy with existing businesses
• Examples- ITC diversifying into Hotel Industries, Paper,
Agriculture.
• Banks in Mutual Funds, Insurance, Loans etc.
• Spice is an umbrella brand of Indian conglomerate B.K. Modi
Group Dr. Prashant Kalaskar

Why Diversification..?
• For Capitalising on organisational strengths &
minimising it weakness
• If this is the only way out, if growth of the
existing business is blocked due to
environmental or regulatory factors
• To Take the advantage of changing trends &
demands of the market

Expansion Through Co-operations
Joint Ventures (JV)
• Occasionally two or more capable firms lack a
necessary component for success in a
particular competitive environment
• The solution is a set of Joint Ventures, which
are commercial companies (children) created
and operated for the benefit of the co-owners
(parents)
• The joint venture extends the supplier-
consumer relationship and has strategic
advantages for both partners

Conditions for Joint Ventures
• When an activity is uneconomical for an
Organisation to do alone
• - When the risk of business is to be shared &
therefore, is reduced for the participating firms.
• - When the distinctive competencies are of two or
more organisations can be brought together

Conditions for Joint Ventures
• When setting up an organisation requires
surmounting hurdles, s/a- Import quotas, Tariffs,
Nationalistic-Political interest & cultural road blocks.
• Types of Joint Ventures-
1) B/n two firms within Industry
2) B/n two firms from different Industries
3) B/n a Indian & a Foreign Company in India or in
Foreign Company’s Country or venture in third
country.

Examples of Joint Ventures
• IBM & TATA Industries Ltd. Created a Joint
Venture to form Tata Information System, to be
the India’s largest & Top IT company
• AT&T & Birla’s group to form a Telecom
Company in India
• Kellogg Company Joins with Wilmar
International Limited in China for Cereals &
Snacks in China
• Used Car Dealer and the Car Wash purchase an
adjacent lot of real estate with the intention of
selling it in 5 years for a profit
• Tata-Docomo & Many More

Strategic Alliances
• Strategic Alliances-Two or more firms unite
together to achieve a set of objective, but remains
independent.
• The partners controls over the performance of
assigned task, & shares the benefits of alliance.
• It differs from joint ventures because the
companies involved do not take an equity position
in one another
• In some instances, strategic alliances are
synonymous with licensing agreements, as they
contribute to each other in terms of one or more
key strategic areas like-Technology, product etc.

Strategic Alliances
• Strategic alliances are partnerships in which two or
more companies work together to achieve
objectives that are mutually beneficial.
• Companies may share resources, information,
capabilities and risks to achieve this

Examples of Strategic Alliances
• Mahindra & Ford/Renault,
• Maruti-Suzuki,
• Ranbaxy-Eli-Lilly
• Taj Hotel-British Airlines
• ICICI Bank and Vodafone India announces strategic
alliance to launch ‘m-pesa’
• Facebook with Skype
• Toys “R” Us with McDonald’s in Japan
• Reasons for Strategic Alliances-
1) Entering in to a new Market
2) Reducing Manufacturing Cost
3) Developing & Diffusing Technology

Acquisitions/Takeovers
• Purchase of company which is already in business,
in the same segment.
• Reasons-
• 1) If the market is volatile & internal development is
slow, it allows the company to grow rapidly
overnight in new market/product area.
• 2) Lack of resources & competencies to develop
strategies
• 3) In stable market, when new entry is difficult
• 4) International developments are often pursued
through acquisitions for the reasons of market
knowledge

Acquisitions/Takeovers
• Motives for Acquisition-
• Production- To acquire newer technology
• -Increase manufacturing capacities
• -Improved Margin, reducing production cost-
Operational Synergy
• Marketing- Acquire new brands, market, products
• -To improve distribution network
• -To increase market share
• -Synergy in marketing function
• Financial- To improve leveraging capabilities
• -Lowering capital cost
• -Cheaper working capital

Problems in Acquisitions/Takeover
• To Business- Inaccurate estimation of Market
potential
- Overestimation of synergies
- Imperfect understanding of Market Psyche
• Financial Point of view- Hidden liabilities
- Size mismatch
- Limited funding options
• Legal- Complexity of regulations, documentation
etc.
• Integration-Implementation delays
- Cultural difference & difficulty in implementation
of Managerial skill
- Conflict of Interest

Mergers
• Mergers are the external route of growth
• With the thought that acquiring firm/part of
firm, it will add value to their effectiveness.
• One of the firm or some times both the firms
looses their original identity, to form a new firm.

Mergers
• A merger is coming together of two or more
firms.
• One acquires assets & liabilities of another in
exchange of cash or stock, or both the firm
dissolves to combine the assets, liabilities &
fresh stock is issued to the share holders of both
firms.
• Examples- Astra from Sweden & Zeneca from
UK, merged together to form Astra Zeneca
Pharma, other example is Hindustan Uni Lever.

Mergers
• Examples-
• HDFC Bank acquisition of Centurion Bank of
Punjab for $2.4 billion.
• Tata Motors acquisition of luxury car maker
Jaguar Land Rover for $2.3 billion.
• Merger of Hindustan Computers Ltd, Hindustan
Instruments Ltd, Indian Software Company Ltd
and Indian Reprographics Ltd into an entirely
new company called HCL Ltd.
• Merger of Broke bond and Lipton

Acquisitions/Mergers/Takeovers
• From Buyers perspective-
1) To Increase the value of Organisation’s stock
2) To Increase the growth rate & Make a good
Investment
3) To Improve the stability of earnings & sales
4) To balance, complete or diversify product line
5) To reduce competition
6) To acquire needed resources as quickly as the need
is
7) To avail tax concession & benefits
8) To take advantage of synergy

Acquisitions/Mergers/Takeovers
• From Sellers perspective-
1) To increase the value of Owner’s stock &
Investment
2) To increase the growth rate
3) To acquire the resources to stabilize operations
4) To benefit from Tax legislation
5) To deal with Top management succession
problem

Reasons for Failure of Mergers
• Merging Fails-
• If the merged company becomes too large to be
manage efficiently. (Operational inefficiency)
• Companies in diverse markets, merged for
financial gains only.
• Workers of one company start demanding
benefits from other company
• The profits of one company is used to subsidize
the others losses
• Productivity level of both the companies are
widely unequal

Reasons for Failure of Mergers
• Merging Fails-
1) Cultural Differences
2) Flawed intention of booming in Stock Market
3) Incompatibility & Clash of Ego of top Managers
4) Differences in Strategic Fit
5) Over Diversification of one company
6) Over estimation of performance of other co.
7) Merger between Equals (Dunlop & Pirelli)

Turnaround
The firm finds itself with declining profits…
Among the reasons are-
-Economic Recessions,
-Production Inefficiencies, and
-Innovative Breakthroughs by competitors.

Turnaround
The Characteristics of Declining Market…
• Diminishing Profitability
• Falling Sales
• Dwindling Cash flow
• Shrinking Market Share
• Increasing debts
• Loss of Credibility & Goodwill
• Disengagement of Suppliers, Creditors &
Customers.

Turnaround
• Strategic managers often believe that, the
firm can survive and eventually recover if a
concerted effort is made over a period of a few
years to fortify its distinctive competences.
• It can be done by two ways-
1) Surgical Method or
2) Non Surgical Method (Humane)
• Two forms of retrenchment:
– Cost reduction
– Asset reduction

Turnaround
• There are 3 ways in which Turnaround can be
handled….
1) With the existing top level management along
with external advisory committee
2) Withdrawing temporary the existing top level
management with the external consultants
(Generally deputed by financial institutions/banks).
3) A permanent replacement of existing teams
with better options

Divestiture
• A divestiture strategy involves the sale of a firm
or a major component of a firm
– Reasons for divestiture
• - Partial mismatches between acquired firm and
parent firm
• - Corporate financial needs
• - Government antitrust action
• Example- Dunlop Tyres sold out in Recession

Liquidation
• Liquidation is the grand strategy, When the
firm typically is sold in parts, only occasionally
as a whole—but for its tangible asset value
and not as a going concern
• Planned liquidation can be worthwhile
• Example-Tata group liquidated Empress
Cotton Mill, Nagpur- an example of Planned
Liquidation

Stability Strategies
- Organizations mainly look at incremental
improvements in the functional performances
- No Strategy / No Change in Strategy is also a
strategic decisions.
- Useful for a short run/Short Time Period
• 3 Types of Stability Strategies:
1) No Change Strategy
2) Profit Strategy
3) Pause & Proceed with Caution Strategy

No Change Strategy
• To Continue with the present business
definitions i.e. to go with the presently
implemented strategies
• Reasons:
- No worth of changing the strategies
- No Significant Opportunities or threats in the
market
- No major strength or weakness developed by
company
- No change in the competitive environment

Profit Strategy
- Environment is dynamic, never remains same
always
- The situations like recession, are short lived &
will go away with time
- Hence for time being companies adopts profit
Strategies
Viz.:-
1) Reducing the Investment
2) Reducing the cost
3) Raising the prices or
4) Increase the Productivity

Pause & Proceed with Caution
• To check/test the responses from the market
to a small strategic decisions, instead of fully
investing & facing the losses.
• Before an Expansion Strategy, Companies
adopts this strategy.
• A deliberate & conscious attempt made by the
company to move on strategically

Sequence of Selection
and Strategy Objectives
• The selection of long-range objectives and
grand strategies involves simultaneous, rather
than sequential, decisions
• While it is true that objectives are needed to
prevent the firm’s direction and progress from
being determined by random forces, it is
equally true that objectives can be achieved
only if strategies are implemented

Outsourcing
Withdrawing certain stages/activities from the
value chain systems and relying on outside
vendors to supply needed products, support
services, and functional activities.
Outsourcing makes strategic sense when:
An activity can be performed better or more
economically by outside specialists.
(e.g. outside assembly of PCs due to sizable
economies of scale in purchasing components in
large volumes and in the assembly process).

Outsourcing
The activity is not crucial to the firm’s ability to
achieve sustainable competitive advantage and
won’t hollow out its core competencies.
(e.g., outsourcing of maintenance services, data
processing, accounting).

Outsourcing
It reduces the company’s risk exposure to
changing technology and/or changing buyer
preferences.
It streamlines company operations in ways that
improve organizational flexibility, cut cycle time,
speed decision-making, and reduce coordination
costs.
It allows a company to concentrate on its core
business and do what it does best.

Strategy Implementation: Functional
Strategy and Strategic Choice
Dell Computer’s partnerships with suppliers of
PC components have allowed it to:
Operate with fewer than 7 days of inventory
Save substantial savings in inventory costs
Get PCs equipped with next-generation
components into the marketplace in less than a
week after the newly upgraded components
start shipping.

Outsourcing
Advantages of Outsourcing:
Obtaining higher quality and/or cheaper
components or services than internal sources
can provide
Improving the company’s ability to innovate by
interacting and allying with “best-in-world”
suppliers who have considerable intellectual
depth and innovative capabilities of their own.

Outsourcing
Advantages of Outsourcing:
• Enhancing the firm’s strategic flexibility should
customer needs and market conditions
suddenly shift--seeking out new suppliers with
the needed capabilities already in place is
frequently quicker, easier, less risky, and
cheaper than hurriedly retooling internal
operations.
• Increasing the firm’s ability to assemble diverse
kinds of expertise speedily and efficiently.

Outsourcing
Pitfalls of Outsourcing:
• Firm may farm out too many or the wrong types
of activities and hollow out its own capabilities.
• Cisco guards against loss of control and protects
its manufacturing expertise by designing the
production methods that its contract
manufacturers must use. Cisco also uses the
Internet to monitor the factory operations
around the clock.

If any Query
Dr. Prashant B. Kalaskar
M: 9975770407, 7350520025
pbkalaskar@sinhgad.edu
prashantkalaskar007@gmail.com

Strategies for Success: Understanding Generic, Grand, and Focus Strategies

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