Business Policy and Strategic

Management

Types of Strategies

Garima Gupta
PGDM V (B)
Roll no-80
TYPES OF STRATEGIES

The five main strategies are:

1) Stability strategy

2) Growth/Expansion Strategy

3) Diversification Strategy

4) Partnership Strategy

5) Retrenchment strategy

1. Stability Strategy

This type of strategy is used by an organization in cases where the organization is satisfied with the current
situation and therefore it does not want to move away from such a position. Consequently, in such a case,
the organization goes for the stability strategy. However a stability strategy can prove to be effective when
the environment of the organization is also stable. In most of the cases, this type of strategy is used by the
organizations. The reason is that it is the least risky course of action. For example, the stability strategy will
be adopted by an organization if it is satisfied by dealing with the same product or service, providing its
services to the same group of consumers and maintaining the same market share. Sometimes, the
organization is not adventurous enough to try new strategies and change its situation. However, the stability
strategy can be adopted successfully by the organizations from a mature industry that has a static
technology. But as a result of adopting the stability strategy, the managers may become complacent. In the
same way, whenever a change arises in such an organization, the managers find it difficult to deal with such
changes.

Example of stability strategy-

SAIL

Steel Authority of India has adopted stability strategy because of over capacity in steel sector.
Instead it has concentrated on increasing operational efficiency of its various plants rather than
going for expansion. Others industries are heavy commercial vehicle, coal industry.
BATA

In the India shoe market dominated by Bata and Liberty, Hindustan Levers better known for
soaps and detergents, produces substantial quantity of shoes and shoe uppers for the export
market. In late 2000, it started selling a few thousand pairs in the cities to find out the market
reaction. This is a pause proceed with caution strategy before it goes full steam into another
FMCG sector that has a lot of potential.

2. Growth/Expansion Strategy

growth is related with expansion and diversification of the business operations. Therefore, if
the management of the organization is not satisfied with the present status of the company, or
when changes are taking place in the environment of the organization, or if favorable
opportunities arise, it will be helpful for the organization to adopt growth strategy as it helps
in expansion and also in diversification. A growth strategy can be implemented in the
organization through market development, product development, merger or diversification.
In case of product development, the organization adds new products to the existing products
or these new products replace the products that were offered by the organization earlier. On
the other hand, in case of vertical integration, the organization may also decide to take
backward or forward lines. In such a case, either the company may decide to produce its own
raw materials or it may decide that it will process its own output in future. It is very
important that the growth strategy should be controlled and planned in a proper way
otherwise such a strategy may not be successful in achieving its objectives. Due to the reason
that growth indicates effective management, it is always desirable to adopt such a strategy.

Example of product development and market penetration

FRITO- LAYS

SCENARIO - Frito-Lay removed trans fats from its salty snack products.

GROWTH STRATEGY- Product development

Comment- Products were modified without introducing new brands; no change in market
potential. Still salty snack foods market and even those non-buyers who didn't buy for health
reasons, say concern over trans fat, were in Frito-Lay's target market. Indeed, this was a way to
reach those non-buyers.

Coca Cola

Market Penetration: (EXISTING Market, EXISTING Product)

This strategy involves an attempt to increase market share within existing industries, either by
selling more product to established customers or by finding new customers within these markets
typically by adapting the Promotion element of the Marketing Mix. Due to the incredible
strength of Coca-Colas brand, the company has been able to utilise market penetration on an
annual basis by creating an association between Coca-Cola and Christmas, such as through the
infamous Coca-Cola Christmas advert, which has helped boost sales during the festive period.

3. Diversification
Diversification is the process of entry into a business which is new to an organization either
marketwise or technology wise or both. Diversification may involve internal or external,
related or unrelated, horizontal or vertical, and active or passive dimensions either singly or
collectively.

Conglomerate Diversification Examples

ITC

Indian company ITC who have adopted growth and expansion through conglomerate
diversification, the classic example is ITC a cigarette company diversifying into hotel
industry, fmcg products, etc

GE- General Electric

It is the example of highly diversified firm. GE makes locomotives, light bulbs, refrigerators,
manages credit cards, owns aircrafts etc
4. Partnership Strategy

This can be done through simultaneous competition and cooperation among rival firms for
mutual benefit.

Merger Acquisition Examples

AT&T Inc buys Time Warner Deal Amount: USD 85.4

Billion Industry: Media

When: 22 October 2016

About the Merger/Acquisition: AT&T has acquired Time Warner and the new company will
be headed by AT&T Chief Executive Randall Stephenson. For AT&T the deal will help
them expand business opportunities and market as well. The prime business of AT&T is core
wireless and it seems to have become saturated now.

Reliance Communications and Aircel

Deal Amount: Undisclosed

Industry: Telecommunications

When: 14 September 2016

About the Merger/Acquisition: Reliance Communications has merged with Maxis

communications Berhad (MCB). This merger is the fourth biggest merger in Telecom sector.
Both the companies will hold 50 percent in the new entity. The new entity will have an asset
base of INR 65000 crores and net worth of INR 35000 crores.
5. Retrenchment Strategy

An organization may decide to retreat or the change from its current position for the
purpose of improving its position or sometimes in order to survive. This type of strategy
has to be adopted by an organization when the company is going through the times of
recession, or the competition is tough, or there is a scarcity of resources and as a result, the
resources need to be reorganized in order to reduce waste. In this way, even if the
retrenchment or retreat strategy reflects a failure on the part of the organization to some
extent, however it is very important that such a strategy should be adopted in order to
ensure the survival of the organization.

Turnaround Strategy Examples

Dell

Dell is the best example of a turnaround strategy. In 2006. Dell announced the cost-cutting
measures and to do so; it started selling its products directly, but unfortunately, it suffered
huge losses. Then in 2007, Dell withdrew its direct selling strategy and started selling its
computers through the retail outlets and today it is the second largest computer retailer in the
world.

Xerox
Xerox revealed a Turnaround Programme in December 2000, which included cutting $1
billion in costs, and raising up to $4 billion through the sale of assets, exiting non-core
businesses and lay-offs. Subsequently, in August 2001, Mulcahy was made CEO. Xerox
continued to report losses in 2001, but it returned to profit in 2002 and continued to report
profits in 2003.