Combination strategies

The Concept
 A stable strategy arises out of a basic perception by the management that the firm should concentrate on using its present resources for developing its competitive strength in particular market areas.
In simple words, stability strategy refers to the company’s policy of continuing the same business and with the same objectives
A firm pursues stability strategy when
1. It continues to serve the public in the same product or service, market, and function sectors as defined in its business definition.
2. Its main strategic decisions focus on incremental improvement of functional performance.
2. Corporate Restructuring is the process of redesigning one or more aspects of a company.
3. The process of reorganizing a company may be implemented due to a number of different factors, such as positioning the company to be more competitive, surviving a currently adverse economic climate, or acting on the self confidence of the corporation to move in an entirely new direction.

1. STABILITY, EXPANSION, RETRENCHMENT AND COMBINATION STRATEGIES

2. Corporate level strategy Stability strategies Expansion strategies Retrenchment strategies Combination strategies No change strategies Pause/proceed with caution strategies Profit strategies Concentration Integration Diversification Cooperation Internationalization Digitalization Turnaround Divestment Liquidation Simultaneous Sequential Combination of both

3. Stability Strategies

4. Stability Strategies A firm pursues stability strategy when It continues to serve the public in the same product or service, market, and function sectors as defined in its business definition. Its main strategic decisions focus on incremental improvement of functional performance.

5. Types of Stability Strategies No change strategies Pause/proceed with caution strategies Profit strategies

6. No Change Strategies Taking no decision sometimes, is a decision too! This strategy is relevant in predictable and certain external environment and stable organizational environment. Small and medium sized firms rely on this strategy

7. Pause/Proceed With Caution Strategies It is employed to test the ground before moving ahead with a full-fledged corporate strategy The purpose is to let the system adapt to the new strategies It is deliberate and conscious attempt

8. Profit Strategies Things do change It is assumed that the problem is short lived Only motive is sustaining profitability for a temporary phase It works only if the problems are really short lived

9. Expansion Strategies

10. Expansion Strategies The corporate strategy of expansion is followed when an organization aims at high growth by substantially broadening the scope of one or more of its business in terms of their respective customer groups, customer functions and alternative technologies-singly or jointly-in order to improve its overall performance.

11. Types of Expansion Strategies Expansion through concentration Expansion through integration Expansion through diversification Expansion through cooperation Expansion through internationalisation Expansion through digitation

12. Expansion Through Concentration

13. Concentration Strategies Concentration is a simple, first-level type of expansion strategy. It involves converging resources in one or more of a firm businesses in terms of their respective customer needs, customer functions, or alternative technologies-either singly or jointly- in such a manner that expansion results.

14. Example The cola war between Coca Cola and Pepsi: where both of them were fighting for the soft drink market. They relied on their marketing activities to gain popularity.  

15. Market Penetration Market penetration involves selling more product to the same market: a firm may attempt at focusing intensely on existing markets with its present products, using a market penetration type of concentration.

16. Market Development It involves selling the same products to new markets: it may try attracting new users for existing products, resulting in a market development type of concentration. Example: Earlier the target market for coca-cola was US market for soft drinks then when coca-cola took their products to Russia to increase their market share.

17. Product Development It involves selling new products to the same markets: it may introduce newer products in the existing markets by concentration on product development. Due to the demand from its current market firm create new product. For example: Mc Donald in order to gain market share in India

18. Expansion Through Integration

19. Integration Strategies Integration (from the Latin integer, meaning whole or entire ) generally means combining parts so that they work together or form a whole. Informational technology , there are several common usages. Integration during product development process in which separately produced components or sub system s are combined and problems in their interactions are addressed.

20. Horizontal Integration When an organisation takes up the same type of products at the same level of production or marketing process, it is said to follow a strategy of horizontal integration.

21. Vertical Integration When an organization starts making new products that serve its own needs, vertical integration takes place. Any new activity undertaken with the purpose of either supplying inputs(such as raw materials) or serving as a customer for outputs (such as marketing of firm”s product) is vertical integration.

22. Example Amazon.com backward vertically integrated when it became not only a bookseller but a book publisher. As a bookseller, Amazon.com buys books from various suppliers, such as publishing companies. By becoming a publisher itself, it has integrated into its business the role of supplier and can sell books that its own publishing company publishes

23. Expansion Through Diversification

24. Diversification Strategies When new products are made for new markets then diversification take place. The notion of diversifying is therefore related to the newness of products or markets or both. By adopting diversification, an organisation does something novel in terms of making new products or serving new markets or doing both simultaneously. 2 types: Concentric diversification conglomerate diversification

25. Concentric Diversification If the new business is in any way related to the original business in terms of the customer groups served, customer functions performed or alternative technologies employed, then it is concentric diversification.

26. Types of Concentric Diversification Marketing-related concentric diversification -: A similar type of product is offered with the help of unrelated technology. Technology-related concentric diversification -: A new type of product or service is provided with the help of related technology. Marketing-and technology-related concentric diversification -: A similar type of product or service is provided with the help of a related technology.

27. Conglomerate Diversification When an organisation adopts a strategy which requires taking up those activities which are unrelated to the existing business definition of any of its businesses, it is conglomerate diversification.

28. Expansion Through Internationalization

29. Internationalization Strategies International strategies are type of expansion strategies that require organizations to market their products or services beyond the domestic or national market. For doing so, an organization would have to assess the international environment, evaluate its own capabilities and devise strategies to enter foreign markets.

30. Expansion Through Cooperative Strategies

31. Cooperative Strategies Corporate strategy is basically the growth design of the firm: it spells out the growth objective of the firm-the direction, extent, pace and timing of the firm’s growth. Corporate strategy is basically concerned with the choice of businesses, product and markets.

32. Types Of Corporate Strategies Mergers and acquisitions Joint Ventures Strategic Alliances

33. Merger and Acquisition Mergers and acquisitions -: refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or new location, without creating a subsidiary, other child entity or using a joint venture.

34. E xample Flipkart- Myntra The seven year old Bangalore based domestic e-retailer  acquired the online fashion portal for an undisclosed amount  in May 2014. Industry analysts and insiders believe it was a  $300 million or Rs 2,000 crore deal . Flipkart co-founder Sachin Bansal  insisted  that this was a “completely different acquisition story” as it was not “driven by distress”, alluding to a plethora of small e-commerce players either having wound up or been bought over in the past two years. Together, both company heads claimed, they were scripting “one of the largest e-commerce stories”.

35. Types of Mergers Horizontal Merger : Both cos. have similar products / product lines. Vertical Merger : One co. is a supplier of the other. Concentric Merger : Two cos. are either related technology wise or market wise. Conglomerate Merger : Two cos. have entirely different products and markets

36. examples Horizontal merger: The merger of Bank of Mathura with ICICI (Industrial Credit and Investment Corporation of India) Bank Vertical merger: New Delhi: Tata Motors Ltd acquired an 80% stake in Trilix Srl, an Italian design and engineering firm for €1.85 million (Rs. 11.29 crore ). Concentric meger: Citigroup's acquisition of Travelers Insurance. While both were in the financial services industry, they had different product lines .

37. Joint venture strategies A joint venture could be considered as an entity resulting from a long- term contractual agreement between two or more parties, to undertake mutually beneficial economic activities, exercise joint control and contribute equity and share in the profit or losses of the entity.

38. E xample Indo Cat Pvt. Limited Date of establishment –  1 st  of June 2006 Joint venture Holders -USA, Intercat Areas of operation-  It deals with manufacturing as well as marketing of FCC additives and catalysts One of the joint venture companies that play an important role in the field of manufacturing and distribution of several additives is named as Indo Cat Pvt Limited

39. Types of joint venture Between two Indian organisations in one industry. Between two Indian organisations across different industries. Between an Indian organisation and a foreign organisation in India. Between an Indian organisation and a foreign organisation in foreign country. Between an Indian organisation and a foreign organisation in a third country.

40. Strategic Alliances Two or more firms unite to pursue a set of agreed upon goals, but remain independent subsequent to the information of the alliances The partners firms contribute on a continuing basis, in one or more key strategic area, for ex. technology

41. Retrenchment Strategies

42. Retrenchment strategies A retrenchment strategy is pursued by a firm when: It sees the desirability of or necessity for reducing its product or service lines, markets, or functions. In this strategy a co. decides to improve its performance in reaching its objectives by focusing on functional improvement, reduction in costs, reduction in number of functions it performs by becoming a captive co, reduction in the number of products and markets it serves and also liquidation of business. when it cuts its size of employees due to recession / reorganization. Retrenchment strategy follows the saying “Slow down and take a breath, we have to do better”.

43. Types of Retrenchment Strategies 1. Turnaround Strategy : Revenue generating : Only promote those products having high demand. Cost cutting : Encourage VRS, lower promotion costs etc. Asset Reduction : Sell off assets that are underperforming. Combination : Of all of the above three.

44. Example When the Finnish handset giant Nokia announced its global turnaround strategy last year, it was about exploiting the rapidly shifting market for smartphones, profiting from its new partnership with Microsoft and developing services based on its own assets

45. 2. Divestment Strategies : Organization decides to get out of a certain business & sells off units / divisions. Probable reasons : Inadequate growth rate or market potential Technology change Management unable to control business

46. Example HUL divested its marine food business to Mumbai based temptation foods to focus on their main core business. Asian paints undertook an international divestment when it decided to divest its stake in Australian operations because of low profits.

47. For example, the TATA group continued concentrating on its various business including steel, automobile manufacturing, etc while selling Tomco, which did not share a synergistic relationship with its current portfolio of businesses .  Similarly, the LTV steel company’s decision (after filing in 1986) to concentrate on “flat rolled” steel products, while divesting other steel operations, reflects the intent to maintain a leadership position in production of high-quality, value-added steel for critical engineering application.

48. 3. Liquidation Strategy : Sell off business. Probable reasons : Very uncertain future. Accumulated losses. Some co. offers high price. Less resources to continue. Diversify into other businesses.

49. Combination Strategies

50. Combination Strategies Combination strategies are used by a firm when: Its main strategic decisions focus on the conscious use of several grand strategies (expansion, stability, retrenchment) at the same time(simultaneously) in several SBUs of the company.

51. Types of Combination Strategies Simultaneous combination strategies Sequential combination strategies Combination of simultaneous and sequential a strategies