Tipos de EStratégias.pptsssssssssssssssssssssssssssss

efeeeeeeeeeeeeeeeeeeeeeeeeeeeee

1. Types of Strategies
Level of strategies
Prof. Dr. Majed El-Farra 20091

2. Strategy hierarchy
1.Corporate strategy: 1) growth strategy, 2)
stability strategy, 3) retrenchment strategy.
2.Business unit strategy: 1) cost leadership, 2)
differentiation, 3) focus, 4) mixed.
3.Functional strategy.
Prof. Dr. Majed El-Farra 20092

3. Ch 5 -3
Types of Strategies
Operational Level
Functional Level
Division Level
Corp
Level
A Large
Company

4. Ch 5 -4
Types of Strategies
Functional
Level
Operational Level
company
A small
Company

5. Corporate strategies
•Top level management formulate for overall
organization
•The question at the corporate level we should
answer when design strategies: In what
industry should we be operating?
•It depends on the outcome of SWOT analysis.
Prof. Dr. Majed El-Farra 20095

6. Growth strategies
Growth strategies:
They result increase in sales, market share and profit: the types:
•Internal growth: Increase internal capacity of organization
without acquiring other firms.
•Conglomerate Diversification: Acquiring unrelated business.
•Merger: Two roughly similar size firms combine into one. To
benefit of synergy.
•Strategic alliance: Temporary partnerships
Prof. Dr. Majed El-Farra 20096

7. Corporate Restructuring
The change in a broad set of actions and decisions, e.g.,
changing relationships and organization of work.
•The aim of restructuring is to improve effectiveness.
•Restructuring could be growth, stability or retrenchment.
This depends on why we use it.
Prof. Dr. Majed El-Farra 20097

8. Retrenchment strategies
•Types:
1-Turnaround:
Eliminating unprofitable outputs,
pruning/cutting assets, reducing size of work
force, rethinking firm’s products lines and
customer groups.
2-Divestment: sell one of business units
3-Liquidation: last resort strategy
Prof. Dr. Majed El-Farra 20098

9. Prof. Dr. Majed El-Farra 20099
Strategies in Action
Vertical Integration Strategies
•Forward integration
•Backward integration
•Horizontal integration

10. Prof. Dr. Majed El-Farra 200910
Strategies in Action
Defined
•Gaining
ownership or
increased control
over distributors
or retailers
Example
•General Motors is
acquiring 10% of its
dealers.
Forward
Integration

11. Strategies in Action
Guidelines for Forward Integration
Present distributors are expensive, unreliable, or incapable of
meeting firm’s needs
Availability of quality distributors is limited
When firm competes in an industry that is expected to grow
markedly
Advantages of stable production are high
Present distributor have high profit margins
Prof. Dr. Majed El-Farra 200911

12. Prof. Dr. Majed El-Farra 200912
Strategies in Action
Defined
•Seeking
ownership or
increased control
of a firm’s
suppliers
Example
•Motel 8 acquired a
furniture
manufacturer.
Backward
Integration

13. Strategies in Action
Guidelines for Backward Integration
When present suppliers are expensive, unreliable, or incapable
of meeting needs
Number of suppliers is small and number of competitors large
High growth in industry sector
Firm has both capital and human resources to manage new
business
Advantages of stable prices are important
Present supplies have high profit margins
Prof. Dr. Majed El-Farra 200913

14. Prof. Dr. Majed El-Farra 200914
Strategies in Action
Defined
•Seeking
ownership or
increased control
over competitors
Example
•Palestinian Islamic
Bank acquired Cairo-
Amman Bank Islamic
transaction branch.
Horizontal
Integration

15. Strategies in Action
Guidelines for Horizontal Integration
Firm can gain monopolistic characteristics without being
challenged by federal government
Competes in growing industry
Increased economies of scale provide major competitive
advantages
Faltering/losing due to lack of managerial expertise or need for
particular resources
Prof. Dr. Majed El-Farra 200915

16. Prof. Dr. Majed El-Farra 200916
Strategies in Action
Intensive Strategies
•Market penetration
•Market development
•Product development

17. Prof. Dr. Majed El-Farra 200917
Strategies in Action
Defined
•Seeking increased
market share for
present products
or services in
present markets
through greater
marketing efforts
Example
•Ameritrade, the on-
line broker, tripled its
annual advertising
expenditures to $200
million to convince
people they can make
their own investment
decisions.
Market
Penetration

18. Strategies in Action
Guidelines for Market Penetration
Current markets not saturated
Usage rate of present customers can be increased significantly
Market shares of competitors declining while total industry
sales increasing
Increased economies of scale provide major competitive
advantages
Prof. Dr. Majed El-Farra 200918

19. Prof. Dr. Majed El-Farra 200919
Strategies in Action
Defined
•Introducing
present products
or services into
new geographic
area
Example
•Khuzendar Tiles maker
introduce his product
to Gulf markets.
Market
Development

20. Strategies in Action
Guidelines for Market Development
New channels of distribution that are reliable, inexpensive, and
good quality
Firm is very successful at what it does
Untapped or unsaturated markets
Capital and human resources necessary to manage expanded
operations
Excess production capacity
Basic industry rapidly becoming global
Prof. Dr. Majed El-Farra 200920

21. Prof. Dr. Majed El-Farra 200921
Strategies in Action
Defined
•Seeking increased
sales by improving
present products
or services or
developing new
ones
Example
•Apple developed the
G4 chip that runs at
500 megahertz.
•Khuzendar Tiles maker
introduce Ceramic as a
new product.
Product
Development

22. Strategies in Action
Guidelines for Product Development
Products in maturity stage of life cycle
Competes in industry characterized by rapid technological
developments
Major competitors offer better-quality products at comparable
prices
Compete in high-growth industry
Strong research and development capabilities
Prof. Dr. Majed El-Farra 200922

23. Prof. Dr. Majed El-Farra 200923
Strategies in Action
Diversification Strategies
•Concentric diversification
•Conglomerate diversification
•Horizontal diversification

24. Prof. Dr. Majed El-Farra 200924
Strategies in Action
Defined
•Adding new, but
related, products
or services
Example
•National Westminister
Bank PLC in Britain
bought the leading
British insurance
company, Legal &
General Group PLC.
Concentric
Diversification

25. Strategies in Action
Guidelines for Concentric Diversification
Competes in no-or slow-growth industry
Adding new & related products increases sales of current
products
New & related products offered at competitive prices
Current products are in decline stage of the product life cycle
Strong management team
Prof. Dr. Majed El-Farra 200925

26. Prof. Dr. Majed El-Farra 200926
Strategies in Action
Defined
•Adding new,
unrelated products
or services
Example
•Consultant
Construction
Engineering acquired
Bisects factory.
Conglomerate
Diversification

27. Strategies in Action
Guidelines for Conglomerate Diversification
Declining annual sales and profits
Capital and managerial talent to compete successfully in a new
industry
Financial synergy between the acquired and acquiring firms
Exiting markets for present products are saturated
Prof. Dr. Majed El-Farra 200927

28. Prof. Dr. Majed El-Farra 200928
Strategies in Action
Defined
•Adding new,
unrelated products
or services for
present customers
Example
•The El-AwdaCo.
provide ice-cream
product to present
customer
Horizontal
Diversification

29. Strategies in Action
Guidelines for Horizontal Diversification
Revenues from current products/services would increase
significantly by adding the new unrelated products
Highly competitive and/or no-growth industry w/low margins
and returns
Present distribution channels can be used to market new
products to current customers
New products have counter cyclical sales patterns compared to
existing products
Prof. Dr. Majed El-Farra 200929

30. Prof. Dr. Majed El-Farra 200930
Strategies in Action
Defensive Strategies
•Joint venture
•Retrenchment
•Divestiture
•Liquidation

31. Prof. Dr. Majed El-Farra 200931
Strategies in Action
Defined
•Two or more
sponsoring firms
forming a separate
organization for
cooperative
purposes
Example
•Lucent Technologies
and Philips Electronic
NV formed Philips
Consumer
Communications to
make and sell
telephones.
Joint Venture

32. Strategies in Action
Guidelines for Joint Venture
Combination of privately held and publicly held can be
synergistically combined
Domestic forms joint venture with foreign firm, can obtain local
management to reduce certain risks
Distinctive competencies of two or more firms are
complementary
Overwhelming resources and risks where project is potentially
very profitable (e.g., Alaska pipeline)
Two or more smaller firms have trouble competing with larger
firm
A need exists to introduce a new technology quickly
Prof. Dr. Majed El-Farra 200932

33. Prof. Dr. Majed El-Farra 200933
Strategies in Action
Defined
•Regrouping through
cost and asset
reduction to reverse
declining sales and
profit. Sometimes it is
called turnaround or
reorganizational
strategy.
Example
•A company sold off a
land and 4 apartments
to raise cash needed.
It introduce expense
effective control
system.
Retrenchment
(turnaround)

34. Strategies in Action
Guidelines for Retrenchment
Firm has failed to meet its objectives and goals consistently over
time but has distinctive competencies
Firm is one of the weaker competitors
Inefficiency, low profitability, poor employee morale, and
pressure from stockholders to improve performance.
When an organization’s strategic managers have failed
Very quick growth to large organization where a major internal
reorganization is needed.
Prof. Dr. Majed El-Farra 200934

35. Prof. Dr. Majed El-Farra 200935
Strategies in Action
Defined
•Selling a division
or part of an
organization
Example
•Harcourt General, the
large US publisher, is
selling its Neiman
Marcus division.
Divestiture

36. Strategies in Action
Guidelines for Divestiture
When firm has pursued retrenchment but failed to attain
needed improvements
When a division needs more resources than the firm can
provide
When a division is responsible for the firm’s overall poor
performance
When a division is a misfit with the organization
When a large amount of cash is needed and cannot be
obtained from other sources.
Prof. Dr. Majed El-Farra 200936

37. Prof. Dr. Majed El-Farra 200937
Strategies in Action
Defined
•Selling all of a
company’s assets,
in parts, for their
tangible worth
Example
•El-Ameer Block factory
sold all its assets and
ceased business.
Liquidation

38. Strategies in Action
Guidelines for Liquidation
When both retrenchment and divestiture have been pursued
unsuccessfully
If the only alternative is bankruptcy, liquidation is an orderly
alternative
When stockholders can minimize their losses by selling the
firm’s assets
Prof. Dr. Majed El-Farra 200938

39. Prof. Dr. Majed El-Farra 2009Ch 5 -39
Michael Porter’s Generic
Strategies
Cost Leadership Strategies
(Low-Cost & Best-Value)
DifferentiationStrategies
Focus Strategies
(Low-Cost Focus &
Best-Value Focus)

40. Business Unit Strategies
•Here we answer the question:
How should we compete in the chosen industry?
Cost leadership
Differentiation (real or perceived).
Mixed
Focus
Prof. Dr. Majed El-Farra 200940

41. 6-41
Business Strategy
Focusesonimprovingcompetitive
positionofcompany’sproductsor
serviceswithinthespecificindustry
ormarketsegment
Prof. Dr. Majed El-Farra 2009

42. 6-42
Porter’s Competitive Strategies
Competitive Strategy --
–Low cost
–Differentiation
–Direct competition
–Focus on niche
Prof. Dr. Majed El-Farra 2009

43. 6-43
Porter’s Competitive Strategies
Generic Competitive Strategies --
–Lower Cost strategy
•Greater efficiencies than competitors
–Differentiation strategy
•Unique/superior value, quality, features,
service
Prof. Dr. Majed El-Farra 2009

44. 6-44
Porter’s Competitive Strategies
Competitive Advantage --
–Determined by Competitive Scope
•Breadth of the target market
Prof. Dr. Majed El-Farra 2009

45. 6-45
Porter’s Competitive Strategies
Prof. Dr. Majed El-Farra 2009

46. Ch 5 -46 Prof. Dr. Majed El-Farra 2009

47. 6-47
Porter’s Competitive Strategies
Cost Leadership --
–Low-cost competitive strategy
–Broad mass market
–Efficient-scale facilities
–Cost reductions
–Cost minimization
Prof. Dr. Majed El-Farra 2009

48. Michael Porter’s Generic Strategies
•Cost leadership emphasizes producing standardized products
at a very low per-unit cost for consumers who are price-
sensitive.
•There are two types of cost leadership strategies.
•a. A low-cost strategy offers products to a wide range of
customers at the lowest price available on the market.
•b. A best-value strategy offers products to a wide range of
customers at the best price-value available on the market.
Prof. Dr. Majed El-Farra 2009
Ch 5 -48

49. Cost leadership
•Striving to be the low-cost producer in an industry
can be especially effective when the market is
composed of many price-sensitive buyers, when
there are few ways to achieve product
differentiation, when buyers do not care much about
differences from brand to brand, or when there are a
large number of buyers with significant bargaining
power.
Prof. Dr. Majed El-Farra 2009
Ch 5 -49

50. Cost leadership
•The basic idea behind a cost leadership strategy is to
underprice competitors or offer a better value and
thereby gain market share and sales, driving some
competitors out of the market entirely.
•5. To successfully employ a cost leadership strategy,
firms must ensure that total costs across the value chain
are lower than that of the competition. This can be
accomplished by:
• a. performing value chain activities more efficiently
than competition, and
• b. eliminating some cost-producing activities in the
value chain.
Prof. Dr. Majed El-Farra 2009
Ch 5 -50

51. 6-51
Porter’s Competitive Strategies
Differentiation –
–Broad mass market
–Unique product/service
–Premiums charged
–Less price sensitivity
Prof. Dr. Majed El-Farra 2009

52. Differentiation
•Differentiation is aimed at producing
products that are considered unique. This
strategy is most powerful with the source of
differentiation is especially relevant to the
target market
Prof. Dr. Majed El-Farra 2009
Ch 5 -52

53. Differentiation
• A successful differentiation strategy allows a firm
to charge higher prices for its products to gain
customer loyalty because consumers may become
strongly attached to the differentiation features.
•3.A risk of pursuing a differentiation strategy is that
the unique product may not be valued highly enough
by customers to justify the higher price.
Prof. Dr. Majed El-Farra 2009
Ch 5 -53

54. Differentiation
•Common organizational requirements for a
successful differentiation strategy include
strong coordination among the R&D and
marketing functions and substantial amenities
to attract scientists and creative people.
Prof. Dr. Majed El-Farra 2009
Ch 5 -54

55. Focus
•1.Focus means producing products and services that fulfill
the needs of small groups of consumers.
•2. There are two types of focus strategies.
•a. A low-cost focus strategy offers products or services to a
small range (niche) of customers at the lowest price available
on the market.
•b. A best-value focus strategy offers products to a small range
of customers at the best price-value available on the market.
This is sometimes called focused differentiation.
Prof. Dr. Majed El-Farra 2009
Ch 5 -55

56. Focus
•Focus strategies are most effective when the
niche is profitable and growing, when industry
leaders are uninterested in the niche, when industry
leaders feel pursuing the niche is too costly or
difficult, when the industry offers several niches, and
when there is little competition in the niche
segment.
Prof. Dr. Majed El-Farra 2009
Ch 5 -56

57. 6-57
Porter’s Competitive Strategies
Cost-Focus –
–Low-cost competitive strategy
–Focus on market segment
–Niche focused
–Cost advantage in market segment
Prof. Dr. Majed El-Farra 2009

58. 6-58
Porter’s Competitive Strategies
Differentiation Focus –
–Specific group or geographic market
focus
–Differentiation in target market
–Special needs of narrow target market
Prof. Dr. Majed El-Farra 2009

59. 6-59
Porter’s Competitive Strategies
Stuck in the middle –
–No competitive advantage
–Below-average performance
Prof. Dr. Majed El-Farra 2009

60. 6-60
Risks of Generic Strategies
Risks of Cost
Leadership
Cost leadership is not
sustained:
• Competitors imitate.
• Technology changes.
• Other bases for cost
leadership erode.
Proximity in
differentiation is lost.
Cost focusers achieve
even lower cost in
segments.
Risks of Differentiation
Differentiation is not
sustained:
• Competitors imitate.
• Bases for
differentiation
become less important
to
buyers.
Cost proximity is lost.
Differentiation focusers
achieve even greater
differentiation in
segments.
Risks of Focus
The focus strategy is
imitated:
The target segment
becomes structurally
unattractive:
• Structure erodes.
• Demand disappears.
Broadly targeted
competitors overwhelm
the segment:
• The segment’s
differences from other
segments narrow.
• The advantages of a
broad line increase.
New focusers subsegment
the industry.
Risksof Cost Leadership
Cost leadership is not
sustained:
• Competitors imitate.
• Technology changes.
• Other bases for cost
leadership erode.
Proximity in
differentiation is lost.
Cost focusers achieve
even lower cost in
segments.
Risks of Differentiation
Differentiation is not
sustained:
• Competitors imitate.
• Bases for differentiation
become less important
to
buyers.
Cost proximity is lost.
Differentiation focusers
achieve even greater
differentiation in
segments.
Risks of Focus
The focus strategy is
imitated:
The target segment
becomes structurally
unattractive:
• Structure erodes.
• Demand disappears.
Broadly targeted
competitors overwhelm
the segment:
• The segment’s
differences from other
segments narrow.
• The advantages of a
broad line increase.
New focusers subsegment
the industry.
Prof. Dr. Majed El-Farra 2009

61. Level of Strategy
•Functional/operational Strategies:
Concern with org. internal resources and
processes which effectively deliver the
corporate and business strategic direction.
Functional strategies are interrelated.
Functional strategies e.g.: purchasing &
materials management, production, finance,
R&D, HR, IT, and marketing.
Prof. Dr. Majed El-Farra 200961

62. purchasing & materials management
(as example)
Buying materials in quantity, quality and cost
which correspond with the corp. generic
strategies (Business Unit strategies).
Prof. Dr. Majed El-Farra 200962