30 B Chap5 SMBP Kazmi
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Transcript of 30 B Chap5 SMBP Kazmi
STRATEGIC MANAGEMENT AND BUSINESS POLICY
THIRD EDITION
Chapter 5Corporate-level strategies: Concentration, Integration and Diversification
DR. KURTKOTI
(c) Dr. Azhar Kazmi 2008 2
Learning objectives Define and explain four types of generic
corporate-level strategies Describe the various types of expansion
strategies Discuss the conditions under which
concentration, integration, and diversification strategies are used
Discuss the risks of using concentration, integration, and diversification strategies
Discuss diversification strategies in the Indian context
(c) Dr. Azhar Kazmi 2008 3
Corporate strategies
Corporate-level strategies are basically about decisions related to:
allocating resources among the different businesses of a firm
transferring resources from one set of businesses to others, and
managing and nurturing a portfolio of businesses.
(c) Dr. Azhar Kazmi 2008 4
Four strategic alternatives
Expansion strategies Stability strategies Retrenchment strategies Combination strategies
(c) Dr. Azhar Kazmi 2008 5
Concentration strategies
Concentration is a simple, first-level type of expansion strategy. It involves converging resources in one or more of a firm's businesses in terms of their respective customer needs, customer functions, or alternative technologies - either singly or jointly - in such a manner that expansion results.
(c) Dr. Azhar Kazmi 2008 6
Ansoff’s product-market matrix
PRODUCT PRESENT NEW
MARKET
MARKET PRODUCTPRESENT PENETRATION DEVELOPMENT
MARKET DIVERSIFICATIONNEW DEVELOPMENT
Adapted from H. I. Ansoff: “Strategies for Diversification” in Harvard Business Review, 1957, 5, pp. 113-124.
Growth Strategies: Penetration, Product-Market Expansion, Vertical Integration, and the Big Idea
PPT 13-7
Alternative Growth Strategies
IV. Vertical Integration Strategies• Forward integration
• Backward integration
Present ProductsPresent Products New ProductsNew Products
Present MarketsPresent Markets
New Markets
New Markets
VerticalIntegration
VerticalIntegration
II. Product DevelopmentI. Growth in existing product markets
III. Market Development
V. Diversification
Figure 13.1
Growth Strategies: Penetration, Product-Market Expansion, Vertical Integration, and the Big Idea
PPT 13-8
Growth in Existing Product Markets
Increasing Market Share Increasing Product Usage
Provide Reminder Communications Position for Regular or Frequent Use Make the Use Easier Provide Incentives Reduce Undesirable Consequences of Frequent Use
Revitalize the Brand New Applications for Existing Product Users
Growth Strategies: Penetration, Product-Market Expansion, Vertical Integration, and the Big Idea
PPT 13-9
Product Development for the Existing Market
Line Extensions
Developing New-Generation Products
Expand the Product Scope
New Products for the Existing Markets
Growth Strategies: Penetration, Product-Market Expansion, Vertical Integration, and the Big Idea
PPT 13-10
Vertical Integration Strategies
Access to Supply or Demand Access to Supply Access to Demand
Control of the Product System Entry into a Profitable Business Area
Comprehensive services Distributor/Retailer Embedded services Integrated solution
Risks of Managing a Different Business
Growth Strategies: Penetration, Product-Market Expansion, Vertical Integration, and the Big Idea
PPT 13-11
Market Development Using Existing Products Expanding Geographically Expanding into New Market Segments
Usage Distribution Channel Age Attribute preference Application-defined market
Evaluating Market Expansion Alternatives Is the market attractive? Do the resources and will exist to make the necessary
commitment in the face of uncertainties? Can the business be adapted to the new market? Can the assets and competencies that are at the heart of the
business success be transferred into the new business environment?
(c) Dr. Azhar Kazmi 2008 12
Ansoff’s matrix for diversification strategies
------------------------------------------------------------------------- ----- New products
------------------------------------------------------------------------------ Related technology Unrelated
technology------------------------------------------------------------------------------
New functions------------------------------------------------------------------------------
Firm its own Vertical integrationcustomer
------------------------------------------------------------------------------Same type Horizontal diversification
of product------------------------------------------------------------------------------
Similar type Marketing and Marketing relatedof product technology-related concentric
diversification diversification------------------------------------------------------------------------------
New type Technology-related Conglomerateof product concentric diversification diversification
------------------------------------------------------------------------------Adapted from H.I. Ansoff: Corporate Strategy (New York: McGraw-Hill, 1965), p.132.
(c) Dr. Azhar Kazmi 2008 13
Integration strategies Horizontal integration: When an organisation takes up
the same type of products at the same level of production or marketing process
Vertical integration: When an organisation starts making new products that serve its own needs
Taper integration strategies require firms to make a part of their own requirements and to buy the rest from outsiders.
Quasi integration strategies firms purchase most of their requirements from other firms in which they have an ownership stake.
(c) Dr. Azhar Kazmi 2008 14
Diversification strategies
Diversification involves a substantial change in business definition - singly or jointly - in terms of customer functions, customer groups, or alternative technologies of one or more of a firm's businesses.
(c) Dr. Azhar Kazmi 2008 15
Concentric or related diversification
Marketing-related concentric diversification
Technology-related concentric diversification
Marketing- and technology-related concentric diversification
(c) Dr. Azhar Kazmi 2008 16
Conglomerate or unrelated diversification
When an organisation adopts a strategy which requires taking up those activities which are unrelated to the existing business definition of one or more of its businesses either in terms of their respective customer groups, customer functions or alternative technologies