Types of Strategies

The model illustrated in Figure 5-1 provides a conceptual basis for applying strategic manage­ment. Defined and exemplified in Table 5-4, alternative strategies that an enterprise could pursue can be categorized into 11 actions: forward integration, backward integration, horizontal inte­gration, market penetration, market development, product development, related diversification, unrelated diversification, retrenchment, divestiture, and liquidation. Each

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Integration Strategies

Forward integration and backward integration are sometimes collectively referred to as vertical integration. Vertical integration strategies allow a firm to gain control over distributors and suppli­ers, whereas horizontal integration refers to gaining ownership and/or control over competitors. Vertical and horizontal actions by firms are broadly referred to as integration strategies. 1. Forward Integration Forward

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Intensive Strategies

Market penetration, market development, and product development are sometimes referred to as intensive strategies because they require intensive efforts if a firm’s competitive position with existing products is to improve. 1. Market Penetration A market penetration strategy seeks to increase market share for present products or services in present markets through greater marketing efforts.

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Diversification Strategies

The two general types of diversification strategies are related diversification and unrelated diversification. Businesses are said to be related when their value chains possess competitively valuable cross-business strategic fits; businesses are said to be unrelated when their value chains are so dissimilar that no competitively valuable cross-business relationships exist.11 Most com­panies favor related diversification

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Defensive Strategies

In addition to integrative, intensive, and diversification strategies, organizations also could pursue defensive strategies such as retrenchment, divestiture, or liquidation. 1. Retrenchment Retrenchment occurs when an organization regroups through cost and asset reduction to reverse declining sales and profits. Sometimes called a turnaround or reorganizational strategy, retrench­ment is designed to fortify an organization’s basic

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Michael Porter’s Five Generic Strategies

Probably the three most widely read books on competitive analysis in the 1980s were Michael Porter’s Competitive Strategy (1980), Competitive Advantage (1985), and Competitive Advantage of Nations (1989). According to Porter, strategies allow organizations to gain competitive advan­tage from three different bases: cost leadership, differentiation, and focus. Porter calls these bases generic strategies. Cost

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Means for Achieving Strategies

1. Cooperation among Competitors Fierce competitors for decades, Apple and IBM recently formed an alliance to cooperate in developing apps and selling iPhones and iPads. For Apple, the alliance allows the company to expand the reach of its products into the business world, whereas for IBM the alliance allows the firm to move more

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Tactics to Facilitate Strategies

Strategists use numerous tactics to accomplish strategies, including being a “first mover,” outsourcing, and reshoring. There are advantages and disadvantages of such tactics, as discussed next. 1. First Mover Advantages First mover advantages refer to the benefits a firm may achieve by entering a new market or developing a new product or service prior

Strategic Management in Nonprofit, Governmental, and Small Firms

Nonprofit organizations are basically just like for-profit companies except for two major differ­ences: (1) nonprofits do not pay taxes and (2) nonprofits do not have shareholders to provide cap­ital. In virtually all other ways, these two types of organizations are like one another. Nonprofits have employees, customers, creditors, suppliers, and distributors as well as

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MINI-CASE ON LINKEDIN CORPORATION (LNKD) SHOULD LINKEDIN COOPERATE WITH FACEBOOK?

This chapter discussed rival firms cooperating. Headquartered in Mountain View, California, LinkedIn is an online professional network designed to help members find jobs, connect with other profession­als, and locate business opportunities. There are currently more than 160 million LinkedIn members in 200 countries. Launched in 2003, LinkedIn is free to join, but the company

The Strategy Analysis and Choice Process

As indicated by Figure 6-1 with white shading, this chapter focuses on generating and evaluating alternative strategies, as well as selecting strategies to pursue. Strategy analysis and choice seek to determine alternative courses of action that could best enable the firm to achieve its mission and objectives. The firm’s present strategies, objectives, vision, and

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The Strategy-Formulation Analytical Framework

Important strategy-formulation techniques can be integrated into a three-stage decision-making framework, as shown in Figure 6-2. The tools presented in this framework are applicable to all sizes and types of organizations and can help strategists identify, evaluate, and select strategies. Stage 1 of the strategy-formulation analytical framework consists of the External Factor Evaluation (EFE)

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The SWOT Matrix

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix is an important matching tool that helps managers develop four types of strategies: SO (strengths-opportunities) strategies, WO (weaknesses-opportunities) strategies, ST (strengths-threats) strategies, and WT (weaknesses- threats) strategies.3 Matching key external and internal factors is the most difficult part of developing a SWOT Matrix, as it requires good judgment—and there is

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The Strategic Position and Action Evaluation (SPACE) Matrix

The Strategic Position and Action Evaluation (SPACE) Matrix, another important Stage 2 matching tool, is illustrated in Figure 6-4. Its four-quadrant framework indicates whether aggres­sive, conservative, defensive, or competitive strategies are most appropriate for a given organi­zation. The axes of the SPACE Matrix represent two internal dimensions (financial position [FP] and competitive position [CP])

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The Boston Consulting Group (BCG) Matrix

Based in Boston and having 6,200 consultants worldwide, the Boston Consulting Group (BCG) has 87 offices in 45 countries, and annually ranks in the top five of Fortune’s list of the “100 Best Companies to Work For.” The Boston Consulting Group is a private management consulting firm that specializes in strategic planning. Autonomous divisions

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The Internal-External (IE) Matrix

The Internal-External (IE) Matrix positions an organization’s various divisions (segments) in a nine-cell display, illustrated in Figure 6-10. The IE Matrix is similar to the BCG Matrix in that both tools involve plotting a firm’s divisions in a schematic diagram; this is why they are both called portfolio matrices. Also, in both the BCG

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The Grand Strategy Matrix

In addition to the SWOT Matrix, SPACE Matrix, BCG Matrix, and IE Matrix, the Grand Strategy Matrix has become a popular tool for formulating alternative strategies. All orga­nizations can be positioned in one of the Grand Strategy Matrix’s four strategy quadrants. A firm’s divisions likewise could be positioned. As illustrated in Figure 6-13, the

The Decision Stage: The Quantitative Strategic Planning Matrix (QSPM)

Other than ranking strategies to achieve the prioritized list, there is only one analytical tech­nique in the literature designed to determine the relative attractiveness of feasible alternative actions. The Quantitative Strategic Planning Matrix (QSPM), which comprises Stage 3 of the strategy-formulation analytical framework, objectively indicates which alternative strate­gies are best.6 The QSPM uses input

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Cultural Aspects of Strategy Analysis and Choice

As defined in Chapter 4, organizational culture includes the set of shared values, beliefs, atti­tudes, customs, norms, rites, rituals, personalities, heroes, and heroines that describe a firm. Culture is the unique way an organization does business. It is the human dimension that creates solidarity and meaning, and it inspires commitment and productivity in an

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The Politics of Strategy Analysis and Choice

All organizations are political. Unless managed, political maneuvering consumes valuable time, subverts organizational objectives, diverts human energy, and results in the loss of some valuable employees. Sometimes political biases and personal preferences get unduly embed­ded in strategy choice decisions. Internal politics affect the choice of strategies in all organiza­tions. The hierarchy of command in

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