Business Strategy Types

Study Notes

Most organizations pursue a combination of two or more strategies, but this approach can be risky if taken too far.
No organization can afford to pursue all strategies that might benefit the firm, and priorities must be established.

Forward Integration: gaining ownership or increased control over distributors or retailers.
Backward Integration: seeking ownership or increased control of a firm's suppliers.
Horizontal Integration: a strategy of seeking ownership of or increased control over a firm's competitors.

Market Penetration Strategy: increasing market share for present products or services in present markets through greater marketing efforts.
Market Development: introducing present products or services into new geographic areas.
Product Development Strategy: increasing sales by improving or modifying present products or services.

When an organization has the capital and managerial talent needed to compete successfully in a new industry.
When an organization has the opportunity to purchase an unrelated business that is an attractive investment opportunity.
When financial synergy exists.
When existing markets for an organization's present products are saturated.
When antitrust action could be charged against an organization that historically has concentrated on a single industry.

Retrenchment: regrouping through cost and asset reduction to reverse declining sales and profits.
Divestiture: selling a division or part of an organization.
Liquidation: selling all of a company's assets, in parts, for their tangible worth.

Retrenchment:
- When an organization has a distinctive competence but has failed consistently to meet its goals.
- When an organization is one of the weaker competitors in a given industry.
- When an organization is plagued by inefficiency, low profitability, and poor employee morale.
- When an organization fails to capitalize on external opportunities and minimize external threats.
- When an organization has grown so large so quickly that major internal reorganization is needed.
Divestiture:
- When an organization has pursued a retrenchment strategy and failed to accomplish improvements.
- When a division needs more resources to be competitive than the company can provide.
- When a division is responsible for an organization's overall poor performance.
- When a division is a misfit with the rest of an organization.
- When a large amount of cash is needed quickly.
- When government antitrust action threatens a firm.
Liquidation:
- When an organization has pursued both a retrenchment strategy and a divestiture strategy, and neither has been successful.
- When an organization's only alternative is bankruptcy.
- When stockholders of a firm can minimize their losses by selling the organization's assets.

Cost Leadership: producing standardized products at a very low per-unit cost for price-sensitive consumers.
Differentiation: producing unique products and services directed at consumers who are relatively price-insensitive.
Low-Cost Focus: offering products or services to a niche group of customers at the lowest price available.
Best-Value Focus: offering products or services to a small range of customers at the best price-value available.