Podcast
Questions and Answers
Which of the following is the MOST accurate definition of a grand strategy?
Which of the following is the MOST accurate definition of a grand strategy?
- A financial strategy focused solely on cost reduction.
- A comprehensive general approach that guides a firm's major actions. (correct)
- A detailed operational plan for day-to-day activities.
- A short-term marketing campaign to boost sales.
A company implements a strategy to increase its market share by intensifying marketing efforts for its existing products within its current markets. Which type of internal growth strategy is the company employing?
A company implements a strategy to increase its market share by intensifying marketing efforts for its existing products within its current markets. Which type of internal growth strategy is the company employing?
- Innovation
- Product development
- Market development
- Concentrated growth (correct)
Java Brew, a South African coffee brand, begins to sell its coffee beans internationally through an online store. Which internal growth strategy does this BEST exemplify?
Java Brew, a South African coffee brand, begins to sell its coffee beans internationally through an online store. Which internal growth strategy does this BEST exemplify?
- Innovation
- Concentrated growth
- Product development
- Market development (correct)
NutriFit, a snack bar company, launches a new line of protein bars that are vegan-friendly and gluten-free. What type of internal growth strategy is NutriFit utilizing?
NutriFit, a snack bar company, launches a new line of protein bars that are vegan-friendly and gluten-free. What type of internal growth strategy is NutriFit utilizing?
A technology company continuously strives to develop new product life cycles, rendering its older products obsolete while also targeting new markets. Which internal growth strategy is the company pursuing?
A technology company continuously strives to develop new product life cycles, rendering its older products obsolete while also targeting new markets. Which internal growth strategy is the company pursuing?
What is a primary risk associated with diversification strategies?
What is a primary risk associated with diversification strategies?
A company acquires a supplier to gain more control over its supply chain and reduce costs. Which type of integration strategy is this an example of?
A company acquires a supplier to gain more control over its supply chain and reduce costs. Which type of integration strategy is this an example of?
Tesla bypasses traditional dealerships and sells cars directly to consumers through its own stores and online platforms. This is an example of which type of integration?
Tesla bypasses traditional dealerships and sells cars directly to consumers through its own stores and online platforms. This is an example of which type of integration?
Facebook (now Meta) acquired Instagram and WhatsApp. This is an example of which type of integration?
Facebook (now Meta) acquired Instagram and WhatsApp. This is an example of which type of integration?
Which of the following scenarios would BEST indicate that a company should consider a decline strategy?
Which of the following scenarios would BEST indicate that a company should consider a decline strategy?
A company decides to focus its efforts on strengthening its core competencies and breaking a downward spiral of declining sales and profits. Which type of decline strategy is the company employing?
A company decides to focus its efforts on strengthening its core competencies and breaking a downward spiral of declining sales and profits. Which type of decline strategy is the company employing?
A diversified company decides to sell off a business unit that has become a liability due to poor profitability and increased competition. Which type of decline strategy is being used?
A diversified company decides to sell off a business unit that has become a liability due to poor profitability and increased competition. Which type of decline strategy is being used?
Which of the following is the MOST likely reason for a company to pursue a liquidation strategy?
Which of the following is the MOST likely reason for a company to pursue a liquidation strategy?
What is the primary goal of corporate combination strategies?
What is the primary goal of corporate combination strategies?
Two companies form a temporary partnership to capitalize on a specific opportunity, sharing skills, resources, and ownership equally. What type of corporate combination strategy is this?
Two companies form a temporary partnership to capitalize on a specific opportunity, sharing skills, resources, and ownership equally. What type of corporate combination strategy is this?
A company partners with another to share skills and expertise for a defined period without transferring ownership. What corporate combination strategy is being implemented?
A company partners with another to share skills and expertise for a defined period without transferring ownership. What corporate combination strategy is being implemented?
Several organizations form a multi-partner alliance with complex linkages to design, finance, and operate a large infrastructure project. Which type of corporate combination strategy is this?
Several organizations form a multi-partner alliance with complex linkages to design, finance, and operate a large infrastructure project. Which type of corporate combination strategy is this?
Which of the following is a key risk associated with corporate combination strategies?
Which of the following is a key risk associated with corporate combination strategies?
What is the primary purpose of functional strategies?
What is the primary purpose of functional strategies?
What is the main focus of functional level objectives?
What is the main focus of functional level objectives?
The balanced scorecard helps managers evaluate an organization from which perspectives?
The balanced scorecard helps managers evaluate an organization from which perspectives?
Fresh Bites, a company specializing in fresh ready-made meals, introduces limited-time discounts and bundle deals. This initiative is MOST aligned with:
Fresh Bites, a company specializing in fresh ready-made meals, introduces limited-time discounts and bundle deals. This initiative is MOST aligned with:
Java Brew, traditionally known for its presence in major cities, decides to open new stores in smaller towns and rural areas. This expansion strategy is best described as:
Java Brew, traditionally known for its presence in major cities, decides to open new stores in smaller towns and rural areas. This expansion strategy is best described as:
NutriFit launches a vegan-friendly and gluten-free protein bar range. Which growth strategy is NutriFit primarily employing?
NutriFit launches a vegan-friendly and gluten-free protein bar range. Which growth strategy is NutriFit primarily employing?
Apple's expansion from computers into smartphones, tablets, and wearables exemplifies which type of diversification?
Apple's expansion from computers into smartphones, tablets, and wearables exemplifies which type of diversification?
Samsung's move from electronics to shipbuilding and financial services is an example of:
Samsung's move from electronics to shipbuilding and financial services is an example of:
McDonald's owning farms and processing plants to produce beef, potatoes and lettuce for its restaurants exemplifies:
McDonald's owning farms and processing plants to produce beef, potatoes and lettuce for its restaurants exemplifies:
Samsung opening exclusive retail stores to sell its products represents which type of integration strategy?
Samsung opening exclusive retail stores to sell its products represents which type of integration strategy?
Apple's return of Steve Jobs as CEO during a period of struggle, is an example of what turnaround strategy?
Apple's return of Steve Jobs as CEO during a period of struggle, is an example of what turnaround strategy?
Starbucks' decision to add new menu items and improve coffee quality during a period of decline is BEST described as:
Starbucks' decision to add new menu items and improve coffee quality during a period of decline is BEST described as:
Vodacom & Alibaba Cloud's partnership best represents which type of corporate combination strategy?
Vodacom & Alibaba Cloud's partnership best represents which type of corporate combination strategy?
Sasol and TotalEnergies forming an entity to produce liquefied natural gas exemplifies:
Sasol and TotalEnergies forming an entity to produce liquefied natural gas exemplifies:
The Bombela Consortium during the Gautrain project exemplifies what type of corporate combination strategy?
The Bombela Consortium during the Gautrain project exemplifies what type of corporate combination strategy?
Which of the following represents a successful implementation of a Concentrated growth?
Which of the following represents a successful implementation of a Concentrated growth?
Which activity is the BEST example of Market Development?
Which activity is the BEST example of Market Development?
A company implements several initiatives to increase efficiency, improve customer service, and enhance the value provided to existing customers. This strategy is aligned with which growth strategy?
A company implements several initiatives to increase efficiency, improve customer service, and enhance the value provided to existing customers. This strategy is aligned with which growth strategy?
What would be the MOST important reason to use a turnaround strategy?
What would be the MOST important reason to use a turnaround strategy?
For what situation would liquidation the MOST appropriate decline strategy?
For what situation would liquidation the MOST appropriate decline strategy?
Which scenario aligns BEST with the utilization of a joint venture strategy?
Which scenario aligns BEST with the utilization of a joint venture strategy?
A company in financial distress decides to sell off a profitable division to raise capital and pay off its debts. WHich decline strategy is the company implementing?
A company in financial distress decides to sell off a profitable division to raise capital and pay off its debts. WHich decline strategy is the company implementing?
A grand strategy is defined as:
A grand strategy is defined as:
Flashcards
Grand Strategy
Grand Strategy
A comprehensive general approach that guides a firm's major actions.
Concentrated Growth
Concentrated Growth
Increase market share through concentrated marketing efforts.
Market Development
Market Development
Expanding existing products/services into new markets
Product Development
Product Development
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Innovation
Innovation
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Related Diversification
Related Diversification
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Unrelated Diversification
Unrelated Diversification
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Vertical Integration
Vertical Integration
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Horizontal Integration
Horizontal Integration
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Forward Integration
Forward Integration
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Backward Integration
Backward Integration
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Decline Strategies
Decline Strategies
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Turnaround Strategy
Turnaround Strategy
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Divestiture
Divestiture
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Liquidation
Liquidation
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Bankruptcy
Bankruptcy
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Corporate Combination
Corporate Combination
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Joint Ventures
Joint Ventures
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Strategic Alliance
Strategic Alliance
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Consortia
Consortia
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Functional Strategies
Functional Strategies
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Study Notes
Introduction to Grand and Functional Strategies
- Strategies complementing generic strategies are needed
- Grand strategies are comprehensive approaches guiding a firm's major actions
- Principal grand strategies include external & internal growth, decline, and corporate combination
Grand Strategies
- A grand strategy is a comprehensive approach that guides a firm's major actions
- Grand strategies are grouped into growth, decline, and corporate combinations
Internal Growth Strategies
- Involves increasing market share through marketing, while focusing on current markets and products
- Concentrated growth is a market penetration strategy
- Market development expands the portfolio of markets served, using existing products in new markets
- Product development improves/modifies products/services to increase sales in existing markets
- Innovation creates new product life cycles rendering existing ones obsolete, also targeting new markets
Fresh Bites Example: Market Penetration (Concentrated Growth)
- Actions: Implemented limited-time discounts, launched digital marketing campaigns, partnered with delivery apps, introduced a loyalty program
- Fresh Bites is a mid-sized company specializing in fresh ready-made meals
- Operates in South Africa for five years with a strong customer base in urban areas
- Recent Developments: Pricing strategy, promotional campaigns, expanded distribution channels, customer loyalty program
Java Brew Example: Market Development
- Actions: Opened new stores in smaller towns and rural areas, introduced a budget-friendly coffee range, started B2B partnerships, launching an online store with international shipping
- Java Brew is a well-established coffee brand in South Africa, known for its premium coffee beans
- Initiatives: Geographic Expansion, New Customer Segments, B2B Partnerships, International Expansion
NutriFit Example: Product Development
- Actions: Launched new product variants, introduced personalized meal replacement bars, introduced limited-edition flavors
- NutriFit is a SA company specialising in high-protein snack bars
- Recent Developments: New product variants, technology integration, limited edition flavours
External Growth: Diversification
- Diversification involves corporate strategies and growth
- Related diversification = adding new but related products/services
- Concentric diversification = adding new but related products/services
- Businesses diversify into related markets or industries
- Unrelated/conglomerate diversification adds new, unrelated products/services to reach/penetrate markets
- Methods for unrelated diversification: buying high-performing or cash-strapped organizations, those with stable sales patterns, or debt-free entities
- Benefits include broader scope, higher profitability/stability, resource access, and value chain efficiencies
- Diversification includes associated risks
Diversification Examples
- Apple began as a computer company and expanded into smartphones, tablets and wearables
- Samsung started in electronics but expanded into shipbuilding, construction, and financial services
- Tata operates in automobile manufacturing, hospitality and steel production
- Coca-Cola's core business is soft drinks, but it diversified into bottled water and sports drinks
- Nike was initially a footwear company but expanded into sports apparel, fitness gear and smart technology
- Virgin started as a music company and expanded into airlines, mobile networks and space travel
External Growth: Integration
- Gaining control of suppliers, distributors, or competitors in a sector to improve organizational efficiency/effectiveness
- Vertical integration includes backward and forward strategies, with their benefits and risks
- Horizontal integration involves mergers, acquisitions, and takeovers
Integration Strategies
- Forward integration is ideal for more control over sales and branding
- Backward integration is ideal for reducing supply chain costs
- Horizontal Integration eliminates competition
Integration Examples
- Facebook acquired Instagram and WhatsApp to eliminate competition, which is an example of horizontal integration
- Tesla sells directly to consumers through its own stores and online platforms, which is an example of forward integration
- McDonald's owns farms and processing plants, which is an example of backward integration
- Disney acquiring Pixar and Marvel, is an example of horizontal integration
- Samsung opening exclusive retail stores, is an example of forward integration
- IKEA purchasing forests, is an example of backward integration
- Coca-Cola acquiring bottling companies, is an example of backward integration
- Volkswagen acquiring Porsche, Audi, and Lamborghini, is an example of horizontal integration
Decline Strategies
- Defensive strategies are pursued when an organisation is vulnerable due to poor management
- Recession and the COVID-19 pandemic have affected South African businesses
Retrenchment or Turnaround
- Profits decline in this situation
- Turnaround focuses on strengthening organizational competencies to break the downward spiral
- Appropriate for organizations with poor management needing major re-organization
- Includes repositioning, rebranding, market repositioning, leadership change, restructuring, operational improvements, and cultural change
Turnaround Examples
- In the late 1990s, Apple brought back Steve Jobs as CEO, focused on design, and launched the iMac, iPod, iTunes, and iPhone.
- In 2008, Starbucks brought back Howard Schultz as CEO, closed underperforming stores, retrained baristas, added menu items, and created coffee quality.
- Pick n Pay in South Africa appointed Sean Summers as CEO, improved their supply chain and IT systems, and recapitalized.
Decline Strategies: Divestiture
- A division is sold to raise capital for acquisitions/investments
- Diversified organizations sell units that have become liabilities due to poor profitability
Divestiture Examples
- Edcon sold CNA and Jet after going into business rescue during the COVID-19 crisis in 2020
- Multichoice divested MWEB in 2016 in order to focus on entertainment and content streaming
Decline Strategies: Liquidation
- All assets are sold in an attempt to avoid bankruptcy
- Pursued if other strategies fail
- Planned and orderly to cut losses for stockholders, which can be an emotional decision
- Consider what happens if failure is inevitable
Liquidation Examples
- Ellies Holdings applied for liquidation after failing to secure financial rescue/investment
- Toys “R” Us was liquidated in 2017/2018 due to heavy debt and competition
- Mr. Video went into liquidation in 2012 due to competition from streaming services
Decline Strategies: Bankruptcy
- Due to a no hope of turning things around
- Assets are sold for their tangible worth
- Declare bankruptcy to avoid debt obligations and union contracts
Corporate Combination Strategies
- Joining efforts and working together to achieve goals
Combination Strategies: Joint Ventures
- It's a partnership capitalizing on an opportunity
- Partners contribute skills and resources and share equal ownership
- It's attractive when competencies of organizations complement each other
Joint Venture Example
- Sasol (SA) and TotalEnergies (France) have a JV to produce liquefied natural gas (LNG) in Mozambique
- Sasol Mining has a 63.64% interest in Natref, and TotalEnergies SA has 36.36%
- Ownership/profits are shared through a Formal JV entity
Combination Strategies: Strategic Alliances
- Skills and expertise are shared for a business venture for a defined term, but not ownership
- Great for those who want to venture into new markets
Strategic Alliance Example
- Vodacom & Alibaba Cloud
- Aims to bring advanced cloud computing to African businesses
- No new entity, but there is tech sharing and co-development
Combination Strategies: Consortia
- Linkages between groups of organisations
- Bombela Consortium (Murray & Roberts, Bombardier, Bouygues Travaux and local investors)
- Formed a consortium to design/finance/build/operate the Gautrain
- Temporary partnership; each member contributed different expertise
Risks of Combination Strategies
- Partners become incompatible/too dependent
- Partners have insight into each other's knowledge/skills that was unintended
- Inability to limit how partners use the knowledge that was gained from cooperation
- Very costly
Combination of Grand Strategies
- Most organizations integrate multiple grand strategies to achieve their goals
Functional Strategies
- Ensures departments/project teams implement strategy successfully
- Functional level objectives involve tactical planning
- Balanced scorecards evaluate financial performance, knowledge, processes, learning, and growth
Conclusion
- Grand strategies achieve competitive advantages based on cost leadership, differentiation, and focus
- Categories: growth, decline and corporate combination strategies
- It depends on the organization’s resources
- Functional strategies have to be formulated once strategy is finalized
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