¿Which are the main corporate directional strategies?

¿Which are the main corporate directional strategies?

1. Growth Strategy

   • Growth strategy is a corporate level strategy, designed to achieve increase in sales, assets and profits. Companies that do business in expanding industries must grow in order to survive. Continuing growth means increasing sales, reducing per unit cost and thereby increasing profits. So, the most widely pursued corporate strategy is growth strategy.
     • Motorola spent huge sum on product development such as cellular phones, pagers, two way radios and so on.
     • Growth strategies may be classified as follows:
       • Concentration
         • It is a form of growth strategy, which results in concentration of resources on those product lines, which have growth potential. Concentration strategy is adopted in growing industry by growing firms. There are two basic concentration strategies namely:
           • Vertical growth
             • Vertical growth occurs when one function previously carried over by a supplier or a distributor is being taken over by the company in order to reduce costs, to maintain quality of input and to gain control over scarce resources. Vertical growth results in vertical integration.
               • Vertical Integration
                 • Vertical integration means the degree to which a firm operates vertically in multiple locations on an industry's value chain from extracting raw materials to manufacturing and retailing. Vertical integration occurs when a company produces its own inputs or disposes of its own outputs.
           • Horizontal growth
             • Jet Airways has alliance with British Airways, KLM Royal Dutch Airlines and Northwest Airlines so as to offer a complete range of flight operations directly from the destinations outside India for domestic travellers. Horizontal integration is a form of acquisition wherein a firm expands by acquiring other companies in its same line of business.
               • Horizontal Integration
                 • A firm is said to follow horizontal integration if it acquires another firm that produces the same type of products with similar production process / marketing practices.
       • Diversification
         • is considered to be a complex one because it involves a simultaneous departure from current business, familiar products and familiar markets. Diversification makes addition to the portfolio of businesses. Firms choose diversification when the growth objectives are very high and it could not be achieved within the existing product/market scope.
           • Related Diversification
             • Concentric Diversification
               • The new product is a spin off from the existing facilities, products and processes. It is a departure from existing value chain, as the new product does not fall within the current product-process chain.
                 • Eureka Forbes which is noted for its innovative marketing practices, has diversified into related products. It has entered into strategic alliance with Morphy Richards, Kenwood and Nilfisk for electric iron and food processors. They were test marketed at Bangalore. It is an instance of market related concentric diversification.
             • IBM operates in 20 fields all related to each other and such diversifications have greater probabi Iity of success due to interl inkages and shared competitive advantages and competencies.
               • Vertically Integrated Diversification
                 • Forward Integration
                 • Backward Integration
           • Unrelated Diversification/Conglomerate Diversification
             • In unrelated diversification, the firm enters into a new business area that has no obvious connection with any ofthe existing business. It is suitable, ifthe company's core functional skills are highly specialized and have few applications outside the company's core business.
               • Ponds India, basically a cosmetic company with talcum powder, Vaseline and Rexona, has diversified into manufacturing of items such as leather products, thermometer and mushrooms. Diversified products have been aimed at export market.

2. Stability

   • Stability strategy change in direction. Stability strategy is pursued by a successful enterprise in a relatively stable and predictable environment. Stability strategy focuses on incremental improvement in functional performance. A stability strategy is less risky. It may be suitable in the short run, but will be dangerous if pursued for a long period of time.
     • Pause/Proceed with Caution Strategy
       • Companies adopt this strategy after a prolonged period of rapid growth in order to consolidate resources and results. It is a deliberate and conscious attempt to postpone strategic shift. It is an opportunity to rest before shift in strategy. This strategy is a conscious attempt to make incremental improvement till the environment changes.
         • It is an example for strategy of Pause/Proceed with caution. Dell Computer relied on on-line selling of personal computers. It followed pause/ proceed strategy in 1993 after it experienced a growth of 285% in two years with 5600 employees in 95 countries. It continued with the same strategy till it hired new managers, built new facilities and improve structure. Thereafter it resumed growth strategy.
     • No Change Strategy
       • No Change strategy is pursued by small business when the future is predicted to be the continuation of the present. The company enjoys relatively stable competitive position in the industry and it has not much opportunities or threats.
     • Profit Strategy
       • Assumes that the difficulties faced by the firm are temporary. When the company sales are declining, the profit strategy tries to project a picture of a profit making organization by taking measures such as reducing investment and blaming the company's problems on negative environment such as government policy changes, competitor's sudden mo\es and so on.

3. Retrenchment

   • Retrenchment strategies are adopted when the firm's performance is poor and its competitive position is weak. Retrenchment strategy is pursued by organizations when they reduce their activities substantially.
     • Capture Company Strategy
       • Companies with weak competitive position enter into long term contract with big customers for continued survival in lieu of their independence.
         • Simpson Industries permitted General Motors to inspect its engine part facilities and account books and became the sole supplier of auto parts to General Motors on long term basis.
     • Divestment strategy
       • Divestment strategy requires dropping of some of the businesses or part of the business of the firm, which arises from conscious corporate judgement in order to reverse a negative trend. It involves redefinition of the business of the corporation.
         • The Raymond Group sold its steel division and cement division to focus on core business.
     • Liquidation
       • Is considered to be an unattractive strategy because the industry is unattractive and the firm is in a weak competitive position. It is pursued as a last step because the employees lose jobs and it is considered to be a sign of failure of the top management.
     • harvest strategy
       • A harvest strategy involves halting investment in a unit in order to maximize short-tomedium-term cash flow from that unit before liquidating it.