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Allocating resources among the different businesses of a firm.

Transferring resources from one set of business to other and

Managing and nurturing a portfolio of business.

These decisions are taken to exercise the choice of direction that an organization adopts.

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The complexity of large firms arises from the fact that each of its businesses, defined along the three dimensions- result in a variety of customer groups, customer functions and alternative technologies that a firm is involved with. It is therefore common to find multi-business firms with interests in serving a diverse base of customer groups, performing for them a variety of customer functions, and making use of a range of several different technologies.

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Strategic alternatives revolve around the question of whether to continue or change the business the enterprise is currently in or improve the efficiency and effectiveness with which the firm achieves its corporate objectives in its chosen business sector.

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According to Glueck, there are four strategic alternatives-

ExpansionStabilityRetrenchmentCombination

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Major reasons for adopting different corporate strategies

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Expansion Strategy is adopted because:

It may become imperative when the environment demands increase in pace of activity.

Psychologically, strategies may feel more satisfied with the prospects of growth from expansion: chief executives may take pride in presiding over organizations perceived to be growth-oriented.

Increasing size may lead to more control over the market as well as competitors.

Advantages from the experience curve and scale of operations may accrue.

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Stability Strategy is adopted because: It is less risky, involves less changes

and people feel comfortable with things as they are.

The environment faced is relatively stable.

Expansion may be perceived as being threatening.

Consolidation is sought through stabilizing after a period of rapid expansion.

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Retrenchment Strategy is adopted because: The management no longer wishes to

remain in business either partly or wholly, due to continuous losses and the organization become unviable.

The environment faced is threatening. Stability can be ensured by reallocation of

resources from unprofitable businesses.

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Combination Strategy is adopted because:

The organization is large and faces complex environment.

The organization is composed of different businesses, each of which lies in a different industry, requiring a different response.

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Expansion Strategy

The corporate strategy of expansion is followed when an organization aims at

high growth by substantially broadening the scope of one or more of its

businesses in terms of their respective customer groups, customer functions and alternative technologies- singly or jointly- in order to improve its overall

performance.

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A chocolate manufacturer expand its customer group to include middle-aged and old persons to its existing customers comprising children and adolescents.

A stockbroker’s firm offers personalized financial services to small investors apart from its normal functions of dealing in shares and debentures, in order to increase the scope of its business and spread its risks.

A printing firm changes from the traditional letter press printing to desk-top publishing in order to increase its production and efficiency.

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Expansion Strategies

Expansion through concentration Expansion through integration Expansion through diversification Expansion through cooperation Expansion through internationalization Expansion through digitalization

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Expansion through concentration

First-level type of expansion strategy.

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Expansion through integration Integration means combining activities related to the

present activity of a firm. Such a combination may be done on the basis of the value chain.

A luggage company taking over its rival luggage company is horizontal integration (also known as acquisitions or merger).

When an organization starts making new products that serve its own needs, vertical integration takes place.

Vertical integration can be of two type- Backward integration means retreating to the source of raw material. Forward integration moves the organization ahead, taking it nearer to the ultimate customer.

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Expansion through diversification

Diversification involves a substantial change in business definition in terms of customer functions, customer groups or alternative technologies of one or more

of a firm’s businesses.

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Expansion through cooperation This expresses the idea of simultaneous

competition and cooperation among rival firms for mutual benefit.

Cooperative Strategies may be- Merger and acquisitions (or takeovers)

Joint ventures Strategic alliances

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Expansion through internationalization

Internationalization strategies are a type of expansion strategies that require

organizations to market their products or services beyond the domestic or national

market.

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Expansion through digitalization Digitalization means such as computerization

and electrification.

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