Generic Corporate (Growth) Strategy Alternatives

Presenter: Maha H

Table of Contents:Topic S.no

Growth strategies 1.

ConcentrationMarket developmentProduct developmentHorizontal integration

2.

Vertical integrationBackward Forward

3.

DiversificationConcentric DiversificationConglomerate Diversification

4.

Cooperative strategiesMergersAcquisitionsAlliances • Joint venture

5.

Growth strategies

It is a corporate strategy which expands company’s activities

Goal: increases sales and earnings

Uses: during high market growth , economic prosperity

Other generic corporate strategy alternatives are:•Stability strategy - aims to increase profitability•Defensive or retrenchment strategy – ensures survival by cutting costs and losses•Combination strategy – aims to increase earnings and cut costs

Growth strategies (concentration)

Concentration strategy focuses on a single or on a small number of closely related products/service.E.g: Kellogs, Coca-cola

Approaches used to pursue a concentration strategy are:

Market development – to expand market of current business by gaining a larger share in the market, attracting new market segments etc.

Product development- to alter the product/service or add a closely related product/service that can be sold through the current marketing channel.

Horizontal Integration - when an organization adds 1 or more business producing similar products/services and operating at same stage in the product marketing chain. E.g. Dr. pepper merging with Canada dry in 1982.

Pros : low initial risk, perfection achieved

Cons : high risk

Growth strategies ( Vertical Integration)It refers to the degree to which the firm owns its upstream suppliers and its downstream buyers is known as Vertical integration.There are 2 types of vertical integration:

Backward integration – occurs when a firm integrates with it’s suppliers in order to reduce dependency.E.g: Nescafe integrates with the coffee suppliers controlling the supply of coffee beans.

Forward integration – occurs when the activities of the firm are expanded to include control of the direct distribution of its products.E.g: Tady line integrating with Radio shack.

Pros: cost advantages, stable quality of components, makes operations difficult for competitors. Cons: reduces flexibility, raises exit barriers, prevents firms from seeking the best latest components from suppliers used by competitors.

Vertical Integration

Growth Strategies (Diversification)

Diversification occurs when an organization moves into areas that are clearly differentiated from its current businesses.

Diversification strategy can be classified into:

Concentric(Related)diversification: occurs when a firm adds related products, markets or technology but is distinct from the firm’s current business.E.g. Dell diversifying by launching a smart phone.

Conglomerate (Un-related) diversification: occurs when a firm diversifies into areas that are unrelated to its current line of business.

E.g. ITC, a cigarette company diversifying into the hotel industry.

More growth strategies

Previous strategies can be implemented through cooperation strategies.

The different types of cooperative strategies are:

Mergers

Takeover ( Acquisitions)

Alliances v Joint venture

Mergers

A Merger refers to a process in which two companies become one by coming together. 

In this case one company does not rules over the other, the management control is shared equally and names of both the companies are retained for the resulting companies. 

E.g. Sony Ericsson (mobile) , GlaxoSmithKline (pharmaceutical)

Acquisition (Takeover)

Acquisitions refers to the process in which one company buys the other company.

Here, the buying company absorbs the bought company into the existing company.

E.g. News Corp Inc acquired MySpace (the leading online networking site) with about100 million registered users not in order to merge it with the other news businesses, but to expand the corporate portfolio.

Alliances v Joint ventures

 It is an approach in which two or more companies agree to pool their resources together to form a combined force in the marketplace.

This way the companies become of doing things and can share the risks of the venture.

Joint venture is a very popular form of an alliance .

E.g. Costa Coffee, the leading coffee brand across the UK and Western Europe, it entered the Chinese market recently with a joint venture with the Yueda Group based in Jiangsu Province in China. Costa coffee joint ventured to learn and get a hold about the new market.

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