There can be backward integration as well as forward integration. Some of these approaches are discussed below. In market development strategy, new customers are approached or those markets are explored which were not covered earlier. This strategy aims at creating value for its customers. In this case, there is incremental growth of 10% every year as it is based on the previous year. The Management has to select the one that best suits the corporate objective.
After some initial cutbacks to gain stability, the company plans to grow much more slowly. Therefore, the management may want to continue with the same activities. It focuses on fine-tuning its business operations and improving functional efficiencies through better deployment of resources. Which of the following statements is true of objectives? Strategy is the direction and scope of an organization in a changing business environment through the configuration of its resources and competence with a view to meeting stakeholder expectation. The firm will try to sustain profitability by controlling expenses, reducing investments, raise prices, cut costs, increase productivity etc.
It represents mix of the three strategies mentioned above. Stability strategy is most likely to be pursued by small businesses or firms in a mature stage of development. This usually takes the form of an operating turnaround strategy. The essence of stability strategy is, therefore, not doing anything but sustaining a moderate growth in line with the existing trends. The company wants to follow a strategy of adapting its products and marketing activities in each national market to suit local preferences.
Efforts are made to hold on to its current product-market position. C Individual responsibility and accountability is foggy. Firms adopting this strategy decide to follow the same technology, at least partially, while transiting into new technological domains. . A bakery might begin offering candy, for example. It involves the diversification of a company into a related industry.
The pause or proceed with caution strategy is seen as a temporary strategy to be used until the environment becomes more hospitable or consolidate resources after prolonged rapid growth. Reasons or factors which help to adopt Stability Strategy: 1. For instance, certain critical resources like financial resources may not be available and therefore a firm may plan for growth that is sustainable with the available resources. Modest growth strategy: In this case, a firm sets its achievement level or target that was accomplished in the past, adjusted for inflation. Companies may pursue this strategy if they have a stable, reliable profit margin and want to avoid the risk that comes with pursuing new opportunities. One strategy might be to pass a law that those convicted of corruption would face severe consequences. Implementing stability strategy does not imply stagnation since the basic thrust is on maintaining the current level of performance with incremental growth in ensuing periods.
This theory of marketing segmentation can be applied to well-known brands of today such as Oral B. Integration involves taking up more activities than taken up earlier. In all the above examples, the companies are not making any significant changes in their operations, they are serving the same customers with the same products using the same technology. Manu Melwin Joy Assistant Professor Ilahia School of Management Studies Kerala, India. Stability strategy may create complacency among managers. Want to add some juice to your work? Section 8: Recovery of gratuity If the amount of gratuity payable under this Act is not paid by the employer, within the prescribed time, to the person entitled thereto, the controlling authority shall, on an application made to it in this behalf by the aggrieved person, issue a certificate for that amount to the Collector, who shall recover the same, together with compound interest thereon at such rate as the Central Government may, by notification, specify, from the date of expiry of the prescribed time, as arrears of land revenue and pay the same to the person entitled thereto: Provided that the controlling authority shall, before ssuing a certificate under this section, give the employer a reasonable opportunity of showing cause against the issue of such certificate: Provided further that the amount of interest payable under this section shall, in no case exceed the amount of gratuity payable under this Act. This strategy is a temporary strategy like the profit strategy; however it is a deliberate and conscious effort to adjoin major strategic changes.
The soft drink company in the previous examples may opt for a retrenchment strategy due to decreased demand, increased cost of ingredients or health issues related to its products. A firm may even sacrifice its market share to generate cash. For example, a weaving unit may start making thread and ginning of cotton backward integration or it may start producing readymade garments forward integration. Growth may also be undertaken by taking up those activities which are unrelated to the existing business, a cigarette company may diversify into hotel industry, it will be a case of conglomerate diversification. In this approach, the firm concentrates on one product or service line. Strategists in these firms reason that the huge number of product based on older technologies on the market would create an aftermarket for spare parts that would last for years. The company wants to follow a strategy of adapting its products and marketing activities in each national market to suit local preferences.
In product development, new products are added to the existing ones or new products replace the old ones when they are obsolete. What then is this diversification strategy we speak of? It is most proper to be used when several circumstances exist like having a steady and static situation, acceptable organizational performance, and existence of important strengths and nonexistence of serious weaknesses, while facing non-important opportunities and threats. These firms deal with products with a value chain extending from the basic raw materials to ultimate consumer. A Socialist economic systems normally levy light taxes on business profits. Multi-business companies have to follow multiple strategies. This strategy is basically an extension of business approaches on hand. It could be an intermediate strategy before proceeding with a growth strategy or retrenchment strategy.
This approach suits a firm, which does not have requisite resources to pursue increased growth for a longer period of time. When an organization takes up an activity in such a manner that it is related to the existing business it is called concentric diversification. Stability strategies enable a company to consolidate its resources after prolonged rapid growth. A does not allow companies to exploit scale economies in product development, manufacturing, and marketing B can cause a company to overlook important differences in buyer preferences across various markets C is applicable only to industries in which price-competitiveness is a key success factor D does not allow a company to modify its products except for the most superficial features TeleToys Inc. Strategists in these firms reason that the huge number of product based on older technologies on the market would create an aftermarket for spare parts that would last for years. This is termed a harvesting strategy and is usually associated, with cost cutting and price increases to generate extra profits. If it cuts off the loss-making units, divisions, curtails product line or reduces the functions performed, it adopts a disinvestment strategy.