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Strategic
Management MGT603
VU
Lesson
20
TYPES
OF STRATEGIES
Objectives:
This
lecture brings strategic
management to life with many
contemporary examples. Sixteen types
of
strategies
are defined and exemplified,
including Michael Porter's
generic strategies: cost
leadership,
differentiation,
and focus. Guidelines are
presented for determining when
different types of
strategies
are
most appropriate to pursue. An overview
of strategic management in nonprofit
organizations,
governmental
agencies, and small firms is
provided. After reading this
lecture you will be able to
know
about:
Types
of Strategies
Intensive
strategies
Intensive
Strategies
Market
penetration, market development, and
product development are sometimes
referred to as
intensive
strategies because
they require intensive efforts to improve a firm's
competitive position
with
existing
products.
Intensive
Strategies
Market
Penetration
Market
Development
Intensive
Strategies
Product
Development
Market
Penetration
A
market-penetration
strategy
seeks to increase market
share for present products
or services in present
markets
through greater marketing efforts. This
strategy is widely used alone
and in combination
with
other
strategies. Market penetration includes
increasing the number of salespersons,
increasing
advertising
expenditures, offering extensive
sales promotion items, or
increasing publicity
efforts.
Guidelines
for Market
Penetration
Four
guidelines when market penetration may be
an especially effective strategy
are:
Current
markets not saturated
Usage
rate of present customers
can be increased significantly
Market
shares of competitors declining while
total industry sales
increasing
Increased
economies of scale provide major
competitive advantages
There
are two aspects of market
penetration:
89
Strategic
Management MGT603
VU
Rapid
market penetration: based on two
assumptions, to lower the price
and promotional activities
can
be
increased.
Slow
market penetration: also based on
two assumptions, to lower the
price but promotional
activities
are
not changed.
Market
Development
Introducing
present products or services into
new geographic area
Market
development involves
introducing present products or services
into new geographic areas.
The
climate
for international market development is
becoming more favorable. In many
industries, such as
airlines,
it is going to be hard to maintain a competitive edge
by staying close to
home.
Guidelines
for Market
Development
Six
guidelines when market development
may be an especially effective strategy
are:
New
channels of distribution that
are reliable, inexpensive, and
good quality
Firm
is very successful at what it does
Untapped
or unsaturated markets
Capital
and human resources
necessary to manage expanded
operations
Excess
production capacity
Basic
industry rapidly becoming global
Product
Development
Product
development is a
strategy that seeks
increased sales by improving or
modifying present products or
services.
Product development usually entails large
research and development expenditures.
The U.S.
Postal
Service now offers stamps
and postage via the
Internet, which represents a
product development
strategy.
Called PC Postage, stamps
can now be obtained online
from various Web sites
such as
stamps.com
and then printed on an
ordinary laser or inkjet
printer. E-Stamp Corporation,
Neopost,
and
Pitney Bowes, too, are actively pursuing
product development by creating their
own versions of
digital
stamps.
Guidelines
for Product Development
Five
guidelines when product development
may be an especially effective strategy
to pursue are:
Products
in maturity stage of life
cycle
Competes
in industry characterized by rapid
technological developments
Major
competitors offer better-quality products at
comparable prices
Compete
in high-growth industry
Strong
research and development
capabilities
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