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Strategic Management

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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:
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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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Table of Contents:
  1. NATURE OF STRATEGIC MANAGEMENT:Interpretation, Strategy evaluation
  2. KEY TERMS IN STRATEGIC MANAGEMENT:Adapting to change, Mission Statements
  3. INTERNAL FACTORS & LONG TERM GOALS:Strategies, Annual Objectives
  4. BENEFITS OF STRATEGIC MANAGEMENT:Non- financial Benefits, Nature of global competition
  5. COMPREHENSIVE STRATEGIC MODEL:Mission statement, Narrow Mission:
  6. CHARACTERISTICS OF A MISSION STATEMENT:A Declaration of Attitude
  7. EXTERNAL ASSESSMENT:The Nature of an External Audit, Economic Forces
  8. KEY EXTERNAL FACTORS:Economic Forces, Trends for the 2000ís USA
  9. EXTERNAL ASSESSMENT (KEY EXTERNAL FACTORS):Political, Governmental, and Legal Forces
  10. TECHNOLOGICAL FORCES:Technology-based issues
  11. INDUSTRY ANALYSIS:Global challenge, The Competitive Profile Matrix (CPM)
  12. IFE MATRIX:The Internal Factor Evaluation (IFE) Matrix, Internal Audit
  13. FUNCTIONS OF MANAGEMENT:Planning, Organizing, Motivating, Staffing
  14. FUNCTIONS OF MANAGEMENT:Customer Analysis, Product and Service Planning, Pricing
  15. INTERNAL ASSESSMENT (FINANCE/ACCOUNTING):Basic Types of Financial Ratios
  16. ANALYTICAL TOOLS:Research and Development, The functional support role
  17. THE INTERNAL FACTOR EVALUATION (IFE) MATRIX:Explanation
  18. TYPES OF STRATEGIES:The Nature of Long-Term Objectives, Integration Strategies
  19. TYPES OF STRATEGIES:Horizontal Integration, Michael Porterís Generic Strategies
  20. TYPES OF STRATEGIES:Intensive Strategies, Market Development, Product Development
  21. TYPES OF STRATEGIES:Diversification Strategies, Conglomerate Diversification
  22. TYPES OF STRATEGIES:Guidelines for Divestiture, Guidelines for Liquidation
  23. STRATEGY-FORMULATION FRAMEWORK:A Comprehensive Strategy-Formulation Framework
  24. THREATS-OPPORTUNITIES-WEAKNESSES-STRENGTHS (TOWS) MATRIX:WT Strategies
  25. THE STRATEGIC POSITION AND ACTION EVALUATION (SPACE) MATRIX
  26. THE STRATEGIC POSITION AND ACTION EVALUATION (SPACE) MATRIX
  27. BOSTON CONSULTING GROUP (BCG) MATRIX:Cash cows, Question marks
  28. BOSTON CONSULTING GROUP (BCG) MATRIX:Steps for the development of IE matrix
  29. GRAND STRATEGY MATRIX:RAPID MARKET GROWTH, SLOW MARKET GROWTH
  30. GRAND STRATEGY MATRIX:Preparation of matrix, Key External Factors
  31. THE NATURE OF STRATEGY IMPLEMENTATION:Management Perspectives, The SMART criteria
  32. RESOURCE ALLOCATION
  33. ORGANIZATIONAL STRUCTURE:Divisional Structure, The Matrix Structure
  34. RESTRUCTURING:Characteristics, Results, Reengineering
  35. PRODUCTION/OPERATIONS CONCERNS WHEN IMPLEMENTING STRATEGIES:Philosophy
  36. MARKET SEGMENTATION:Demographic Segmentation, Behavioralistic Segmentation
  37. MARKET SEGMENTATION:Product Decisions, Distribution (Place) Decisions, Product Positioning
  38. FINANCE/ACCOUNTING ISSUES:DEBIT, USES OF PRO FORMA STATEMENTS
  39. RESEARCH AND DEVELOPMENT ISSUES
  40. STRATEGY REVIEW, EVALUATION AND CONTROL:Evaluation, The threat of new entrants
  41. PORTER SUPPLY CHAIN MODEL:The activities of the Value Chain, Support activities
  42. STRATEGY EVALUATION:Consistency, The process of evaluating Strategies
  43. REVIEWING BASES OF STRATEGY:Measuring Organizational Performance
  44. MEASURING ORGANIZATIONAL PERFORMANCE
  45. CHARACTERISTICS OF AN EFFECTIVE EVALUATION SYSTEM:Contingency Planning