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Business strategy

Strategy formerly refers to planning and managing an operation for a

 particular purpose such as in a war.

•  A business’s strategy is the pattern of decisions and actions that are

taken by the business to achieve its goals.

•  A business may have a variety of goals or objectives, but for many

 businesses, the major goal is to improve performance so that

 profits increase through designing and implementing strategies.

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Types of strategy

1.Functional strategy

Strategies of the functional level developed to improve the

efficiency of a business operations. It is also called operational strategy.

Ex.

 Marketing strategy

 HR strategy

 Production strategy

 R&D strategy

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2. Business strategy

Plans a company uses to gain competitive advantage overcompetitors in a market. It is unlikely that a company can serve an

entire market all the time. Therefore a company must decide which

 parts of the market to aim at and how to be different from

competitors.

Ex.

 

Cost leadership strategy

 Differentiation strategy

 Focus strategy

 Withdrawal strategy

 Market penetration strategy

 

 New product development strategy

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3.Corporate strategy

Strategies aimed at the long-term development of the organization.

For example, a company may consider where it will be in 10 years

time and how it manages to get there.

Ex.

 Internal development strategy

 Takeover and merger strategy

 Strategic alliances

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3. Forward Integration

Gaining ownership or increased control over distributors or

retailers

Example

General Motors is acquiring 10% of its dealers.

4. Backward Integration

Seeking ownership or increased control of a firm’s suppliers 

Example

Motel 8 acquired a furniture manufacturer.

5.Horizontal Integration

•  Seeking ownership or increased control over competitors

Example

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•  Palestinian Islamic Bank acquired Cairo-Amman Bank Islamic

transaction branch.

6. Market Penetration

•  Seeking increased market share for present products or services in

 present markets through greater marketing efforts

Example

•  Ameritrade, the on-line broker, tripled its annual advertising

expenditures to $200 million to convince people they can maketheir own investment decisions.

7. Market Development

Introducing present products or services into new geographic area

Example

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•  Khuzendar Tiles maker introduce his product to Gulf markets.

8.Product Development

Seeking increased sales by improving present products or services

or developing new ones

Example

•  Apple developed the G4 chip that runs at 500 megahertz.

•  Khuzendar Tiles maker introduce Ceramic as a new product.

9.Concentric Diversification

Adding new, but related, products or services

Example

 National Westminister Bank PLC in Britain bought the leading

British insurance company, Legal & General Group PLC.

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10.Conglomerate Diversification

Adding new, unrelated products or services

Example

•  Consultant Construction Engineering acquired Bisects factory.

11. Horizontal Diversification

Adding new, unrelated products or services for present customers

Example

•  The El-Awda Co. provide ice-cream product to present customer

12.Joint Venture

Two or more sponsoring firms forming a separate organization for

cooperative purposes

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Example

•  Lucent Technologies and Philips Electronic NV formed Philips

Consumer Communications to make and sell telephones.

13. Retrenchment

Regrouping through cost and asset reduction to reverse declining

sales and profit. Sometimes it is called turnaround orreorganizational strategy.

Example

•  A company sold off a land and 4 apartments to raise cash needed.

It introduce expense effective control system.

14. Competitive Strategy ---------------- 

 –   Low cost  

 –   Differentiation  

 –   Direct competi tion  

 –   Focus on niche  

15.Functional/operational Strategies:

Concern with org. internal resources and processes which

effectively deliver the corporate and business strategic direction.

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Functional strategies are interrelated.

e.g.: purchasing & materials management, production, finance,

R&D, HR, IT, and marketing.

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