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Strategy Identification
Identify strategic alternatives
The purpose of external and internal analysis is to help generate strategy alternatives to provide the criteria for selecting among them.
Strategies can be generated in many different ways for different companies and essentially depend on three critical key factors
(i) Resources available for investment in growth.
(ii) Skills core competencies and assets which can be leveraged
(iii) “Appetite” for growth
These three factors together determine the first level of strategic alternatives for a firm consider.
1. Intensive growth- growth within the same industry
Organic route- means achieving growth of revenues in existing products and product lines or adding new product lines.
Inorganic route- acquires brands or competitor companies within existing businesses. Jet Airways proposed acquisition of Air Sahara is the inorganic route to strengthening its position in the airline industry.
2. Diversification growth- looks at growth outside the present business/industry.
Companies could consider getting into new businesses or product areas which may be related to or unrelated to present businesses. Company’s choosing to diversify their businesses may adopt the organic route by setting up the business themselves and growing it; or to take the inorganic route of making acquisitions of other companies within the industry they have chosen to diversify into.
3. Intensive growth- through vertical integration
This means performing or having control over the performance of many more activities related to an existing product, in house.
In the petroleum business or having control reliance petroleum is into the refining, marketing and retailing of petroleum products. Getting into oil exploration and drilling as well, makes it only other vertically integrated company (the other being ONGC) in this industry. The other oil majors are into refining, marketing and now retailing.
In the textiles business, Reliance not only manufactures the Polyster Filament Yarn, but also the key raw materials and fabric and retails it through Vimal and Harmony outlets.
Integrative growth is not only aimed at growing the top lines (sales revenues), but growing bottom lines (better margins and profitability) as well.
Companies that have a large “appetite” or ambition for growth, the access to resources fund growth as well as the skills and competencies to manage the growth, will naturally look at all the three growth directions, more conservative organizations that processes the resources and skills but lack may Mao the appetite, may map out a different growth route.
Market penetration
This is the growth strategy where the business focuses on selling more of the existing products into existing markets.
Market penetration sees to achieve four main objectives:
(a) Maintain or increase the market share of current products:
A company can increase it market share by:
(i) Converting prospective non users to users.
(ii) Convert the occasional user to a regular user.
(iii) Induce competitor’s customers to switch by using aggressive pricing communication and sales promotion.
To maintain and increase market share companies need to build a big brand presence, through extensive communication and aggressive distribution.
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The purpose of external and internal analysis is to help generate strategy alternatives to provide the criteria for selecting among them.
Strategies can be generated in many different ways for different companies and essentially depend on three critical key factors
(i) Resources available for investment in growth.
(ii) Skills core competencies and assets which can be leveraged
(iii) “Appetite” for growth
These three factors together determine the first level of strategic alternatives for a firm consider.
1. Intensive growth- growth within the same industry
Organic route- means achieving growth of revenues in existing products and product lines or adding new product lines.
Inorganic route- acquires brands or competitor companies within existing businesses. Jet Airways proposed acquisition of Air Sahara is the inorganic route to strengthening its position in the airline industry.
2. Diversification growth- looks at growth outside the present business/industry.
Companies could consider getting into new businesses or product areas which may be related to or unrelated to present businesses. Company’s choosing to diversify their businesses may adopt the organic route by setting up the business themselves and growing it; or to take the inorganic route of making acquisitions of other companies within the industry they have chosen to diversify into.
3. Intensive growth- through vertical integration
This means performing or having control over the performance of many more activities related to an existing product, in house.
In the petroleum business or having control reliance petroleum is into the refining, marketing and retailing of petroleum products. Getting into oil exploration and drilling as well, makes it only other vertically integrated company (the other being ONGC) in this industry. The other oil majors are into refining, marketing and now retailing.
In the textiles business, Reliance not only manufactures the Polyster Filament Yarn, but also the key raw materials and fabric and retails it through Vimal and Harmony outlets.
Integrative growth is not only aimed at growing the top lines (sales revenues), but growing bottom lines (better margins and profitability) as well.
Companies that have a large “appetite” or ambition for growth, the access to resources fund growth as well as the skills and competencies to manage the growth, will naturally look at all the three growth directions, more conservative organizations that processes the resources and skills but lack may Mao the appetite, may map out a different growth route.
Market penetration
This is the growth strategy where the business focuses on selling more of the existing products into existing markets.
Market penetration sees to achieve four main objectives:
(a) Maintain or increase the market share of current products:
A company can increase it market share by:
(i) Converting prospective non users to users.
(ii) Convert the occasional user to a regular user.
(iii) Induce competitor’s customers to switch by using aggressive pricing communication and sales promotion.
To maintain and increase market share companies need to build a big brand presence, through extensive communication and aggressive distribution.
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