Types of the strategies

Types of the strategies

The following strategies may be adopted by an organization to accomplish its objectives:

Stability: it case the organization is satisfied with the present level of activities and profits, it may follow the stability strategy. The factors which contribute to this line of approach may be:

1.       Stable environment

2.       Limited number of products and services

3.       Limited number of customers, suppliers, and competitors

4.       Minimum need for specializes knowledge and skills about products, customers etc. 

5.       Values attitudes, background, etc, of the top management which may disfavour growth for its own sake. An important drawback of stability strategy is that it may make the management complacent and indifferent to the need for any change, such that when the external environment undergoes a swift change, the organization may not be fully prepared to bear its effects.

Product development: the main thrust of the product development strategies is development of new products for the existing markets, creation of new uses for existing products for development of new products for new markets. Product development strategy will be followed in case the organization, in response to a dynamic environment, decides the entire new products or services in the market in order to meet and beat the competitors more effectively. Generally, product development strategies will be followed in an environment which is dynamic even to an extent unpredictable, with a large number of products and services, as also customers, supplies and competitions.

Market development: Market development strategies are concerned with either selling the existing range of products in new markets or selling new products in new markets the underlying object in each case being to expand the customers being served the existing products and services.

Vertical integration: vertical integration is the process of consolidation where by an organization diversifies its activities either backwards towards the supply of essential materials or forwards towards sales outlets. Accordingly it may decide to produce the necessary raw materials for its production activity so as to assure continuous supply. It may also decide to develop its own sales outlets in order to better serve the consumers. Obviously vertical integration strategy will be followed in response to a dynamic unpredictable environment comprising a plenty of products and services and a number of customers suppliers and competitors.

Merger: merger denotes the combining of several similar businesses units so as to rationalize manufacturing and selling activities and to attain the economics of large scale production and to weed out competition. Merger as a strategy aims at acquiring other similar organizations to expand products range and markets. Such a strategy will be followed in a dynamic unpredictable environment by an organization which desires growth and expansion without waiting for its own projects to achieve the same results.

Divestment or retreat: to divest means to get rid of. In managerial terminology divestment as a strategy means to give up production of unprofitable products to achieve rationalization of the product range and to avoid the benefits of standardization. The products chosen for elimination are those which contribute little or no profits. But the exercise should be undertaken with care and caution because elimination of products with low profits may also adversely affect the overall profit position.

Other strategic: an organization may also adopt various other strategies such as distribution strategy, technological strategy, financial strategy, managerial strategy, product design strategy, cost reduction strategy, etc, in order to accomplish its specific objectives.

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