STRATEGIES

Marketing strategy
Marketing strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage.

Forward Integration:
A business strategy that involves a form of vertical integration whereby activities are expanded to include control of the direct distribution of its products. Example: A good example of forward integration is when a farmer sells his/her crops at the local market rather than to a distribution center. Doll maker & mail order firm, Pleasant Co., opened a retail store in Manhattan

Backward Integration:
A form of vertical integration that involves the purchase of suppliers in order to reduce dependency. Example: A good example would be if a bakery business bought a wheat farm in order to reduce the risk associated with the dependency on flour. McDonalds recently acquired a paper cup producer

Horizontal Integration:
The process of joining similar companies or taking over a company in the same line of business as yourself

Example: Callaway Golf recently acquired Top-Flite Golf Company. A car manufacturer merging with another car manufacturer. In this case both the companies are in the same stage of production and also in the same industry.

Market Penetration:
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. Example: SABMiller Plc spent $500 million in 2003 on marketing its Miller brands of beer

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. Example: JetBlue is adding dozens of new routes

Product development
Product development is a strategy that seeks increased sales by improving or modifying present products or services.

Example GM developing hydrogen powered automobiles or Pfizer developing a new antismoking pill

Related Diversification:
Adding new but related products or services. Example Microsoft launched its first personal computers that double as entertainment centers

UN Related Diversification:
Adding new unrelated product or services.

Example The video-rental firm Blockbuster may acquire the DVD and music direct-marketing firm Columbia House

Defensive Strategies
In addition to integrative, intensive, and diversification strategies, organizations also could pursue retrenchment, divestiture, or liquidation.

Retrenchment
Retrenchment occurs when an organization regroups through cost and asset reduction to reverse declining sales and profits. Sometimes called a turnaround or reorganization strategy, retrenchment is designed to fortify an organization's basic distinctive competence. Example America West Airlines closing its hub at Columbus, Ohio and laying off 390 employees

Divestiture
Selling a division or part of an organization is called divestiture. Divestiture often is used to raise capital for further strategic acquisitions or investments. Divestiture can be part of an overall retrenchment strategy to rid an organization of businesses that are unprofitable, that require too much capital, or that do not fit well with the firm's other activities. Example ConocoPhillips recently sold its Circle K convenience store chain to Alimentation Couche-Tard, a Canadian firm

Liquidation
Selling all of a companys assets, in parts, for their tangible worth. Selling all of a company's assets, in parts, for their tangible worth is called liquidation. Liquidation is recognition of defeat and, consequently, can be an emotionally difficult strategy. However, it may be better to cease operating than to continue losing large sums of money. Example Sprint liquidated its Web-hosting division.

The TOWS Matrix

1. The TOWS Matrix is an important matching tool that helps managers develop four types of strategies: a. SO strategiesuse a firms internal strengths to take advantage of external opportunities. b. WO strategiesare aimed at improving internal weaknesses by taking advantage of external opportunities. c. ST strategiesuse a firms strengths to avoid or reduce the impact of external threats. d. WT strategiesare defensive tactics directed at reducing internal weaknesses and avoiding external threats.

2. A schematic representation of the TOWS Matrix is provided in the other planning documents. 3. There are eight steps to construct a TOWS Matrix: List the firms key external opportunities. List the firms key external threats. List the firms key internal strengths. List the firms key internal weaknesses. Match internal strengths with external opportunities and record the resulting SO strategies in the appropriate cell. f. Match internal weaknesses with external opportunities and record the resulting WO strategies. g. Match internal strengths with external threats and record the resultant ST strategies. h. Match internal weaknesses with external threats and record the resulting WT strategies. a. b. c. d. e.

The SPACE Matrix

1. The SPACE Matrix, another important Stage 2 matching tool. Its four-quadrant framework indicates whether aggressive, conservative, defensive, or competitive strategies are more appropriate for a given organization.

2. Depending on the type of organization, numerous variables could make up each of the dimensions represented on the axes of the SPACE Matrix. 3. The steps to develop a SPACE Matrix: a. Select a set of variables to define financial strength (FS), competitive advantage (CA), environmental stability (ES), and industry strength (IS). b. Assign a numerical value ranging from 1 (worst) to 6 (best) for the variables that make up the FS and IS dimensions. Assign a number between 1 (best) to 6 (worst) for variables that make up the ES and CA dimensions. c. Compute an average score for FS, CA, IS, and ES by summing the values given to the variables and dividing by the number of variables included in each dimension. d. Plot the average scores for FS, IS, ES, and CA on the appropriate axis in the SPACE Matrix. e. Add the two scores on the x-axis and plot the resultant point on X. Add the two scores on the y-axis and plot the resultant point on Y. Plot the intersection of the new xy point. f. Draw a directional vector from the origin of the SPACE matrix through the new intersection point. This vector reveals the type of strategies recommended for the organization. 1. 2. 3. 4. Aggressive Competitive Defensive Conservative

The BCG Matrix

1. The BCG Matrix graphically portrays differences among divisions (of a firm) in terms of relative market share position and industry growth rate.

2. The BCG Matrix: Divisions in the respective circles in the BCG Matrix are called question marks, stars, cash cows, and dogs.

3. The four quadrants represent the following:

a. Question MarksDivisions in Quadrant I have a low relative market share position, yet compete in a high-growth industry. Generally these firms cash needs are high and their cash generation is low. StarsQuadrant II businesses represent the organizations best long-run opportunities for growth and profitability. These businesses have a high relative market share and compete in high growth rate industries.

c. Cash CowsDivisions positioned in Quadrant III have a high relative market position, but compete in a low-growth industry. Called cash cows because they generate cash in excess of their needs.

d. DogsQuadrant IV divisions of the organization have a low relative market share position and compete in a slowed or no-growth industry; they are Dogs in a firms portfolio.

The IE Matrix.
1. The IE Matrix positions an organizations various divisions in a nine-cell display.

2. The IE Matrix is similar to the BCG Matrix in that both tools involve plotting organization divisions in a schematic diagram; this is why they are called portfolio matrices. 3. Differences between the IE Matrix and the BCG Matrix a. Axes are different b. IE Matrix requires more information about divisions than BCG c. Strategic implications of each matrix are different

The Grand Strategy Matrix

1. In addition to the TOWS Matrix, SPACE Matrix, BCG Matrix, and IE Matrix, the Grand Strategy Matrix has become a popular tool for formulating alternative strategies. All organizations can be positioned in one of the Grand Strategy Matrixs four strategy quadrants.

2. The Grand Strategy Matrix is pictured in the other planning documents. 3. It is based on two evaluative dimensions: competitive position and market growth.

THE DECISION STAGE

A. The Quantitative Strategic Planning Matrix (QSPM)

1. Other than ranking strategies to achieve the prioritized list, there is only one analytical technique in the literature designed to determine the relative attractiveness of feasible alternative actions.

&3. This technique is the QSPM, which comprises Stage 3 of the strategy-formulation analytical framework. This technique objectively indicates which alternative strategies are best.

4. Six steps to developing a QSPM: