Stability, Conglomerate Strategy and Variants

Stability, Conglomerate Chippigiri Sukruthi
Strategy and Variants Akshatha

• Defensive Approach
• Basic Principle – Maintain the Current Course of
Business
• A strategy where Business retains its present
Stability strategy at corporate level and continues to
Strategy focus on its present products & Markets.
• Firm stays in Current business and products
markets, maintains existing level of efforts and
is satisfied with incremental growth.
• Less risky and Less change
Why Stability • Environment Faced is relatively stable
Strategy? • Expansion is treated as threat

Types of Stability Strategy
Types of
Stability
Strategy
No Change
Profit Strategy Caution Strategy
Strategy
• Decision to do Nothing
• No Change in Objectives or operations of the
business.
NO Change • Conscious Decision to maintain its current

strategic Objectives.
Strategy • Most Common in low competition environment
with no major or market shifting occurrences.
• Examples –
• Endorses any action necessary to maintain or
improve profitability.
• It includes
• Cutting Costs
• Selling Assets
• Raising Prices
• Increasing Output/ sales
• Common with firms that are profitable but are
Profit Strategy facing temporary pressures.
• It does not involve the investment of new resources.
• Profitability is maintained with present level of
resources only.
• Examples –
• Wait and Continue to assess the market before
employing any strategy.
• Survey & Examination is taken before strategy
action
Cause • Avoids making any significant investment of
resources.
Strategy • Used for the complete evaluation of strategy.
• Common in manufacturing companies
evaluating the launch of new product.
• Examples -
• Growth strategy
• Adding new products or services
• Significantly different from the organization's
Conglomerate present products or services.
• Occurs when the firm diversifies into an areas
Diversificatio totally unrelated to the organization current
n business.
• Examples -
• Diversification mitigates risks in the event of an
industry downturn.
• Diversification allows for more variety and
options for products and services. If done
correctly, diversification provides a tremendous
Why boost to brand image and company profitability.
Conglomerate • Diversification can be used as a defence. By
diversifying products or services, a company can
Diversification? protect itself from competing companies.
• In the case of a cash cow in a slow-growing
market, diversification allows the company to
make use of surplus cash flows.
• There are two types of conglomerate mergers:
pure, where the two firms continue to operate
Types of in their own markets, and mixed, where the
firms seek product and market extensions.
Conglomerate • Two firms would enter into a conglomerate
merger to increase their market share, diversify
Strategy their businesses, cross-sell their products, and
to take advantage of synergies
Advantages
• Usage of updated technology

• Advantage of size of the company
• Ensure proper utilization of cash
Advantages & • Degree of diversification
Disadvantages
Disadvantages
• Risk factor
• Exit barriers
• Divergence from core business
• Strategy at the level of corporation
• It is shaped by the head managers, which oversees
whole organization rather than one type of business.
• It deals with the activities undertaken by the
organization as a whole and seeks to define the role
it plays and roles of business units.
• Strategy at the level of strategic business unit
• It is used to control of interests and activities of a
Variants of single business unit. Strategic Business Unit SBU
groups all types of economic activities, designed to
Strategy produce a specific type of product or service and
treats them as a single unit.
• Strategy at the functional Level
• It creates a framework for the management of such
areas as: finance, research and
development, marketing, ecology, etc.
• This strategy consists in determining how the
function is to be implemented, to foster the
desired competitive advantage, and on the
coordination of the function with other functions
in company.
Area Corporate Strategy SBU Strategy Functional Strategy
Scope selection, in which areas of economic selection of products, services and on specify the target market,
activity company should be positioned what markets they should be sold breadth and depth of the product
range,
product brand policy
product recall
Objective aggregated business objectives (e.g.. limited by objectives of the Limited by objectives of the
development, profitability, earnings per corporation, corporation and SBU
share) aggregated around the aggregated around specific
products/markets (e.g. the increase in product/market (sales, market
sales, profitability, cash flow) share, customer satisfaction)
Comparisons of
Variants Resource
Allocation
allocation between SBU areas of
activity
allocation between the functional
allocation between products/markets
within the particular SBU
allocation between the functional
the allocation between the
instruments of the marketing
mix for each product/market
departments working for different departments within the SBU
areas of the business (for
example research and development)
Source of • financial and human resource • strategies of competition • efficient product placement
Competitive • Better organization and • better competences than • superiority of marketing
advantage management competitor activities relative to
• Synergistic effects competitors
Areas of • financial policy • design of the production system, • price policy,

Decision • organization matters • policy mix • promotion,
• diversification of activities, • development of the market, • managing stocks.
• diversification of products, • distribution policy
• technologies

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Stability, Conglomerate Chippigiri Sukruthi

Strategy and Variants Akshatha

Strategy? • Expansion is treated as threat

NO Change • Conscious Decision to maintain its current

• Usage of updated technology

Areas of • financial policy • design of the production system, • price policy,

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