Strategic Management: Intensive, Integration, Diversification & Defensive Strategies
Strategic Management Approaches
Alternative Strategies
Intensive Strategies
- Market Penetration: Increase participation of current products or services in existing markets.
- Market Development: Introduce current products or services into new geographic areas.
- Product Development: Increase sales through improvement or modification of current products or services.
Integration Strategies
- Forward Integration: Control distributors, including establishing websites for direct sales.
- Backward Integration: Increase control over suppliers, enabling the company to provide its own materials.
- Horizontal Integration: Acquire properties or increase control over competitors through mergers or acquisitions.
Diversification Strategies
- Concentric Diversification: Add new products or services related to the company’s core business.
- Horizontal Diversification: Add new products or services unrelated to the company’s core business.
Defensive Strategies
- Retrenchment: Regroup through cost and asset reduction to reverse declining sales and profit.
- Divestiture: Sell a division or part of a company.
- Liquidation: Sell all of a company’s assets, acknowledging defeat.
Porter’s Strategies
- Cost Leadership: Sell products at very low unit costs through cost reduction (targeting price-sensitive consumers).
- Differentiation: Produce or sell a unique and original product that distinguishes itself from the competition and is not easily imitated (targeting consumers insensitive to price).
- Focus: Concentrate on a specific market segment, producing or selling products that meet the needs and tastes of a particular group of consumers.
SWOT Analysis
| Strengths | Weaknesses | |
|---|---|---|
| Opportunities | Use strengths to take advantage of opportunities (SO) | Overcoming weaknesses by taking advantage of opportunities (WO) |
| Threats | Use strengths to avoid threats (ST) | Reduce weaknesses to avoid threats (WT) |
SPACE Matrix
Average EA: ?EA ÷ Number of EA
Average FI: FI ?FI ÷ Number of FI
Average VC: VC ?VC ÷ Number of VC
Average FF: ?FF ÷ Number of FF
Directional Vector Coordinates: X: VC + FI Y: EA + FF
Financial Strength (FF): Return on investment, leverage, liquidity, working capital, cash flows, ability to exit the market, risks involved in the business (internal). +1 (Worst) to +6 (best)
Industrial Strength (FI): Growth potential, profit potential, financial stability, resource utilization, capital intensity, ease of market entry, productivity, capacity utilization. (External). +1 (Worst) to +6 (best)
Environmental Stability (ES): Technological changes, inflation, variability of demand, price range of competing products, barriers to market entry, competitive pressures, demand elasticity. (External). -6 (Worst) to -1 (best)
Competitive Advantage (CA): Market share, product quality, product life cycle, customer loyalty, capacity utilization of competition, technological knowledge, control over suppliers and distributors. (Internal). -6 (Worst) to -1 (best)