Grand Strategy

Topics: Vertical integration, Strategic management, Horizontal integration Pages: 10 (3478 words) Published: February 19, 2011
Gaurav kumar (SEC. A) Grand Strategies Strategy Formulation is a strategic planning or long range-planning. This process is primarily analytical, not action oriented. This process involves scanning external and internal environmental factors, analysis of the strategic factors and generation, evaluation and selection of the best alternative strategy appropriate to the analysis. Identification of various alternative strategies is an important aspect of strategic management as it provides the alternatives which can be considered and selected for implementation in order to arrive at certain result. At this stage, the managers are able to complete their environmental analysis and appraisal of their strengths and they are in a position to identify what alternatives strategies are available for them in the light of their organizational mission. In this there are four main strategies: 1) Stability strategy 2) Growth/Expansion Strategy 3) Retrenchment strategy 4) Combination strategy 1. Stability strategy The basic approach is ‘maintain present course: steady as it goes.’ In an effective stability strategy, companies will concentrate their resources where the company presently has or can rapidly develop a meaningful competitive advantage in the narrowest possible product-market scope consistent with the firm’s resources and market requirement's. Reasons for adopting Stability Strategies: Managers of small business desire a satisfactory level of profits rather than increased profits. Maintenance of status quo involves less risk than a more growth strategy. Change may upset the smooth operations and result in poor performance especially, if the firm considers itself successful with the present level of operations. Changing operations to pursue a more aggressive growth strategy usually requires an increased investment and managerial support. Firms, which cannot provide resources, may continue with the stability strategy. Some executives maintain with the stability strategy due to inertia for change. In some cases, firms are forced to adopt stability strategy, if they operate in a low-growth or no-growth industry. Sometimes, firms may find that the cost of growth is more than the benefits of the same. Firms that dominate its industry through their superior size and competitive advantage may pursue stability to reduce their chances of being prosecuted for engaging in monopolistic practices. Smaller firms that concentrate on specialized products or services may choose stability because of their concern that growth will result in reduced quality and customer service. Examples of Stability Strategies adopted by companies: Steel Authority of India has adopted stability strategy because of over capacity in steel sector. Instead it has concentrated on increasing operational efficiency of its various plants rather than going for expansion. Others industries are ‘heavy commercial vehicle’, ‘coal industry. Apart from over capacity, regulatory restrictions in some industries have forced companies to adopt stability strategy. Cigarette, liquor industries fall in this category because of strict control over capacity expansion. Both these industries require license under the provisions of Industries (Development and

regulations) Act, 1951. Many companies in public sector have been forced to adopt stability strategy because of government’s policy of cutting the role of public sector and budgetary support for expansion of these companies has been withdrawn.

2. Growth/Expansion Strategies A growth strategy is one that an enterprise pursues when it increases its level of objectives upward in significant increment, much higher than an exploration of its past achievement level. The most frequent increase indicating a growth strategy is to raise the market share and or sales objectives upward significantly. If we look at the corporate performance in the recent years, we find how the various organizations have grown both in terms of sales and profit...
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