This strategy is friendlier to those companies

This preview shows page 14 - 18 out of 27 pages.

This strategy is friendlier to those companies needing to use economies of scale. Disadvantages of Stability Strategy: There is often poor communication within the departments of the company. Customers can be negatively affected from the lack of cooperation.
NETFLIX 15 Expansion Strategy Horizontal Diversification: With a horizontal diversification the firm will develop a new product that is different from its normal products, but the same customers will enjoy this product. When a company decides to move to an expansion strategy, its main focus point will revolve around enhancing the current business. The goal of expansion is to focus on reformation of goals and directions within the company. The strategy will measure initiatives and investment exploration of the new products. A business may choose expansion : For acquiring better market share. Optimum utilization of available resources. Ways to Expand A company can choose to expand through diversification. A company may merge with or purchase other companies. Advantages of Expansion Strategy: Economics of scale New customers Disadvantages of Expansion Strategy: Capital requirements Spread too thin Expansion can often lead to pitfalls that may not have been further explored, but it can also lead great promises. Diversification:
NETFLIX 16 Diversifying allows the business to venture into new products through new product lines, services or new markets. This will involve the company to undertake different types of skills and knowledge than what it has been involved with before. Retrenchment Strategy: This is a strategy in which the company looks to reduce diversity and possibly the size of the organization. When a company needs to reduce costs and expenses in order to become more financially stable, the business will use this strategy. This may come in the form of the company withdrawing from market or discontinuing products and services that are seen as profitable. Forms of retrenchment : Turnaround Divestment Liquidation Advantages of retrenchment strategy: Poor performance of firm Better opportunities in the environment Disadvantages of retrenchment strategy: High cost Competition from government subsidized industries. Competitive Strategy: In any industry the goal of a company is to gain a competitive advantage over its competitors in order to lead the industry to gain customer share and have high profits. Porter’s speaks to having one of three strategies for a business to create a strategy to outperform competitors in the short run while also sustain success in the long term. Those strategies are: Cost Leadership
NETFLIX 17 Differentiation Focus or Niche Strategy Cost Leadership The company strives to have the lowest cost in the industry.

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture