Reasons for adopting combination strategies are given below Rapid Environment

Reasons for adopting combination strategies are given

This preview shows page 57 - 60 out of 136 pages.

Reasons for adopting combination strategies are given below • Rapid Environment change • Liquidate one unit, develop another • Involves both divestment & acquisition (take over) It is commonly followed by organizations with multiple unit diversified product & National or Global market in which a single strategy does not fit all businesses at a particular point of time. BUSINESS STRATEGY The plans and actions that firms devise to compete in a given product/market scope or setting and asks the question “How do we compete within an industry?” is a business strategy. It focuses on improving the competitive position of a company’s business unit’s products or services within the specific industry or market segment that the company or business unit serves. It can be: A) Competitive – battling against all competitors for advantage which includes Low- cost leadership, Differentiation and Focus strategies; and/or 57
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B) Cooperative – working with one or more competitors to gain advantage against other competitors which is also known as Strategic alliances. Eg: Wet grinder companies like Shantha and Sowbhagya seeks differentiation in a targeted market segment. A) COMPETITIVE BUSINESS STRATEGY (PORTER’S GENERIC STRATEGY) Porter's generic strategies framework constitutes a major contribution to the development of the strategic management literature. Generic strategies were first presented in two books by Professor Michael Porter of the Harvard Business School (Porter, 1980). Porter suggested that some of the most basic choices faced by companies are essentially the scope of the markets that the company would serve and how the company would compete in the selected markets. Competitive strategies focus on ways in which a company can achieve the most advantageous position that it possibly can in its industry . The profit of a company is essentially the difference between its revenues and costs. Therefore high profitability can be achieved through achieving the lowest costs or the highest prices facing the competition. Porter used the terms ‘cost leadership' and ‘differentiation', wherein the latter is the way in which companies can earn a price premium. Main aspects of Porter's Generic Strategies Analysis According to Porter, there are three generic strategies that a company can undertake to attain competitive advantage: cost leadership, differentiation, and focus. 58
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i) Low-Cost Strategy : It is the ability of a company or a business unit to design, produce and market a comparable product more efficiently than its competitors. It is a competitive strategy based on the firm’s ability to provide products or services at lower cost than its rivals. It is formulated to acquire a substantial cost advantage over other competitors that can be passed on to consumers to gain a large market share.
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