INTERNATIONAL STRATEGIC MANAGEMENT

PROFESSOR: TATIANA VELEZ ANGEL

TYPES OF STRATEGIES
VERTICAL INTEGRATION

INTENSIVE

DIVERSIFICATION

TYPES OF STRATEGIES
Forward Integration

Vertical Integration Strategies Backward Integration

FORWARD INTEGRATION

Control of the direct distribution of its products

BACKWARD INTEGRATION

Control of the suppliers

TYPES OF STRATEGIES
Market Penetration

Intensive Strategies

Market Development

Product Development

MARKET PENETRATION

Deals with enhancing the share of market by effective and innovative strategies in order to make the present product more effective and attractive.

MARKET DEVELOPMENT

Deals with adding products in different geographic areas.

PRODUCT DEVELOPMENT
Deals with increasing the sales as well as revenues by enhancing the quality of existing products. The quality of existing products can be easily enhanced by adding different flavors in it.

TYPES OF STRATEGIES
Concentric Diversification

Diversification Strategies

Conglomerate Diversification

Horizontal Diversification

DIVERSIFICATION STRATEGIES
Why Firms Diversify:
To grow To more fully utilize existing resources and capabilities. To escape from undesirable or unattractive industry environments. To make use of surplus cash flows.

CONCENTRIC

A company acquires or develops new products or services (closely related to its core business or technology) to enter one or more new markets.

HORIZONTAL

Adding related or similar product/service lines to existing core business, either through acquisition of competitors or through internal development of new products/services.

CONGLOMERATE

Firms pursue this strategy for several reasons:

Continue to grow after a core business has matured or started to decline. To reduce cyclical fluctuations in sales revenues and cash flows.

CRUCIAL ROLE OF MANAGERS

Successful diversification strategies result from the ability of managers to develop skill and competency at MANAGING diversification. Managers must develop two important types of mental models: Must have well-developed understandings of their firms diversity and relatedness that define their companies. Must also have well-developed beliefs about how diversification should be managed in order to achieve synergies.

CRUCIAL ROLE OF MANAGERS

The Learning Hypothesis
Managers learn from trial and error.
They evaluate success of past strategic decisions. These acquired beliefs become embedded in an organizations routine operating procedures.
Usually difficult for rivals to imitate.

By engaging in a number of acquisitions over time, managers can come to develop an expertise about how the acquisition process should be managed.

CRUCIAL ROLE OF MANAGERS

Those firms with management teams that have more experience at managing diversification will enjoy higher performance than those firms that do not have that experience.
Evidence suggests that firms stock market performance is directly related to diversification experience (see exhibit on following slide).

TYPES OF STRATEGIES

Retrenchment

Defensive Strategies

Divestiture

Liquidation

RETRENCHMENT
A corporate-level strategy. Seeks to reduce the size or diversity of an organization's operations. Reduction of expenditures in order to become financially stable. Retrenchment is a pullback or a withdrawal from offering some current products or serving some markets.

DIVESTITURE
Selling a division or part of an organization. Used to raise capital for further strategic acquisitions or investments. When firms try to focus on their core strengths, lessening their level of diversification.

LIQUIDATION
Selling all of a companys assets, in parts, for their tangible worth Recognition of defeat. Cease operating than to continue losing large sums of money

SOURCES
All of the information which is on these slides was taken from: http://www.businessdictionary.com/definition/concentricdiversification.html#ixzz1lYJMhiI

www2.gsu.edu/~wwwsmg/BA8993week10.ppt

http://www.mba-tutorials.com/strategy/1112-intensive-strategies.html

http://www.investopedia.com/terms/f/forwardintegration.asp#ixzz1lYfXLCay