Managers at all levels are faced with challenges from the business environment. These challenges could be as a result of technological changes, rise in international competition, political and economic changes and the issue of total quality management. Also, these changes require the manager to understand the forces the drive strategies, to formulate new strategic plans and also implement new strategies.
However, if a manager must remain useful and relevant in today’s turbulent environment, he must be able to help, shape and implement new strategies and new managerial processes and activities.
TYPES OF STRATEGIES
According to David (1991), he grouped those strategies into four broad categories.
1. Integration Strategies – These type of strategy enables the firm to gain control over distributors, suppliers, and/or competitors. This strategy is divided into three. They are:
a. Forward Integration – it involves gaining ownership or increased control over distributors. It is usually applied when organization sees distributors as being expensive, unreliable to meeting the firm’s distribution needs.
b. Backward Integration – this strategy seeks ownership over the firm’s suppliers when the current suppliers are unreliable, too expensive or cannot meet the firm’s needs. Or when the organization needs to meet up acquired resources quickly.
c. Horizontal Integration – this strategy seeks ownership over the firm’s competitors. It could be in the form of a merger acquisition and take-overs.
2. Intensive Strategies – This strategy is concerned with improving the firm’s competitive position with existing products. It is subdivided three. They are:
a. Market Penetration – it seeks to increase the market of a present product in present markets through greater market effort, such as; increasing the number of sale-persons, advertising, expenses, extensive sale promotion, etc. This strategy is used at the maturity stage of a product/service and when the market shares of major competitors have been declining while total industry sales have been increasing.
b. Market Development – it involves the introduction of products or services into new geographical areas. This strategy is applied when new channel of distribution are available that are reliable, inexpensive and of good quality. For this strategy to work, the firm must be good at what it does and there must be an untapped market.
c. Product Development – it is used to increase sales by improving on present products or services. It involves large research and development expenditure if successfully done; they will attract satisfied customers at its maturity stage. However, this strategy is used in industries characterised by rapid technological development.
3. Diversification Strategy – This strategy helps the firm not to be dependent on any single industry. It is divided into three. They are:
a. Concentric Diversification – it is used when the firm competes in a no-growth industry and it involves adding new, but related products or services. It is also useful when the firm’s product is in a decline stage.
b. Horizontal Diversification – it is a strategy for adding new/unrelated products/services for present customers.
c. Conglomerate Diversification – it is adding new, related products or services present and it is used in a industry experiencing declining annual sales or product.
i. Joint Venture – it occurs when two or more companies form a temporary partnership for the purpose of capitalizing on some opportunities. It is used when distinctive competences of the firms complement each other and when some project is potentially very profitable, but requires large resources and risk.
ii. Retrenchment Strategy – it is also called turn-around or re-organization of basic distinctive competence. It involves regrouping through cost and asset reduction to reverse declining sales and profit.
iii. Divestiture – it involves selling a division of an organization which are unprofitable, requires too much capital or do not fit well with firms activity. It is often used to raise capital.
iv. Liquidation – it is selling of a company’s assets; in parts, for a tangible worth.
v. Combination – it involves the combination of two or more strategies simultaneously.
vi. Deliberate Strategy – it is a strategy which a firm decides on its goals and implements intended strategy to realize those goals.
vii. Emergent Strategy – are those strategies that are actually in place in the organization.
PORTER’S GENERIC STRATEGY
It allows firms to gain competitive advantage from three bases.
1. Cost Leadership – it emphasize producing standardized product at a very low per per-unit cost for customers who are price sensitive.
2. Differentiation – it aims at producing products and services considered unique and directed to consumers who are relatively price-insensitive.
3. Focus – it means producing products and services that fulfil the needs of small groups of consumers.
However, if the generic strategies must be met, the firm must be involved in the use of intensive strategy.
BUSINESS POLICY AND STRATEGY IN THE ORGANIC BUSINESS FUNCTIONS
These functional areas; formulates and implement strategies that are geared toward the achievement of the organization’s wild goals. They are responsible for communicating short term objectives and create an environment that assists the achievement of objective.
Therefore, the functional area are:
1. Marketing Department – They formulate marketing strategies that match product services and set prices. They use strategy such as market segmentation, market penetration, market development and diversification, product life-cycle. However, the strategy in use is dependent on the customers that the organisation is addressing and the market elements of product, price, promotion, distribution, etc. must be carefully combined for effectiveness and efficiency.
2. Productive/Operation Department – It transforms materials, labour and capital into products, services or ideas. The strategies used includes:
– The nature, size and location of facilities,
– Choice of production process,
– Vertical integration,-
– Production capacity,
– Manufacturing infrastructure.
These strategies are geared toward total quality management.
3. Finance Department – They are responsible for the preparation of regular capital budgets, to ensure the availability of funds for expenditure and to advise on suitable sources for funds if it cannot be found within the organization. It also ensures the constant flow of working capital to meet the revenue and running expenses of the company.
The strategies applied are: record keeping, calculation of financial requirements, managing debts and dealing with creditors.
4. Personal Department – They are responsible for the recruiting, selection, placement and induction of employees, promotion, transfer, demotion which could be retirement, dismissal, resignation, termination and lay-off. They are also responsible for wage and salary administration, industrial relation, development, welfare, manpower, planning, personal record keeping, etc.
The policies applied are: Employment policies, training policy, wages and salary policy, welfare policy and industrial policy.
Conclusively, all functional units in a organization performs different activities to enhance organizational profit and synergy; and this makes the firm more effective and efficient.