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HOSP4060TypesofStrategies3.pptxTypes of Strategies
HOSP4060 Hospitality Design and Execution Seminar
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Table of Contents
Intensive Strategies
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Integration Strategies
Management controlled strategy. Allows and organization to gain control over suppliers, distributers, and/or competitors
Forward Integration
Backward Integration
Horizontal Integration
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Forward Integration
Gaining Ownership or Increased Control over Distributers or Retailers
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Forward Integration Guidelines
When an organization’s present distributors are especially expensive
When the availability of quality distributors is so limited as to offer a competitive advantage
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• When an organization’s present distributors are especially expensive, or unreliable, or incapable
of meeting the firm’s distribution needs.
• When the availability of quality distributors is so limited as to offer a competitive advantage
to those firms that integrate forward.
• When an organization competes in an industry that is growing and is expected to continue
to grow markedly; this is a factor because forward integration reduces an organization’s
ability to diversify if its basic industry falters.
• When an organization has both the capital and human resources needed to manage the new
business of distributing its own products.
• When the advantages of stable production are particularly high; this is a consideration because
an organization can increase the predictability of the demand for its output through
forward integration.
• When present distributors or retailers have high profit margins; this situation suggests that
a company could profitably distribute its own products and price them more competitively
by integrating forward.
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Backward Integration
Seeking Ownership or Increased control of a firms suppliers.
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Backward Integration Guidelines
When an organization’s present suppliers are especially expensive or unreliable
When the number of suppliers is small and the number of competitors is large
When an organization has both capital and human resources
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• When an organization’s present suppliers are especially expensive, or unreliable, or incapable
of meeting the firm’s needs for parts, components, assemblies, or raw materials.
• When the number of suppliers is small and the number of competitors is large.
• When an organization competes in an industry that is growing rapidly; this is a factor
because integrative-type strategies (forward, backward, and horizontal) reduce an organization’s
ability to diversify in a declining industry.
• When an organization has both capital and human resources to manage the new business of
supplying its own raw materials.
• When the advantages of stable prices are particularly important; this is a factor because
an organization can stabilize the cost of its raw materials and the associated price of its
product(s) through backward integration.
• When present supplies have high profit margins, which suggests that the business of supplying
products or services in the given industry is a worthwhile venture.
• When an organization needs to quickly acquire a needed resource.
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Horizontal Integration
Seeking Ownership or Increased Control over Competitors.
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Horizontal Integration Guidelines
When an organization can gain monopolistic characteristics in a particular area or region without being challenged by the federal government.
When an organization competes in a growing industry.
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• When an organization can gain monopolistic characteristics in a particular area or region
without being challenged by the federal government for “tending substantially” to reduce
competition.
• When an organization competes in a growing industry.
• When increased economies of scale provide major competitive advantages.
• When an organization has both the capital and human talent needed to successfully manage
an expanded organization.
• When competitors are faltering due to a lack of managerial expertise or a need for particular
resources that an organization possesses; note that horizontal integration would not be
appropriate if competitors are doing poorly, because in that case overall industry sales are
declining.
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Intensive Strategies
Business plans designed to improve the business performance of a company, bringing the highest gains with the least amount of effort and risk.
Market Penetration
Market Development
Product Development Strategy
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Market Penetration
Seeking increased Market Share for present products or services in present markets through greater marketing efforts.
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Market Penetration Guidelines
When current markets are not saturated with a particular product or service
When the usage rate of present customers could be increased significantly
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• When current markets are not saturated with a particular product or service.
• When the usage rate of present customers could be increased significantly.
• When the market shares of major competitors have been declining while total industry
sales have been increasing.
• When the correlation between dollar sales and dollar marketing expenditures historically
has been high.
• When increased economies of scale provide major competitive advantages.
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Market Development
Introducing Present Products or Services into a new geographic area.
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Market Development Guidelines
When new channels of distribution are available that are reliable, inexpensive, and of good quality
When an organization is very successful at what it does
When new untapped or unsaturated markets exist
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• When new channels of distribution are available that are reliable, inexpensive, and of good
quality.
• When an organization is very successful at what it does.
• When new untapped or unsaturated markets exist.
• When an organization has the needed capital and human resources to manage expanded
operations.
• When an organization has excess production capacity.
• When an organization’s basic industry is rapidly becoming global in scope.
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Product Development
Seeking Increased Sales by Improving Present Products or Services or developing new ones.
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Product Development Guidelines
When an organization has successful products that are in the maturity stage of the product life cycle
When an organization competes in an industry characterized by rapid technological developments
When major competitors offer better-quality products at comparable prices
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• When an organization has successful products that are in the maturity stage of the
product life cycle; the idea here is to attract satisfied customers to try new (improved)
products as a result of their positive experience with the organization’s present products
or services.
• When an organization competes in an industry that is characterized by rapid technological
developments.
• When major competitors offer better-quality products at comparable prices.
• When an organization competes in a high-growth industry.
• When an organization has especially strong research and development capabilities.
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Diversification Strategies
Entering into a new market or industry which the business is not currently in.
Related Diversification
Unrelated Diversification
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Related Diversification
Adding New but Related Products or Services
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Related Diversification Guidelines
When an organization competes in a no-growth or a slow-growth industry
When adding new, but related, products would significantly enhance the sales of current products
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• When an organization competes in a no-growth or a slow-growth industry.
• When adding new, but related, products would significantly enhance the sales of current
products.
• When new, but related, products could be offered at highly competitive prices.
• When new, but related, products have seasonal sales levels that counterbalance an organization’s
existing peaks and valleys.
• When an organization’s products are currently in the declining stage of the product’s life
cycle.
• When an organization has a strong management team.
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Unrelated Diversification
Adding new, unrelated products or services
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Unrelated Diversification Guidelines
When revenues derived from an organization’s current products would increase significantly by adding the new, unrelated products
When an organization’s present channels of distribution can be used to market the new products to current customers
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• When revenues derived from an organization’s current products or services would increase
significantly by adding the new, unrelated products.
• When an organization competes in a highly competitive and/or a no-growth industry, as
indicated by low industry profit margins and returns.
• When an organization’s present channels of distribution can be used to market the new
products to current customers.
• When the new products have countercyclical sales patterns compared to an organization’s
present products.
• When an organization’s basic industry is experiencing declining annual sales and
profits.
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Defensive Strategies
Refer to the actions of a market leader to protect its market share, profitability, product positioning, and mind share against an emerging competitor.
Retrenchment
Divesture
Liquidation
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Retrenchment
Regrouping through cost and asset reduction to reverse declining sales and profit.
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Retrenchment Guidelines
When an organization has a distinctive competence but has failed consistently to meet its goals
When an organization is one of the weaker competitors in a given industry
When an organization is plagued by inefficiency, low profitability, and poor employee morale
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• When an organization has a clearly distinctive competence but has failed consistently to
meet its objectives and goals over time.
• When an organization is one of the weaker competitors in a given industry.
• When an organization is plagued by inefficiency, low profitability, poor employee morale,
and pressure from stockholders to improve performance.
• When an organization has failed to capitalize on external opportunities, minimize external
threats, take advantage of internal strengths, and overcome internal weaknesses over time;
that is, when the organization’s strategic managers have failed (and possibly will be replaced
by more competent individuals).
• When an organization has grown so large so quickly that major internal reorganization is
needed.
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Divesture
Selling a Division or part of an Organization
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Divesture Guidelines
When an organization has pursued a retrenchment strategy and failed to accomplish needed improvements.
When a division needs more resources to be competitive than the company can provide.
When a division is responsible for an organizations poor performance.
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Liquidation
Selling all of a company's assets, in parts, for their Tangible worth.
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Liquidation Guidelines
When an organization has pursued both a retrenchment and a divesture strategy and neither has been successful.
When an organizations only alternative is bankruptcy
When stockholders of a firm can minimize their losses by selling the organizations assets.
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Michael Porter’s Generic Strategies
According to Porter, strategies allow organizations to gain competitive advantage from three different basis; cost leadership, differentiation, and focus. These are referred to as, generic strategies.
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Cost Leadership – Low Cost
Emphasizes producing standardized products a low per-unit cost for consumers who are price sensitive.
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Cost Leadership – Low Cost
Striving to be the low-cost producer in an industry can be especially effective when the market is composed of many price-sensitive buyers.
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Differentiation
A strategy aimed at producing products and services considered unique industrywide and directed at consumers who are relatively price-insensitive.
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Differentiation
A successful differentiation strategy allows an organization to charge a higher price for its product and to gain customer loyalty because consumers may become strongly attached to the differentiation features.
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Focus
Producing products and services that fulfill the needs of small groups of consumers.
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Focus
Focus strategies can be especially attractive when:
The target market niche is large, profitable, and growing.
When industry leaders do not consider the niche to be crucial to their own success
When the industry has many different niches and segments.
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