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Management - Vikhanskiy OS

1.2. Reference development strategies

The most common business-oriented business strategies, widely reviewed in the literature [1], are usually called basic, or reference ones. They reflect four different approaches to the growth of the firm and are associated with a change in the state of one or more of the following elements: product, market, industry, position of the firm within the industry, technology. Each of these five elements can be in one of two states: an existing state or a new state.

The first group of reference strategies are the so-called concentrated growth strategies. These fall into those strategies that are associated with a change in the product and (or) the market and do not affect the other three elements. In the case of following these strategies, the firm tries to improve its product or to start producing a new one without changing the industry. As for the market, the firm is looking for opportunities to improve its position in the existing market or to move to a new market.

The specific types of strategies for the first group are as follows:

• strategy of strengthening the position in the market, in which the company does its best to win the best positions with this product in this market. To implement this strategy, great marketing efforts are required. Implementation of this strategy also allows the implementation of the so-called "horizontal integration", in which the company tries to establish control over its competitors;

• market development strategy, which consists in finding new markets for an already produced product;

• a product development strategy that assumes the solution of the problem of growth due to the production of a new product and its implementation on the market already mastered by the firm.

The second set of benchmark strategies are business strategies that involve the expansion of the firm by adding new structures. These strategies are called integrated growth strategies. Usually a firm can resort to such strategies if it is in a strong business, can not implement concentrated growth strategies and at the same time, integrated growth does not contradict its long-term goals. The firm can realize integrated growth both by purchasing property and by expanding from within. In both cases, there is a change in the position of the firm within the industry.

There are two main types of integrated growth strategies:

• a reverse vertical integration strategy aimed at the growth of the firm through the acquisition or strengthening of control over suppliers, as well as through the creation of subsidiaries that supply the supply. The implementation of the reverse vertical integration strategy can give the company favorable results associated with a decrease in dependence on fluctuations in the prices of components and supplier requests. At the same time, deliveries as a center of expenses for a firm can turn in case of reverse vertical integration into the revenue center;

• a strategy of forward vertical integration , expressed in the growth of the firm by acquiring or strengthening control over the structures located between the firm and the end user, i.e. Over distribution and sale systems. This type of integration is beneficial in cases where intermediary services are very broadening or when a firm can not find intermediaries with a quality work level. The third group of benchmark business development strategies are diversified growth strategies. These strategies are implemented in the event that firms can no longer develop in this market with this product within the framework of this industry. Strategies of this type are as follows:

• A strategy of centered diversification , based on the search for and use of prisoners in the existing business of additional opportunities for the production of new products. At the same time, existing production remains at the center of business, and the new one arises, based on the opportunities that are contained in the developed market, the technology used, or in other strengths of the firm's functioning;

• a strategy of horizontal diversification , which involves looking for opportunities for growth in the existing market through new products that require a new technology that is different from the one used. With this strategy, the firm should focus on the production of such technologically unrelated products that would use the already available capabilities of the company, for example in the field of supply. Since the new product should be targeted to the consumer of the main product, then by its qualities it must be an accompanying product already produced. An important condition for the implementation of this strategy is the preliminary evaluation by the firm of its own competence in the production of a new product;

• The strategy of conglomerative diversification, consisting in the fact that the company is expanding due to the production of technologically not related to the already produced new products that are sold in new markets. This is one of the most difficult strategies for development, as its successful implementation depends on many factors, in particular, on the competence of the existing staff, and in particular managers, the seasonality in the life of the market, the availability of necessary amounts of money, etc.

The fourth type of reference business development strategies are reduction strategies. These strategies are implemented when a firm needs to regroup after a long period of growth or because of the need to increase efficiency, when there are downturns and dramatic changes in the economy, such as, for example, structural adjustment, etc. In these cases, firms resort to the use of targeted and planned reductions strategies. The implementation of these strategies often takes place not painless for the firm. However, it is necessary to clearly realize that these are the same development strategies for the firm as the growth strategies discussed, and under certain circumstances they can not be avoided. Moreover, in certain circumstances this is the only possible strategy for business renewal, since in the overwhelming majority of cases, renewal and general acceleration are mutually exclusive business development processes.

There are four types of strategies for targeted business reduction:

• liquidation strategy , which is the limiting case of a reduction strategy and is implemented when the firm can not conduct further business;

• a "harvesting" strategy that involves abandoning a long-term view of the business in favor of maximizing revenue in the short term. This strategy is applied to an unpromising business that can not be profitable sold, but can yield revenues during the "harvest". This strategy involves reducing procurement costs, labor and maximizing revenue from the sale of an existing product and continuing to shrink production. The strategy of "harvesting" is designed to achieve, with a gradual reduction of this business to zero, during the period of reducing the receipt of the maximum aggregate income;

• A reduction strategy, which means that a firm closes or sells one of its units or businesses in order to implement a long-term change in the boundaries of the business. Often this strategy is realized by diversified firms when one of the productions does not fit well with others. This strategy is implemented also when it is necessary to get funds for the development of more promising or to start new businesses that are more appropriate to the long-term goals of the firm;

• a cost-cutting strategy , the main idea of ​​which is to find ways to reduce costs and implement appropriate measures to reduce costs. This strategy has certain distinctive features, which consist in the fact that it is more focused on eliminating rather small sources of costs, and also in the fact that its implementation is temporary or short-term measures. Implementation of this strategy is associated with a reduction in production costs, increased productivity, reduced hiring and even the dismissal of personnel, the cessation of the production of profitable goods and the closure of profitable facilities.

In practice, a firm can simultaneously implement several strategies. This is especially common among diversified companies. It can be produced by the firm and a certain sequence in the implementation of strategies. Concerning the first and second cases, it is said that the firm carries out a combined strategy.