2) Types of strategies

• Integration strategies

  Forward integration:

  • Business combines business with or take over its distributors
  • Involves expansion of business activities to gain control over direct distribution of products

  Backward integration:

  • Business combines business with or takes over its suppliers
  • Aim to decrease businesses dependency on supplier
• Integration strategies

  Horizontal integration:

  • Business takes control of/ incorporates other businesses in same industry/ which produce the same goods/ services
  • Aim to reduce threat of competition/ substitute products/ services
• Intensive strategies

  Market penetration:

  • Existing products penetrate existing market at low price, until well known to customers then prices increases.
  • Growth strategy where businesses focus on selling existing products to existing markets

  Market development:

  • Growth strategy where businesses aim to sell its existing products in new markets
  • Strategy involves finding new markets and new ways to distribute product
• Intensive strategies

  Product development:

  • Growth strategy where businesses aim to introduce new products into existing markets/ modifies an existing product
  • Businesses generate new ideas and develop new products/ services

  Advantages of intensive strategies:

  • Increase in sales/ income and profitability
  • Regular sales to existing customers may increase
  • Eliminate competitors and dominate market prices
• Diversification strategies

  Concentric diversification:

  • Business adds new product or service that is related to existing products and which will appeal to new customers
  • Occurs when business wants to increase its product range and markets

  Horizontal diversification:

  • Business adds new products or services unrelated/ different to existing products, but which may appeal to existing/ current customers
  • Occurs when business acquires or merges with business that is at same production stage, but may offer different product
• Diversification strategies

  Conglomerate diversification:

  • Business adds new products or services that are unrelated to existing products which may appeal to new groups of customers
  • Occurs when business wants to increase its product range and markets

  Advantages of diversification strategies:

  • Increase sales and business growth
  • Reduce risk of relying only on one product
  • Improves the business brand and image
• Defensive strategy

  Divestiture:

  • Business disposes/ sells some assets that are no longer profitable
  • Unproductive assets are sold to pay off debts
  • Process used to withdraw its investment in another business (divesting)

  Retrenchment:

  • Terminating employment contracts of employees for operational reasons
  • Decreasing number of product lines/ closing certain departments may result in workers becoming redundant
• Defensive strategy

  Liquidation:

  • All assets are sold to pay creditors due to lack of capital/ cash flow
  • Creditors may apply for forced liquidation in order to have their claims settled
• Steps of evaluation strategy

  • Examine underlying basis of a business strategy
  • Set specific dates for control and follow up
  • Decide on the desired outcome