Types of Strategies

1. Corporate Strategies or Grand Strategies

Corporate level strategies are basically about the choice of direction that the firms adopts in
order to achieve its objectives. They are basically about decisions related to allocating
resources among the different business of a firm, transferring resources from one set of
business to another, and managing and nurturing portfolio of businesses so that overall
corporate objectives are achieved.
Types of Corporate Strategy:
1. Stability Strategy
2. Expansion Strategy
3. Retrenchment Strategy
4. Combination Strategy
 2. Stability Strategy:
When a company finds that it should continue in the existing business and is doing reasonably
well in that business but no scope for significant growth, the stability is the strategy to be
adopted.
A stability strategy is a strategy that a firm pursues when-
1. It continues to serve the customers in the same product or service, market, and function
sectors as defined in its business definition, or in very similar sectors.
2. 2. Its main strategic decisions focus on incremental improvement of functional
performance.

The stability strategy is not a “do nothing” strategy. It may involve incremental
improvements.
 Reasons for Adopting Stability Strategy:
1. The company is doing fairly well or perceives itself as successful and expects the same in the future.
2. The stability strategy is less risky. Frequent changes involving new products or new ways of doing things
may lead to failure of the firm. The larger the firm and the more successful it has been, the greater is the
resistance to the risk.
3. The stability strategy can evolve because the managers prefer action to thought and do not tend to
consider any other alternatives. Many of the firms that follow stability strategy do this unconsciously. Such
companies react to the changes in the forces in the environment.
4. To follow a stability strategy, it is easier and more comfortable for all concerned as activities take place
in routines.
5. The management pursuing stability strategy does not have the mind-set of a strategist to appraise the
environmental opportunities and threats and take advantage of the opportunities.
6. The company that has core competence in the existing business does not want to take the risk of
diverting attention from the current business by opting for diversification.
7. It is a frequently employed strategy. An organization adopts the stability strategy when it aims at an
incremental improvement of its functional performance but marginal changes to one or more of its
businesses in terms of their respective customer groups, customer functions or alternative technologies
are required. Its focus is confined to improving functional efficiencies in an increment way, through better
deployment and utilization of resources.
2. Expansion Strategy: is followed when an organization aims at high growth. This strategy involves redefining the
business either adding to the scope of activity or substantially increasing the efforts of the present business.

• When expansion strategy is pursued, it could lead to addition of new products or new markets or
functions.
• Expansion strategy is often considered as “entrepreneurial” strategy where firms develop and introduce
new products and markets or penetrate markets to build share. Expansion is usually thought as the way
to improve performance.
Reasons for Adopting Expansion Strategy:
1. If business environments are volatile, expansion may be a necessary strategy for survival.
2. Many executives may feel more satisfied with the prospects of growth expansion.
3. Chief Executive Officer may feel pride in presiding over organizations perceived to be growth-oriented.
4. Some executives believe that expansion is in the benefit of the society.
5. Expansion provides more financial and other rewards.
6. Expansion enables to reap advantages from the experience curve and scale of operations.
3. Retrenchment Strategy: Retrenchment strategy may require a firm to redefine its business and
may involve divestment of a major product line or an SBU, abandon some markets or reduce its
functions. Retrenchment in pace may necessitate a firm to use layoffs, reduce R&D or marketing
or other outlays, increase the collection of receivables etc.

• Retrenchment strategy involves a partial or total withdrawal either from products,

markets or functions in one or more of a firm’s businesses.
• Retrenchment strategy is generally followed during the period of decline of a business
when it is thought possible to bring profitability back to the firm. If the prospects of
restoring profitability are not good, abandoning market share, reducing expenses and
assets can use controlled divestment.
Reasons for following retrenchment strategy
1. The firm is doing poorly.
2. If there is pressure from various groups of stakeholders to improve
performance.
3. If better opportunities of doing business are available elsewhere a
firm can better utilize its strengths.
The retrenchment strategy is particularly followed for dealing with
crises. For minor crises pace retrenchment will be suitable, for moderate
crises, divestiture of some division or units may be inevitable whereas
for serious crises, a liquidation strategy will be imperative.
4. Combination Strategy:

When an organization adopts a mix of stability, expansion and retrenchment

either simultaneously or sequentially for the purpose of improving its
performance, it is said to follow the combination generic strategy.

For example a paints company adopts combination strategies when it augments

its offering of decorative paints to provide a greater variety to its customers
(stability) and increases its product range to add industrial and automotive paints
(expansion), and closes down the paint-contracting division (retrenchment).
Reasons for following Combination strategies

1. When the organization is large and faces a fast changing complex

environment.
2. The company’s products are in different stages of the life-cycle.
3. A combination strategy is suitable for a multiple-industry firm at the
time of recession.
4. The combination strategy is best for firms, divisions of which perform
unevenly or do not have the same future potential.
Business Level Strategy: Business Level Strategies are the course of action adopted by a firm for each of its
business separately to serve identified customer groups and provide value to the customer by satisfying their
needs.
Types of Business-Level Strategies

 Cost Leadership
Organizations that pursue Cost Leadership gain a competitive advantage by reducing operating
costs to a level below the industry average. Business owners then pass these savings on to their
customers with low-priced merchandise or services, or maintain average pricing to increase their
profit margin.
 Differentiation
Companies that leverage a Differentiation business-level strategy win market share and defend
higher pricing by offering unique product or service features that are valued by their customers.

• Focus
Focus strategies involve achieving Cost Leadership or Differentiation within niche markets in
ways broadly-focused players can not.
Functional Level Strategy:

Functional Level Strategy can be defined as the day to day strategy which is formulated to assist in the
execution of corporate and business level strategies. These strategies are framed as per the guidelines given by
the top level management.
•Functional Level Strategy is concerned with operational level decision making, called tactical decisions, for
various functional areas such as production, marketing, research and development, finance, personnel and so
forth.

•As these decisions are taken within the framework of business strategy, strategists provide proper direction and
suggestions to the functional level managers relating to the plans and policies to be opted by the business, for
successful implementation.
Functional Areas of Business: There are several functional areas of business which require strategic decision making,
discussed as under:
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