A key component of any management process is strategy. In its framework, it is considered as a long-term developed direction regarding the development of the company (in particular, the strategy concerns the scope, forms, means of its activity; the system of internal relationships between all participants; the company's position regarding the environment).
For clarity, it is worth distinguishing between such concepts as goals and strategy of the organization: the former reflect the end point of aspiration, while the latter reflect the methods and its achievement in a dynamic competitive atmosphere.
In a broad sense, the strategy is the intended general course of action for the company, following which should lead in the long term to the desired goals.
What does management face in the process of determining an effective company strategy?
At the first stage, you need to find answers to three main questions about the organization's position in the market, namely:
- What type of business is worth stopping?
- Which should be given more attention?
- Which business is worth a closer look.
A variety of company strategies according to M. Porter
The professor identifies three main areas of development of the company's behavioral strategy in the market:
1. Leadership in minimizing production costs. This type is characterized by the fact that the company reduces the level of production costs, sales of products to a minimum, as a result of which it is gaining a large market share relative to its competitors.
Characteristic features of companies using this type of strategy:
- high level of organization of production, supply;
- advanced technologies and engineering base;
- ramified system of distribution of products;
- low-grade marketing.
2. Specialization of production. The homogeneity of the process and products, the use of special equipment and specialized personnel are characteristic. Effect - consumers buy products of this company, even at an inflated price.
Typical features of firms with this strategy option are as follows:
- vast potential for R&D;
- highly qualified designers;
- quality control of products;
- effective marketing system.
3. Fixation on a separate market segment. The company does not focus on the entire market, but only on a specific group of consumers. In this situation, she can pursue either the aforementioned policy of specialization, or minimization, or both at the same time. A feature of this type of strategy is focusing on the needs of not the entire market, but the target group of consumers.
The considered types of competitive strategies allow us to solve the main problem for most companies: achieving an advantage over direct competitors. They also help in determining exactly how this can be done.
Types of business development strategies
Those that have gained a foothold in practice are called basic. They distinguish four different approaches related to the growth of the company associated with a change in the basic state of one (or several) elements, such as the market, the position of the company within the industry, product, industry, technology. Each of the above components can be in one of two states: current or fundamentally new.
The types of strategies of the first group are strategies of concentrated growth (they are associated with a change in the market for either a product or both). Following this course, companies are striving to improve their products or try to produce a new one, while remaining in the old industry.
As for the market aspect, here organizations are looking for opportunities to improve the existing market position.
First group strategies
It is customary to distinguish three types here:
- Strategy to strengthen market position (the company focuses on marketing, carries out horizontal integration - control over competitors).
- Market development strategy (search for new sales markets for the manufactured product).
- Development strategy for a previously manufactured product (transition to the production of a fundamentally new product within the framework of the old sales channel).
Second group of strategies
The benchmark is the expansion of the company through the merger of new structures. The types of business strategies of this group are referred to as integrated growth strategies. Companies resort to them in a situation where the business is fairly stable, and you can not follow the first group described above. In this case, integrated growth does not impede the long-term goals of the firm. It can be achieved through the acquisition of property, as well as expansion from the inside.
Integrated Growth Strategies
These include the following types of strategies:
- Reverse vertical integration (company growth through the introduction or strengthening of existing control over all suppliers, the creation of a number of subsidiaries for the supply).
- Forward vertical integration (the growth of an organization through the introduction or strengthening of existing monitoring over its structures located above distribution and sales systems). This type is effective in the event of a significant expansion of intermediary services or the absence of first-class intermediaries.
These are diversified growth strategies. They resort to them if companies can no longer develop in their market, with their product and within their industry.
The types of strategies in this group are as follows:
- Centered diversification (search and application of additional opportunities in the field of the production of fundamentally new products along with the existence of the old business in the central positions).
- Horizontal diversification (the search for opportunities for substantial growth of the company in the already developed market through a new product, the manufacture of which will require a different technology). Here, the organization should focus primarily on the manufacture of technologically independent products that could use the existing capabilities of the company, for example, in the supply sector. Due to the fact that the new product is focused on the target segment of the old (main) one, it should act as a companion to the already manufactured product in terms of quality characteristics. An important condition is a preliminary assessment by the organization of its own competence regarding the production of a new product.
- Conglomerative diversification (expansion of the company through the production of fundamentally new products as part of an undeveloped sales system). It is generally accepted that this is one of the most difficult development strategies from the point of view of implementing its successful implementation directly depends on numerous factors: staff competence, seasonality of the market, qualifications of managers, availability of required capital, etc.
Types of enterprise strategies by management level
A large-scale organization with a divisional type of structure most often has three levels of basic strategic decisions:
In other words, these are types of strategies, a productive result in the implementation of which can be obtained only if they interact closely. Each individual level forms a specific strategic environment for the next one (the strategic plan of the lower level is directly dependent on the limitations of higher strategies).
Three levels of key strategic decisions
The first strategy (corporate, portfolio) describes the general direction of the company's growth, the development of its activities in the supply and sales sector. It shows ways to achieve a balance of goods and services through the competent management of different types of business. Strategic decisions of this level are recognized as rather complicated due to the fact that they relate to the organization as a whole.
The corporate strategy includes the following areas:
- resource allocation based on portfolio analysis between the relevant business units;
- diversification of production as a way to reduce possible economic risks and achieve the synergy effect;
- change in corporate structure;
- merger, acquisition and entry into such an integration structure as FIGs;
- universalization of the strategic orientation of units.
An important decision made at this level is to finance products or business units exclusively on a budgetary basis.
The types of enterprise strategies in terms of management are also represented by a business (business) strategy that provides long-term competitive advantages for the business unit. It is embodied, as a rule, in business plans and reflects facts about the competition of a given enterprise within a specific product market (target segment, pricing and marketing policy, competitive advantages, etc.). In this regard, it is also mentioned, listing the types of competitive strategies. For organizations engaged in one activity, corporate strategy is identical to business.
Functional strategies are developed by the functional services and departments of the company on the basis of the above (financial, production, product, marketing strategy , etc.). Their goal is the distribution of resources of the service (department), the search for an effective behavioral course of the functional unit in the overall strategy. An example in the marketing department is focusing on finding ways to increase sales of products relative to the previous period.
Innovative strategies: interpretation, types
This is a model of a firm’s behavior in certain market conditions. This strategy is one of the organization’s management tools. Based on the behavioral aspect and content, the following types of innovative strategies are distinguished:
a) technological leadership (development of a new type of product and technology, investment in R&D, the latest management models even in situations of increased risk);
b) following the leader (application of technologies developed by other companies);
c) copying (organization of production on the basis of a license purchased from a leader or developer);
d) addiction (imitation of a new product).
Innovative strategies can also be classified by scale:
- targeting a specific niche;
- oriented to a specific market;
- targeting multiple markets;
The content distinguish the following types of innovative strategies:
- information processes;
- managerial models;
- social change.
The starting point is the mission (the formulation of the idea, because of which the company was created). On its basis, a general company development strategy is being developed.
All of the above types of innovative strategies have the following initial stage:
- assessment of the existing external environment of the company;
- characteristic features of the internal environment (scientific, technical, innovative potential , etc.).
A variety of marketing strategies
They can be classified according to the following guidelines:
1. In relation to the scale of the market:
- conquest strategy (development of a new product, consumer motivation, development of new areas of consumption of old products);
- expansion strategy (increase in output, conquering new market segments);
- monopolization of a segment (search for a target group of consumers in which there are no competitors, creating a new product for them, consumer motivation in this segment);
- retention of its market share in all target segments (development of a full range of goods of the corresponding type).
2. According to the fundamental factor that provides demand, the following types of marketing strategies are distinguished:
- high-demand goods (emphasis on the manufacture of goods necessary for most consumers without reference to group affiliation);
- high quality products (emphasis on the highest possible quality of the products manufactured on the market for this product);
- price level (pricing policy for products that are available to most);
- innovation (creating a product that has no analogues);
- customer commitment (benchmark - full satisfaction of existing customer needs);
- after-sales service (emphasis on the after-sales service package);
- additional monetary advantage (system of loans, discounts, bonuses, installments).
3. According to the degree of development of marketing policy, the following strategies are distinguished:
- adaptation to demand (marketing research, determining consumer demand, creating a product that meets the needs);
- creation of demand (the formation of the idea of a product, its development, stimulating the needs of customers in the created product).
4. In response to existing market processes, the following types of enterprise strategies (marketing) are distinguished:
- adaptation to the ongoing changes (monitoring the current state of the market and prompt response to its change);
- forecast (advance conversion based on the forecast).
5. In response to the dynamics of market conditions, marketing strategies are divided as follows:
- adjustment of production volumes (reduction or increase in output based on changes in consumer demand);
- changing the assortment (improvement of the product and its varieties, modification, creation of substitutes);
- price changes (pricing adjustment);
- change of sales channels (using various kinds of sales).
6. In relation to the product, it is customary to distinguish the following types of organization strategies (marketing):
- innovation (creating a new product, the company's desire for leadership in the relevant market);
- “Second place” (following the leader);
- improvement of competitive products (change or refinement of competitive products by complementing their advantages).
HR strategies: definition, types
This is the development by the management team of the priority and most effective course of action conducive to the achievement of long-term goals such as the creation of a highly qualified, cohesive, responsible team, subject to the existing strategic objectives of the company and its capabilities.
It is customary to distinguish the following types of personnel strategies:
- dynamic growth;
- the cycle.
According to most leading companies, the personnel strategy is an integral part of the overall economic, as well as a consequence of the long-term planning of the economic activities of companies.
Summing up, it is worth recalling once again that the main types of competitive strategies are cost leadership, focusing and differentiation.