Exploring the Principal Grand Strategies for Business Success

What are Grand Strategies?

Grand strategies, often called master or business strategies, provide basic direction for strategic actions Indicate the time period over which long-range objectives are to be achieved Firms involved with multiple industries, businesses, product lines, or customer groups usually combine several grand strategies Any one of these strategies could serve as the basis for achieving the major long-term objectives of a single firm.

Four Alternatives of Grand Strategies  

Stability Growth Combination Retrenchment

1. Stability - To remain the same size or to grow slowly and in a controlled fashion
2. Growth –
• Internal growth: It can include development of new or changed products.
• External growth: Its typically involves diversification – businesses related to current product lines or into new areas
3. Combination - It involves deliberate use of different strategies for different units or divisions at the same time or chronological use of different strategies over the period of time.
4. Retrenchment - The organization goes through a period of forced decline by either shrinking current business units or selling off or liquidating entire businesses.

Grand strategies, often called master or business strategies provide basic direction for strategic actions. They are the basis of coordinated and sustained efforts directed toward achieving long-term business objective. Grand strategies indicated the time period over which long range objective are to be achieved. So, it can be defined as a comprehensive general approach that guides a firm's major actions. 

Business managers can use tools and techniques such as Grand Strategies selection Matrix or Grand Strategies Cluster or Matched - Pair Analysis to Design means that will be used to achieve long term objective.

The model for grand strategy cluster is shown in figure below. The technique is based on the idea that the situation of business in terms of the growth rate of the general market and the firm's competitive position in that market. When these factors are considered simultaneously, a business can be broadly categorized in one of four quadrants. 

1. Strong Competitive Position in a rapidly growing market, 
2. Weak Position in a rapidly growing market , 
3. Weak Position in a slow growth market 
4. Strong Position in a slow growth market.

Model of grand strategy cluster

The model for Grand Strategy selection Matrix is shown below. The basic idea underlying the matrix is that is that two variables are of central concern in the selection Process 

1. The Process Principal Purpose of the grand strategy
2. The choice of an internal or external emphasis for growth or profitability.

GRAND STRATEGY SELECTION MATRIX

The Principal Grand strategies 

1. A concentrated growth strategy - It involves focusing on increase market share in existing market. This strategy is also sometime called concentration or market dominance strategy. In stable environment where demand growing, concentrated growth is a low risk strategy. Concentration may involve increasing the rate of use of a product by current customers, attracting competitor's customers; and attracting non users or new customers. for example - XYZ company's Market analysis shows that the decline is fueled by negative publicity, perception of poor customer service, and concern about the price versus the value of the company's service, given the wide array of do it yourself alternatives. XYZ's approach would be increasing market share hinges on addressing quality, price and value issues discontinuing products that the public or environmental authorities perceives as unsafe and improving the quality of its workforce.
2. A market development strategy - It involves selling present products or service in new markets. Manager takes action like targeting promotions, opening sales offices and creating alliance to operationalize a market development strategy. For examples - Du Pont used market development when it found a new application for Kevlar, an organic material that police, security, and military personnel had used primarily for bulletproofing. Kevlar now is being used to refit and maintain wooden hulled boats, since it is lighter and stronger than glass fibers and has 11 times the strength of steel.
3. A product development strategy - It focuses on substantial modification of existing products developing new products for currently served markets and customers. The focus is often on products/service related to current offering. Sometimes quality variations or new models or sizes of products are developed. As part of product development strategy, a company may emphasize getting a product to market quickly, developing a product that can be sold at the lowest cost, or developing a product that has the highest level of product performance, or developing a product with high levels of produce quality and reliability. In some situations, product development is constrained by a development budget. For example - Pepsi changed its strategy on beverage products by creating new products to follow the industry movement away from mass branding. This new movement was designed to attract a younger, hipper customer segment. Pepsi's new products include a version of Mountain Dew, called Code Red and new Pepsi brands called Pepsi Twist and Pepsi Blue.
4. A vertical integration - It is a grand strategy that involves acquiring firms that supply it with inputs (such as Raw materials) or are customers for its outputs (such as warehouser's for finished products). The transaction may involve stock purchase, buying assets, or stock swap. Backward vertical integration involves acquiring a firm at an earlier stage of the value chain. Forward integration involves acquiring a firm at a later stage in the value chain. For example - Amoco emerged as North America's leader in natural gas reserves and products as a result of its acquisition of Dome Petroleum. This backward integration by Amoco was made in support of its downstream businesses in refining and in gas stations, whose profits made the acquisition possible.
5. A concentric diversification - It is one type of strategic thrust. Concentric diversification focuses on creating a portfolio of related businesses. The portfolio is usually developed by acquisition rather than by internal new business creation. Product market synergies are a major issue in creating the portfolio of related strategic business units (SBUs) for example - Head Ski initially sought to diversify into summer sporting goods and clothing to offset the seasonality of its "Snow" business.
6. A conglomerate diversification – It involves acquiring a portfolio of business based on financial performance criteria. Product market synergies are not an issue.
7. A horizontal integration strategies - It focus on acquiring firms in current markets or in new markets. such acquisition eliminate competitors and provide the acquiring firm with access to new markets. a horizontal integration strategy can support a concentrated growth or a market development strategy. For example - N.V.Home's purchase of Ryan Homes another example Nike's acquisition in the dress shoes business.
8. A divestiture - It is a strategic action that involves selling a major component of a firm or the entire firm. the entity is sold as an ongoing business.
9. Liquidation - It involves selling parts of a firm or entire firm at auction or to a private buyer for its tangible asset value. The intent is not to operate an ongoing business. Contrast this strategic action with divestiture. For example - Columbia Corporation, a $ 130 million diversified firm, liquidated its assets for more cash per share than the market value of its stock.
10. A turnaround Strategy - It is used when firms are struggling financially. The strategy usually involves cost reduction and asset reduction. manager reduce costs by reducing staff, leasing rather than buying equipment, reducing marketing expenditures or R&D. assets are also often sold to free up cash for new initiative. in some cases assets are sold and then leased back by the company from the purchaser of the asset. Once costs are reduced and assets have been sold to generate cash a positive growth or diversification strategy must be implemented to complete the turnaround.
11. An innovation strategy - It involves the creation of a new device or process based upon study, research and experimentation. An innovation strategy involves new processes, business ideas, and more basic R&D than is usually associated with a product development strategy. In business setting, innovation may involve creation of new products and or services. Innovation is usually paired with other strategies as a supporting or complementary strategy firms find it profitable to make innovation their grand strategy. They seek to reap the initially high profits associated with customer acceptance of a new or greatly improved product. Then, rather than face stiffening competition as the basis of profitability shifts from innovation to production or marketing competence, they search for other original or novel ideas.
12. A joint venture - It involves creating complementary synergies. Occasionally two or more capable firms lack a necessary component for success in a particular competitive environment. For example no single petroleum firm controlled sufficient resources to construct the Alaskan Pipeline. Nor was any single firm capable of processing and marketing all of the oil that would flow through pipeline the solution was a set of joint venture, which is commercial company (children), created and operated for the benefits of the co-owner (parents). These cooperative arrangements provided both the funds needed to build the pipeline and the processing and marketing capacities needed to profitably handle the oil flow.