Strategic Options

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Business strategy moves, changes, develops over time, more quickly than ever in some industries.  But what are the options?

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Directions

Consolidation

This is about maintaining market share or maintaining profitability.  Companies may consider withdrawing from some market sectors or downsizing to meet changing demands.  Consolidation builds on existing strengths normally through continued investment and innovation (limited).  As a strategy its low risk because its works by exploiting existing strategies.

Market Penetration

I’m not sure I need say more but… this is about gaining market share, exploiting current products/services and existing resources.  Again a low risk strategy.

Product Development

This works by leveraging knowledge of customer needs, so by implication you need to know what the customer considers is a need.  This strategy is about research and then development of products and services.  This is a medium risk strategy reliant on exploiting current strengths and market knowledge.

Market Development

This strategy is often adopted when current markets are saturated.  The opportunities are usually centered on geographical spread, entering new segments or new uses for existing products and services.  Again this works on exploiting current products and services.  The strategy offers better returns potentially but carries a medium risk.

Diversification

This is a strategy for when current markets are saturated or declining.  Out with the old and in with the new.  But , this strategy will often mean developing new core competencies in new areas.  There is potential for much better returns but the risk is also higher.  Nonetheless ‘assets will sweat’ and managing this process can be disheartening.

Methods

Internal Development

Be the first in the field, there are no potential partners or acquisitions.  This will mean development of competencies but because of the relatively slow process cost is spread.  This method presents cultural ease.

Mergers and Acquisitions

This offers speed to market, supply and demand already being established. Competencies and economies of scale are quickly reached.  Growth and market share will very quickly increase but there is the issue of cultural clash to overcome.

Joint Development

Again speed to market is an advantage but you also get a very quick handle on industry norms.  Competencies can be seen as complementary and partners see the process as an opportunity to learn from each-other.  Risk is diluted through this method but work on trust is essential.

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