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TYPES OF STRATEGIES-3

Objectives:
This lecture brings strategic management to life with many contemporary examples. Sixteen types of
strategies are defined and exemplified, including Michael Porter's generic strategies: cost leadership,
differentiation, and focus. Guidelines are presented for determining when different types of strategies
are most appropriate to pursue. An overview of strategic management in nonprofit organizations,
governmental agencies, and small firms is provided. After reading this lecture you will be able to know
about:
. Types of Strategies
. Intensive strategies

Intensive Strategies

Market penetration, market development, and product development are sometimes referred to as
intensive strategies
because they require intensive efforts to improve a firm's competitive position with
existing products.

Market Penetration

A market-penetration strategy seeks to increase market share for present products or services in present
markets through greater marketing efforts. This strategy is widely used alone and in combination with
other strategies. Market penetration includes increasing the number of salespersons, increasing
advertising expenditures, offering extensive sales promotion items, or increasing publicity efforts.

Guidelines for Market Penetration

Four guidelines when market penetration may be an especially effective strategy are:
. Current markets not saturated
. Usage rate of present customers can be increased significantly
. Market shares of competitors declining while total industry sales increasing
. Increased economies of scale provide major competitive advantages
There are two aspects of market penetration:

Rapid market penetration: based on two assumptions, to lower the price and promotional activities can
be increased.
Slow market penetration: also based on two assumptions, to lower the price but promotional activities
are not changed.

Market Development

Introducing present products or services into new geographic area
Market development
involves introducing present products or services into new geographic areas. The
climate for international market development is becoming more favorable. In many industries, such as
airlines, it is going to be hard to maintain a competitive edge by staying close to home.

Guidelines for Market Development

Six guidelines when market development may be an especially effective strategy are:
. New channels of distribution that are reliable, inexpensive, and good quality
. Firm is very successful at what it does
. Untapped or unsaturated markets
. Capital and human resources necessary to manage expanded operations
. Excess production capacity
. Basic industry rapidly becoming global

Product Development

Product development
is a strategy that seeks increased sales by improving or modifying present products or
services. Product development usually entails large research and development expenditures. The U.S.
Postal Service now offers stamps and postage via the Internet, which represents a product development
strategy. Called PC Postage, stamps can now be obtained online from various Web sites such as
stamps.com and then printed on an ordinary laser or inkjet printer. E-Stamp Corporation, Neopost,
and Pitney Bowes, too, are actively pursuing product development by creating their own versions of
digital stamps.

Guidelines for Product Development

Five guidelines when product development may be an especially effective strategy to pursue are:
. Products in maturity stage of life cycle
. Competes in industry characterized by rapid technological developments
. Major competitors offer better-quality products at comparable prices
. Compete in high-growth industry
. Strong research and development capabilities

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