Concentrated, integrated and diversified growth and downsizing strategies. Integrated Growth and Diversification Strategies

External growth strategies.

External growth strategies involve the inclusion of new areas in the business portfolio, the use of which ensures a synergistic effect due to:

Marketing (single client, single geographical territory, single sales channels, single supplier, etc.)

Production (single production facilities, similar technologies, R&D, etc.)

Management (unified system of management, management, etc.)

Such correspondences in strategic management are called strategic fits (SC).

Related integration (diversification) presupposes the presence of strategic correspondence between areas of activity.

Unconnected means its absence.

Example of marketing compliance. The cost of creating a brand has always been a significant share of an organization's intangible assets. Yes, the cost brands The Coca-Cola and Marlboro companies are valued at more than $13 billion each. If an organization has a recognized trademark, it can use it to promote a new product and, in any case, will spend significantly less resources on promotion.

An integrated growth strategy is the process of acquiring or incorporating into the enterprise new production facilities included in the technological production chain.

Feasibility (prerequisites) of use

– usually for firms in strong business, that is, when there is no need to expand the market or improve the product;

An enterprise can increase its profitability by controlling strategically important links in the chain of logistics, production and sales of products.

Depending on the direction of integration and the position of the enterprise in the production chain, the following varieties are distinguished:

A. Reverse vertical integration:

The enterprise takes over the functions that were previously performed by suppliers, that is, it establishes control over the sources of raw materials and the production of components (creates subsidiaries, acquires companies that already provide supplies, etc.).

The goal is to protect a strategically important source of supply or gain access to new technology, important for basic activities.

B. Direct vertical integration (forward):

Acquiring or strengthening control over the structures located between the enterprise and the end consumer - systems for distribution and sale of goods.

This type of strategy is used when a company cannot find intermediaries with a high-quality level of customer service or seeks to know its customers better.

Example. Moscow meat processing plant "Mikoms" - its share accounted for about 30% of the market. However, during the year it dropped to 17%. The strategy is to cut out intermediaries and build two of our own markets.

C. Horizontal integration:

This is an association of enterprises operating and competing in the same field of activity. the main objective– strengthening the firm’s position in the industry by absorbing certain competitors or establishing control over them.

Horizontal consolidation allows for economies of scale in production. expand the range of goods and services and thus gain an additional competitive advantage. Often the main reason for horizontal integration is the geographical expansion of markets. In this case, companies that produce similar products but operate in different regional markets merge.

A downsizing strategy involves a company selling or closing one of its divisions in order to long time change business boundaries. This may be necessary when production does not fit well with others, or there is a need to obtain funds for the development of more promising forms of business or for organizing new directions in it. The main idea of ​​the cost reduction strategy is to reduce costs, for which appropriate measures are taken to reduce costs and increase labor productivity. The implementation of this strategy may even require the use of such unpopular measures as reduction in hiring and even dismissal of personnel, cessation of production profitable products and closure of profitable facilities.

Benchmark Growth Strategies

• 1 Role reference strategies growth in business
• 2 Definition of the concept
• 3 Concentrated growth strategy and its variations
• 4 Integrated growth strategy and its types
• 5 Diversified growth strategy:
• 6 Centered diversification strategy and its varieties
• 7 Four types of reduction strategies
• 8 Links

The role of reference growth strategies in doing business A company's strategy is one of the key factors in its development. A clear understanding of the goals of the activity and the ways to achieve them is an indispensable condition for the existence of a long-term and successful business.
Among the strategic directions that the company implements in the course of its activities, the leading place is given to reference development strategies.

Strategies for concentrated, integrated and diversified growth

Attention

As a result of the implementation of this strategy, the company reduces its dependence on fluctuations in prices for components and requests from suppliers. Ø The strategy of forward vertical integration is expressed in the growth of the company through the acquisition or strengthening of control over the structures located between the company and the end consumer, namely distribution and sales systems. This type of integration is very beneficial when intermediary services are expanding significantly or when the company cannot find intermediaries with a high-quality level of work.

Diversified growth strategies are implemented when a company can no longer develop in a given market with a given product within one industry.
The horizontal diversification strategy involves searching for growth opportunities in the existing market through new products that will be produced using new technology that differs from those already used in production. In this case, it is advisable to turn to the release of technologically unrelated products that would use the existing capabilities of the company and could be accompanying products already produced.

Info

The conglomerate diversification strategy is one of the most expensive and difficult to implement. Its success depends not only on the availability of funds necessary to finance the implementation of the strategy, but also on the competence of the company’s personnel, seasonality in the life of the market, etc.

The essence of the strategy is that the company should expand through the production of new technologically unrelated products that are already produced, which are sold in new markets.
This includes strategies that involve changing a product or market. If these strategies are followed, the company tries to improve its product, or start producing a new one, without changing its industry.
Specific types of concentrated growth strategies: a) a strategy for strengthening market positions, in which the company does everything to win in a given market with a given product best positions. b) market development strategy: consists of searching for new markets for an already produced product, i.e. the product is the same, the market is changing. c) product development strategy: involves solving the problem of growth through the production of a new product, which will be sold in a developed market, i.e. the same market, a new product. 2) integrated growth strategy. These types of business strategies are associated with the expansion of the company by adding new structures.

Strategies for concentrated, diversified and integrated growth

In doing business, a situation may arise when a company is forced not to expand, but to reduce production. In these cases, four types of strategies are resorted to, which involve targeted and planned reductions.
Four Types of Downsizing Strategies A liquidation strategy essentially shuts down a company's operations because. By various circumstances she cannot continue to run the business. The goal of the Harvest strategy is to abandon the long-term view of the business and eventually stop doing it altogether.

The strategy is applied to a business that has no prospects and therefore cannot be sold. But at the same time, reducing procurement costs and labor, trying to get maximum income from the sale of an existing product, the “Harvest” strategy allows you to receive cumulative income for some time.

PreviousPage 5 of 9Next ⇒ There are three main types of strategies: limited growth strategy, growth strategy, reduction strategy. IN general case, four main types of strategies can be developed and implemented at an enterprise: 1.

Concentrated growth strategies – strategy for strengthening market positions, market development strategy, product development strategy. 2. Integrated growth strategies – backward vertical integration strategy, forward vertical integration strategy.

3. Diversification growth strategies – centered diversification strategy, horizontal diversification strategy. 4. Reduction strategies – elimination strategy, harvesting strategy, reduction strategy, cost cutting strategy. The company's growth strategy is to increase the organization, often through penetration and capture of new markets.
Exit strategies (anti-crisis strategy) (loss of competitive advantage) focuses on a gradual reduction in production volumes; sales volumes; market shares; product promotion channels; number of factories; equipment. - Cost reduction - savings (organizational changes, asset reduction, cost reduction, measures to create profits, financial strategies (N. change in the structure of debt obligations). - Pivot (price changes; reorientation (concentrating efforts on specific customers and specific products); development of a new product; rationalization of the product range (reduction)). - Exit - divestment (franchise agreement, transfer of contracts, sales (to a subsidiary or division of the parent company)). - Liquidation - complete cessation of activity. Separation (exit) strategy ) is used for market segments and products that are at the stage of withering.
A company can pursue an integrated growth strategy, both through acquisitions and by expanding its activities from within. In both cases, this results in a change in the position of the enterprise within the given industry.

Integrated growth strategies can be divided into 2 main types: - reverse vertical integration strategy. It is focused on the growth of the company through acquisitions or increasing the level of control over suppliers.

A company can create subsidiaries that carry out supplies, or acquire companies that already carry out supplies. Implementing a reverse vertical integration strategy can enable a firm to achieve very favorable results.

This is due to reduced dependence on fluctuations in prices for product components, as well as requests from suppliers.
Defensive strategies consist primarily of strengthening previously achieved positions and taking adequate measures against a competitor’s offensive strategy, as well as maintaining prices for their products at a level not exceeding the corresponding prices of competitors, concluding exclusive agreements with distributors and dealers, and training organizational personnel. consumers on a preferential basis, increasing and shortening delivery times, etc. 40. Formation of enterprise strategy. The essence and content of maintenance strategies and care strategies.

Strategy formation follows the stage of strategic analysis and is aimed at choosing one of the strategic alternatives. The strategy formation process includes three stages: the formation of the overall strategy of the company; formation of a competitive strategy; definition of function

company strategies. Development strategies include: growth, maintenance, care, and combined strategies.
A distinctive feature of this strategy is that it is in the nature of temporary or short-term measures aimed, as a rule, at eliminating small sources of costs. In practice, a company can simultaneously implement several strategies.

This is especially common in multi-industry companies. At the same time, a certain consistency in the implementation of strategies can be observed.

In this case, the company is considered to be pursuing a combined strategy. Typical combination strategies can be a response to typical change external environment. One example of such a strategy is the three stages of startup development (creation of technology, development of the sales market, entry into the market valuable papers). Many consistent combined strategies can be formulated from an analysis of the development of companies that fall into the transition phases described in the article Innovation_Cycle.

Strategy is not just a buzzword. It is a train of thought and a course of action that, if done correctly, can change almost any business situation for the better.

An integrated growth strategy is used when strong company strives to develop by expanding its structure. This could be growing from within or purchasing a third-party business. Let's look at the features of the different options.

There are two main types of integrated growth strategies:

1. Reverse vertical integration strategy. It is usually used in manufacturing to expand the company's sphere of influence within the industry and reduce the number of contractors with whom it has to interact.

Developing a reverse vertical integration strategy includes creating new purchasing and supply departments, acquiring companies that supply raw materials or components, and other measures.

All this allows us to reduce production costs and reduce dependence on prices set by other companies. In this scenario, an expense item automatically becomes an income item.

2. Strategy of forward-going vertical integration. It is aimed at reducing the number of intermediaries between the manufacturer and the end consumer. Measures that can be taken as part of this strategy:

• Purchase of intermediary companies;
• Recruitment of new sales specialists;
• Opening of our own branded stores and showrooms.

An additional effect may be a reduction in the price of a product by eliminating intermediaries from the sales chain.

The goal of this strategy is to shorten the path that a product takes from the moment of production to the moment it reaches the end consumer. The goal is to expand the company’s sphere of influence and increase business profitability.

Let's say the difference between a backward vertical integration strategy and a forward vertical integration strategy is now clear to you. Then the next question arises:

How to choose the most suitable strategy for your business?

Not many people have strategic thinking, but an entrepreneur cannot do without it.

You need to be able to look at a business idea from the outside, obtain and analyze market data, collect information about the target audience, and navigate the situation in a specific industry.

And also - put forward hypotheses and have good intuition. In practice, it usually turns out that a whole set of decisions becomes a growth strategy.

The integrated growth strategy is suitable for companies that want to expand and have the necessary resources to do so.

If you are interested in entrepreneurship, try your hand at the 10-day business game “Your Start”, in which you will start making money from your business, using your talents and strengths!

General characteristics of the integrated growth strategy

In practice, business strategies are used, which are called basic or reference.

Definition 1

The basic strategy is the fundamental development strategy of the company, which determines the growth, reduction or fixation of the company’s activities at the same level. Growth or contraction of business in in this case is assessed based on the volume of sales of goods not in value terms, but in physical terms.

Benchmark strategies are based on five main elements:

• product;
• market;
• industry;
• the company's position within the industry;
• technology.

One of the basic strategies is the integrated growth strategy. It is used in cases where a strong company seeks to develop by expanding its structure. This could be internal growth or the purchase of another business.

Definition 2

An integrative growth strategy is a business strategy that involves adding new entities (business units) through acquisition or expansion from within.

In both options, the company's position within the industry changes. Organizational changes are also being made at the enterprise.

There are several options for an integrated growth strategy:

1. reverse vertical integration strategy;
2. forward-looking vertical integration strategy;
3. horizontal integration strategy;
4. strategy of combined actions for integration.

Reverse vertical integration strategy

Backward vertical integration occurs when a company seeks to gain control of resource-based businesses. Such control guarantees the stability of supply, quality and cost of the final product. This approach also allows a vertically integrated corporation to increase its own volume of surplus value.

A reverse vertical integration strategy or a regressive strategy focuses on the growth and development of a company through the acquisition or strengthening of control over suppliers.

Definition 3

Regressive integration is getting an answer to the question: produce raw materials for manufacturing products yourself or purchase them from suppliers? This form of integration is used to stabilize or protect strategically important sources of supply and reduce the dependence of enterprises on suppliers.

This policy is effective as a way to combat unstable supplies and dependence on large suppliers. In some cases, such backward integration is used by companies when their suppliers cannot provide sufficient quality of raw materials.

Benefits of a backward integration strategy:

• the supplied resources constitute the bulk of the cost of the company's finished product;
• easy development of technological skills;
• integration into a large number of links in the value chain leads to the possibility of differentiation due to the addition of characteristics to the product that enhance its significance for the consumer;
• the possibility of economies of scale in production for supply companies, since the required production volume is too large.

Forward Vertical Integration Strategy

This type of integration means reducing the number of intermediaries between the producer and the final buyer. The strategy of forward-going vertical integration allows the company to outbid intermediary companies and hire new personnel who will be involved in sales of goods. You can also open branded outlets.

Note 1

Another name for strategy is progressive. It is expressed in the growth and development of the enterprise by strengthening control over business units that are located between the company and end customers, i.e. over product distribution systems.

Lack of control over sales can lead to the accumulation of inventory balances in the warehouse and frequent underloading production capacity. This in turn leads to instability in the production process and the impossibility of achieving savings.

This form of integration is effective when the market is oversaturated with intermediary firms and it is difficult for a company to find a reliable partner.

Horizontal integration strategy

Note 2

The horizontal integration strategy involves the growth and development of a company through the acquisition of competing enterprises, that is, the purchase of assets of organizations that specialize in the same industry value chain.

Companies can operate in different market niches. Integration creates new competitive advantages.

The goal of horizontal integration is to strengthen the position of an enterprise in an industry through acquisition, merger with or control of competitors.

Reasons for choosing a horizontal integration strategy:

• the connection between horizontal integration and industry growth;
• enhancing competitive advantage through economies of scale;
• surplus financial and labor resources allows you to manage the merge.

Advantages of a horizontal integration strategy:

1. economies of scale;
2. territorial expansion of the market;
3. minimizing the risk of competition;
4. expansion of the range of goods and services.

Strategy of combined actions for integration

This strategy involves strengthening control over both suppliers and production structures. In addition, companies carry out simultaneous acquisitions and mergers with competing companies.

Note 3

Combined strategies are usually used by diversified companies. Several strategies can be implemented simultaneously. Enterprises follow a certain consistency in the implementation of selected growth and development strategies.

Combining horizontal and vertical integration strategies allows the company to gain complete control over intermediary structures, suppliers and competitors.

In some cases, a combined strategy is called a portfolio strategy, since it determines the level and nature of the company’s investment assets and establishes the size of investments in each of the business units. This means the formation of a certain composition and structure of the enterprise’s investment portfolio.

An organization's growth strategies are determined based on several principles: what the enterprise can do within its field of activity, what it can do in conjunction with other industries, and how it will manifest itself in development in an unfamiliar area. Based on this, management can plan opportunities and ways to achieve goals and improve performance. In marketing, there are several types of company growth strategies.

Concentrated growth strategy

This variety is divided into three subtypes: opportunities for market development, the need to strengthen one’s position in it and the development of the directly produced product.

The market development strategy is aimed at improving the process of promotion and sales of an already mature product. This process also includes the search for new sales channels and research into the possibility of introducing products into a related segment.

The second subtype involves increasing sales volume and consolidating a certain product as a positional unit. To achieve a positive result, the development of a marketing campaign will be required, which should lead to sales promotion.

As for the strategy of concentrating growth in the area of ​​promoting a specific product, here, first of all, the manufacturing company must be sure that the end consumer will need the proposed product. To achieve this, a whole range of measures must be developed to modernize manufactured products, enhance the product’s advantages over competitors and maintain quality at the proper level.

Growth strategy of the company (enterprise)

In general, we can say that the growth strategy of any company depends not only on its mission and goal, but also on the resources that ensure its functioning. First of all, you should decide at what stage of development the organization is in this moment. And only after this can one identify those directions and scenarios according to which a strategic development scenario can be written. As a rule, it involves certain financial investments, as well as the development of marketing strategies aimed at recognizing a product or brand.

Integrated growth strategy.

This strategy consists of strengthening control over the work of third-party interacting organizations or counterparties. To control the work of suppliers, a company can buy a manufacturing plant. In this case, bureaucracy and possible risks from dishonesty of partners will be minimized. This is called regressive integration. The company can also tighten the system for distributing its products among intermediaries, for example, by acquiring a controlling stake in the distribution company. In marketing, this phenomenon is called progressive integration. The fight against competitors by acquiring them into ownership is called horizontal integration.

Limited growth strategy

A limited growth strategy is the least risky way to improve an organization's profitability. It consists of setting and achieving new goals, building on what has already been achieved previously. Typically, this practice is used when a company already has many years of successful experience in promoting its products, and an increase in sales volume is associated with a change in external economic factors, such as inflation, for example.

Diversified growth strategy

This strategy implies the development of a company outside its field of activity, the development of new industries, but at the same time using accumulated experience and knowledge in the event that maximum limit development in its industry has already been achieved by the organization.

There are three types of strategic development:

• Concentric diversification - filling the assortment with similar existing products to attract increased attention the end consumer.
• Horizontal diversification- release of products that are not related to those already presented by the company, but may well be of interest to the same target audience.
• Conglomerate diversification - transition to completely the new kind production and final product, without changing the brand.

Economic growth strategy

The economic growth strategy implies a regular influx of investment, otherwise losses may exceed profits. Here, both sponsorship or partner financial injections and an increase in monetary potential by attracting credit funds can be used. The result of additional cash flows into the organization’s assets should be an expansion of the product range, as well as measures aimed at increasing customer loyalty to an already well-known brand.

Intensive growth strategy

This type of strategic development implies the active introduction of manufactured products into the market, provided that the organization’s potential and resources have not been fully used. An increase in sales volume can be achieved by increasing the influx of customers or introducing additional functionality for a product already available on the market.

This can also be achieved by luring potential and regular customers from competing organizations. There are many ways to do this: reducing prices, providing additional services, etc. Expanding the market segment can also be part of this type of strategy. For example, expanding sales regions by opening company branches in other cities.

Basic growth strategy

The basic growth strategy includes several stages:

• Proper distribution of resources, both human and financial.
• Minimizing costs and risks when performing strategic tasks.
• Internal corporate reorganization.
• Attracting additional investments, merging several companies into a single company.
• Development of a unified management strategy.

Ansoff's growth strategies

Igor Ansoff (American mathematician, creator of the theory strategic management) at one time proposed the following options for the development of the organization.

• Market penetration. Despite the name, we're talking about about an already implemented product designed for a very specific target audience. The goal of this stage is to attract the buyer specifically to the products of a specific organization through marketing activities, as well as a number of other actions: reducing prices, offering additional services, etc.
• Market development. This means expanding the sales market both geographically and segmentally.
• Product development. This means improving the product, releasing it under a new brand, expanding the range of product varieties and releasing new items.
• Diversification. This is the introduction of a new product into new market segments. The riskiest option. It is not a fact that the new products will be to the taste of the end consumer.

Example of a company and business growth strategy

One of the most striking examples of a growth strategy is the development of the Pepsi company. In order to increase sales of the drink and lure some customers away from its main competitor, Coca-Cola, Pepsi decided to combine its activities with an equally popular company, Frito-Lay, which produces Lace and Cheetos chips.

The calculation was extremely simple: after eating salty chips, you always want to drink. Since the range of soft drinks is quite extensive, maintaining a leading position in sales is extremely difficult. Therefore, it was decided first to partner and then to merge the two conglomerates to stimulate sales of the products of both companies.