The Grand Strategies are the corporate level strategies designed to identify the firm’s choice with respect to the direction it follows to accomplish its set objectives. Simply, it involves the decision of choosing the long term plans from the set of available alternatives. The Grand Strategies are also called as Master Strategies or Corporate Strategies.
There are four grand strategic alternatives that can be followed by the organization to realize its long-term objectives:
- Stability Strategy
- Expansion Strategy
- Retrenchment Strategy
- Combination Strategy
The grand strategies are concerned with the decisions about the allocation and transfer of resources from one business to the other and managing the business portfolio efficiently, such that the overall objective of the organization is achieved. In doing so, a set of alternatives are available to the firm and to decide which one to choose, the grand strategies help to find an answer to it.
Business can be defined along three dimensions: customer groups, customer functions and technology alternatives. Customer group comprises of a particular category of people to whom goods and services are offered, and the customer functions mean the particular service that is being offered. And the technology alternatives covers any technological changes made in the operations of the business to improve its efficiency.
Definition: The Stability Strategy is adopted when the organization attempts to maintain its current position and focuses only on the incremental improvement by merely changing one or more of its business operations in the perspective of customer groups, customer functions and technology alternatives, either individually or collectively.
Generally, the stability strategy is adopted by the firms that are risk averse, usually the small scale businesses or if the market conditions are not favorable, and the firm is satisfied with its performance, then it will not make any significant changes in its business operations. Also, the firms, which are slow and reluctant to change finds the stability strategy safe and do not look for any other options.
Stability Strategies could be of three types:
- No-Change Strategy
- Profit Strategy
- Pause/Proceed with Caution Strategy
To have a better understanding of Stability Strategy go through the following examples in the context of customer groups, customer functions and technology alternatives.
- The publication house offers special services to the educational institutions apart from its consumer sale through the market intermediaries, with the intention to facilitate a bulk buying.
- The electronics company provides better after-sales services to its customers to make the customer happy and improve its product image.
- The biscuit manufacturing company improves its existing technology to have the efficient productivity.
In all the above examples, the companies are not making any significant changes in their operations, they are serving the same customers with the same products using the same technology.
is adopted by an organization when it attempts to achieve a high growth as compared to its past achievements. In other words, when a firm aims to grow considerably by broadening the scope of one of its business operations in the perspective of customer groups, customer functions and technology alternatives, either individually or jointly, then it follows the Expansion Strategy.
The reasons for the expansion could be survival, higher profits, increased prestige, economies of scale, larger market share, social benefits, etc. The expansion strategy is adopted by those firms who have managers with a high degree of achievement and recognition. Their aim is to grow, irrespective of the risk and the hurdles coming in the way.
The firm can follow either of the five expansion strategies to accomplish its objectives:
- Expansion through Concentration
- Expansion through Diversification
- Expansion through Integration
- Expansion through Cooperation
- Expansion through Internationalization
Go through the examples below to further comprehend the understanding of the expansion strategy. These are in the context of customer groups, customer functions and technology alternatives.
- The baby diaper company expands its customer groups by offering the diaper to old aged persons along with the babies.
- The stockbroking company offers the personalized services to the small investors apart from its normal dealings in shares and debentures with a view to having more business and a diversified risk.
- The banks upgraded their data management system by recording the information on computers and reduced huge paperwork. This was done to improve the efficiency of the banks.
In all the examples above, companies have made significant changes to their customer groups, products, and the technology, so as to have a high growth.
is adopted when an organization aims at reducing its one or more business operations with the view to cut expenses and reach to a more stable financial position.
In other words, the strategy followed, when a firm decides to eliminate its activities through a considerable reduction in its business operations, in the perspective of customer groups, customer functions and technology alternatives, either individually or collectively is called as Retrenchment Strategy.
The firm can either restructure its business operations or discontinue it, so as to revitalize its financial position. There are three types of Retrenchment Strategies:
To further comprehend the meaning of Retrenchment Strategy, go through the following examples in terms of customer groups, customer functions and technology alternatives.
- The book publication house may pull out of the customer sales through market intermediaries and may focus on the direct institutional sales. This may be done to slash the sales force and increase the marketing efficiency.
- The hotel may focus on the room facilities which is more profitable and may shut down the less profitable services given in the banquet halls during occasions.
- The institute may offer a distance learning programme for a particular subject, despite teaching the students in the classrooms. This may be done to cut the expenses or to use the facility more efficiently, for some other purpose.
In all the above examples, the firms have made the significant changes either in their customer groups, functions and technology/process, with the intention to cut the expenses and maintain their financial stability.
means making the use of other grand strategies (stability, expansion or retrenchment) simultaneously. Simply, the combination of any grand strategy used by an organization in different businesses at the same time or in the same business at different times with an aim to improve its efficiency is called as a combination strategy.
Such strategy is followed when an organization is large and complex and consists of several businesses that lie in different industries, serving different purposes. Go through the following example to have a better understanding of the combination strategy:
* A baby diaper manufacturing company augments its offering of diapers for the babies to have a wide range of its products (Stability)and at the same time, it also manufactures the diapers for old age people, thereby covering the other market segment (Expansion). In order to focus more on the diapers division, the company plans to shut down its baby wipes division and allocate its resources to the most profitable division (Retrenchment).
In the above example, the company is following all the three grand strategies with the objective of improving its performance. The strategist has to be very careful while selecting the combination strategy because it includes the scrutiny of the environment and the challenges each business operation faces. The Combination strategy can be followed either simultaneously or in the sequence.