Definition of Strategy:

Strategy is a game plan.

People also call it as long term blueprint of an organisation.

Strategy depicts the desired image, direction and destination of

• what a company wants to be,
• what it wants to do and
• where it wants to go.

Why do businesses need strategy?

Strategy is meant to fill in the need of organisations for a sense of dynamic direction, focus and cohesiveness.

Businesses operate in a dynamic and often hostile environment. Strategies provide an integral framework for management and negotiate their way through this complex and turbulent external environment.

Strategy seeks to relate the goals of the organisation to the means of achieving them.

A company’s strategy is the game plan that management follows to stake out market position and conduct its operations.

A company’s strategy consists of the combination of competitive moves and business approaches that managers employ to please customers, compete successfully and achieve organisational objectives.

The Generic Strategies:

According to Glueck and Jauch there are four generic ways in which strategic alternatives can be considered.

These are

• stability,
• expansion,
• retrenchment and
• combinations.

Description of different strategic alternatives:

(i) Stability strategies:

One of the important goals of a business enterprise is stability.

A business uses stability strategies:

• to safeguard its existing interests and strength,
• to pursue well established and tested objectives,
• to continue in the chosen business path,
• to maintain operational efficiency on a sustained basis,
• to consolidate the commanding position already reached, and
• to optimise returns on the resources committed in the business.

(ii) Expansion Strategy:

Expansion is a promising and popular strategy that tends to be equated with dynamism, vigor, promise and success.

It is often characterised by significant reformulation of goals and directions, major initiatives and moves involving investments, exploration and onslaught into new products, new technology and new markets, innovative decisions and action programmes and so on.

Expansion strategy is implemented by redefining the business by adding the scope of business substantially increasing the efforts of the current business.

Expansion includes diversifying, acquiring and merging businesses.

(iii) Retrenchment Strategy:

Retrenchment may be called as an another name of curtailing operations or retreating.

In business parlance retreat is not a bad proposition. It may save the enterprise's vital interests, minimise the adverse environmental effects.

Retrenchment or retreat becomes necessary or expedient for coping with particularly hostile and adverse situations in the environment.

Retrenchment strategy is generally opted for when any other strategy is likely to be suicidal.

It results in regrouping and recouping of the resources before a fresh assault and ascent on the growth ladder is launched.

A business may opt for retrenchment strategy for coping with hostile and adverse situations in the business environment. A business organisation can redefine its business by divesting a major product line or market.



(iv) Combination Strategies:

A business may use all the above three strategies together.

In other words, if a business follows all the three strategies - Stability, expansion or retrenchment strategies simultaneously then it is said to be following combination strategy.

In theory, these three strategy may look mutually exclusive. e.g. - You may ask how can a business follow expansion and retrenchment strategy together?

In reality, big business houses may have different verticals eg Reliance group has Jio and Oil. The management may decide to have expansion for Jio and stability for Oil.

So, strategically, It is possible to adopt a mix to suit particular situations.

eg an enterprise may seek stability in some areas of activity, expansion in some and retrenchment in the others. Retrenchment of ailing products followed by stability and capped by expansion in some situations may be thought of. For some organisations, a strategy by diversification and/or acquisition may call for a retrenchment in some obsolete product lines, production facilities and plant locations. in pursuit of their mission.