LEADERSHIP STYLES

LEADERSHIP STYLES

 

The statement that a ‘good leader varies his/her style between authoritarian to participative (autocratic to democratic, if you like) depending on the task, the changing situation s/he encounters and changing group that s/he has to lead’ sums up rather briefly, the way an effective leader has to function. However, no effective leader ever consciously adopts a style—it comes, and indeed it must come, naturally from within. Style invariably is the reflection of the substance. It is the expression of the man and the strength and balance of his “Universal Inner Structure of Effective Leaders”. Rusi Modi while discussing leadership repeatedly emphasises “above all be yourself”.

Conceptually the changes in style which spread between the two extremes is well depicted in the model evolved by R. Tannenbaum and W. Smidt shown in Figure-1. It should be seen only as an illustration depicting the range of options available.

 

Figure 1 : Leadership Styles

 

 

 

In practical terms any change in style is merely an intuitive variation in the mix of personal example, persuasion and compulsion. Personal example is the most potent factor in the technique to inspire people to do what they are expected to do. If a leader can work 12 to 14 hours a day then the message gets across. Personal example in punctuality, integrity, honesty, frugality, courage, persistence, initiative unselfish love of people, or whatever is infectious with the Indian people. They try and live up to the standards of a leader. TO DO YOURSELF what you expect your people to do is the secret of leading people.

                                                                         

There are people and there are times when persuasion is necessary to motivate people to do what has to be done. When they understand the circumstances, people do rise to the occasion and go through the most irksome tasks. The long-term persuasion lies in the organizational culture (esprit de corps) in which people take pride in doing anything to uphold the honour and good name of the organization.

 

Compulsion by the way of punishing the few indolent, lazy or resentful individuals who do not perform their share of work is also necessary to maintain discipline. Also, to let people know unambiguously that the leader is fair and just, but not tolerant of the incompetent, the crooked and mischievous. There is an innate tendency among Indians to kill or retard an organization with kindness. Inability to take appropriate action is rationalised by arguments like pressures from the top, fear of litigation, trade union agitation and so on. To a degree it is also due to a lack of moral courage.

 

Leadership in Indian Context 

 

More and more organizations in the country are reflecting the diversity of Indian people. Executives and workers in organizations often hail from different parts of the country, speak different languages, have different customs and traditions, profess different religions and have different ethnic origin. For a leader to be able to handle such groups of people, s/he must be able to rise above his/her own narrow regional, religious, linguistic and ethnic origin, and project, by convictions and actions, a true all-India personality to be able to command, respect and loyalty of his team. There are two essential requirements for succeeding in this goal.  

 

First, a leader should have a good grasp and pride in the long history and cultural ethos of India. Second, a leader should have rudimentary knowledge of all religions of India and s/he should genuinely respect all faiths.

 

Attributes of successful leader – Here are some attributes of successful leaders. 

1. Ambition
2. Willingness to work hard
3. Enthusiasm
4. Enterprise
5. Capacity to speak lucidly
6. Astuteness
7. Single-mindedness
8. Ability to ‘stick to it’
9. Willing to take risks
10. Capacity for lucid writing
11. Leadership
12. Imagination
13. Ability to take decisions
14. Ability to spot opportunities
15. Ability to administer efficiently
16. Analytical ability
17. Willingness to work long hours
18. Ability to meet unpleasant situation
19. Curiosity
20. Understanding of others
21. Open-mindedness
22. Skill with numbers
23. Ability to adopt quickly to change
24. Capacity for abstract thought
25. Integrity 

Developing appropriate leadership is one of the most important elements in the implementation of a strategy. This is important because leaders are key organic elements who help an organization cope with changes. Appropriate leadership is necessary, though not a sufficient condition, for mobilising people, and for developing effective structure and systems for the success of strategy. Failure of leadership may lead to difficulties in achieving goal congruence, communication breakdown, ambiguity with regard to roles of sub-units, and difficulty in obtaining commitment to a plan, e.g., staff conflicts and lack of strategic thinking. Leadership is the key factor for developing and maintaining the right culture and climate. 

Figure -2 : Dimensions of Leadership Styles 

 

 

There are several aspects of leadership styles and skills, some of them are more appropriate to the context/content of a strategy, while others are desirable attributes in general for the success of an organization. Leadership styles are manifested through the orientations, Khandwalla has identified five orientations (dimensions of style) namely, the risk taking (willingness to make high risk, high return decisions), optimisation (degree of commitment to the use of planning, and management science techniques in decision making by technically qualified people vis-a-vis seat-or-the pant decisions), flexibility (degree of looseness and flexibility in organization structuring), participation (of those other than the ones holding key positions) and coercion (use of fear and domination) (see Figure-2).

 

For superior performance on key organization goals he proposes that if : 

1. the orientation of top management is risk taking, then it should be at least moderately organic and coercive in proportion to internal resistance to change.
2. the orientation is risk aversive, then it should be moderately mechanistic and non-coercive.
3. the orientation is of highly optimisation type, then it should be strongly participative.
4. the orientation is highly seat-or-the-pant and non-technocratic, then it should be at least moderately risk taking and non-participative. 

Different leadership styles have “good fit” with different environments. Since the strategy determines the product/market scope, and also the environment in which the organization is going to operate in future, it has a bearing on leadership style. Khandwalla has further categorised leadership styles into seven types to relate them to environment, each reflecting different mix of the five orientations, as shown in the table -1.

 

Table 1: Seven Styles of Top Management

 

Like leadership, there are several dimensions of environment also, namely, the degree of turbulence/volatility (high degree of changeability/unpredictability), hostility (hostile environment are highly risky and overwhelming), heterogeneity (diversity of markets/consumers), restrictiveness (economic, social, legal and political constraints) and the degree of technological sophistication. The leadership styles which are more appropriate to different types of environment are shown in Table 1.

 

Table 2: Environment-Style Fit

 

It should be noted that while the above discussion gives a good idea of orientations and the styles of leadership to respond effectively to the environmental demands, it does not cover the leadership skills required for “revitalisation” or “transformation” of the “organization”. The above discussion gives the attributes of a manager who is a “transactional” leader, and not a “transformational” leader. The task of a “transformation” or “revitalisation” leader is to take the organization to a dominant position. This involves managing change or transition. It has three distinctive phases. 

1. Recognising the need for revitalisation
2. Creating a new vision
3. Institutionalising change. 

The leadership task in the first phase requires the ability to sense the need for change (often there is a low threshold to catch trigger events in the environment). The second phase requires communication skills to create a vision for future that excites people to move, and also the interpersonal skills and creativity to mobilise commitment of at least at critical mass in the organization. To perform the task in the third phase of the transformation process the leader should have the ability to understand and manage powerful conflicting forces in people. The negative emotions and threats to power and authority have to be transformed into positive emotions and reconciliation. New ways of working, new styles, new culture, and new norms have to be developed. The shock of change has to be reduced.

 

The challenges of leadership in implementation are grave as leadership is the most scarce resource. Organizations cope with it in several ways, by changing the current leadership and by developing appropriate leadership styles. The change of current leadership may not be easy to achieve even though it might be inevitable for effecting “transformation” in the situation. The existing leadership might have been cast in a particular mold which may be inappropriate to the demands of the organization. The “casting” effect can be overcome if changes are introduced gradually in the leadership styles and skills, to avoid accumulated lags or mismatches between existing leadership styles/skills and company’s changed requirements. This would require a blueprint to indicate the kinds of styles and skills, and the number of persons of different styles and skills required in future, current talent available and a plan of recruitment and grooming. The task of human resources development is thus very closely related and determined by strategy of the organization.

 

 

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LEADERSHIP : ROLE, CONCEPT & FUNCTION

ROLE OF LEADERSHIP

 

Leadership means – to guide or to influence into an action. In today’s highly competitive world, it becomes important for organizations to have a good leader. The well-known book “In Search of Excellence” concludes that every company that has maintained its excellence over the years has done so because it had ‘a leader or two’ who gave it its structure. This conclusion has since been reinforced in a recent study by the Stanford Research Institute. It concluded that “12 per cent of effective management strategy is knowledge and 88 per cent is dealing appropriately with people”. Indeed, dealing appropriately with people is Leadership.

 

We know instinctively that in every human activity involving a group of people, there is a need for the guiding hand of a leader. The head of a family is the most ubiquitous leader since the dawn of human history. It is well accepted that on the quality and effectiveness of this leader, be it father or the mother, depends the progress and fortunes of the family.

 

In the modern complex society thousands of individuals are appointed or elected to shoulder roles and responsibilities of leadership in junior, middle and senior levels in factories and farms, schools and colleges, business and financial institutions, dispensaries and hospitals, in civil and military organs of the State’s scientific and research institutions and so on. On their quality and effectiveness depends the strength, prosperity and happiness of society. In history an effective leader has always been a ‘force multiplier’.

 

Leadership as the behavioural dimension helps in the successful implementation of the strategy. It is important to remember that leadership cannot be taught. However, a man does have the capability to perform himself/herself-to reprogramme his/her personality. And, it is here, that the most exciting part of human endeavour lies.

 

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PERSPECTIVES ON STRATEGY AND STRUCTURE

PERSPECTIVES ON STRATEGY AND STRUCTURE

 

Two perspectives on strategy and structure are described here: One by Michael E. Porter (Competitive Strategy, The Free Press, New York, 1980) and the other by Thomas J. Peters and Robert H. Waterman Jr. (In Search of Excellence, Warner Books, 1982).

 

Porter’s Perspective

 

Porter has enunciated three generic strategies: Overall Cost Leadership, Differentiation and Focus. According to him the successful implementation of the three generic strategies requires not only different resources and skills but also imply different organizational arrangements, control procedures and inventive systems. 
 

Overall cost leadership (common in 1970s in the USA) is achieved through a set of functional policies culminating into what is popularly known as the Experience Curve Effect. This strategy requires construction of efficient scale facilities, vigorous pursuits of cost reduction from experience, tight cost and overhead control and cost minimisation in areas like R&D, sales force, advertising and so on. A great deal of managerial attention to cost control is necessary to achieve the aims.

 

The differentiation strategy implies offering a product or service by the firm which is perceived in the industry as being unique. Differentiation can be approached in many ways (one or more at the same time); product design features, brand image, technology, customer services, dealer network and other dimensions.

 

The focus strategy means concentrating on a particular buyer group, segment of product lines, or geographic market.

 

As with differentiation, focus may take many forms. Whereas the ‘low cost’ and ‘differentiation’ strategies aim at achieving their objectives industry-wise, the focus strategy is built around serving a particular target very well. All functional policies are geared in that direction. This strategy rests on the premise that the firm is able to serve its narrow strategic target more effectively and efficiently than those competitors who are engaged in broader activities.

 

We now turn our attention to the organizational requirements for each strategy. Some common implications of the generic strategies in terms of skills and resources and organizational requirements are presented in Table -1 which are

self-explanatory.

 

Table -1 : Organizational Requirements for Different Generic Strategies
 

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STAGES MODEL OF STRUCTURE

Explain the Stages Model of structure. Is it necessary for an organization to pass through all successive stages of growth?

 

The experiences of many firms indicate that organization structure evolves through different stages. What structure an enterprise will have would depend upon its growth stage, apart from size and the key success factors inherent in its business. For example, the type of organization structure that suits a small speciality steel tubes manufacturing firm relying upon ‘focus’ strategy in a regional market may not be suitable for a large, vertically integrated steel producing firm with businesses in diverse geographical areas. To extend our example further, the structural form suitable for a multi-product, multi-technology, multi-business enterprise pursuing unrelated diversification is likely to be still different. Recognition of this characteristic pattern has prompted several attempts to formulate a model linking changes in organizational structure to stages in an organization’s strategic development. 

The basic idea behind the stages concept is that enterprises can be arranged along a continuum running from simple to very complex organizational forms; and that there is a tendency for an organization to move along this continuum towards more complex forms as it grows in size, market coverage, product line scope and as the strategic aspects of its customer—technology—business portfolio become more intricate. The stages model proposes four distinct stages of strategy-related organization structure.

 

Stage I : Organizations in this stage are essentially small, single business and managed by one person. The owner entrepreneur has close daily contact with employees. He personally knows all phases of operations. Most employees report directly to him and he makes all pertinent strategic and operating decisions. As a consequence, the organization’s strengths, vulnerabilities and resources are closely linked with the entrepreneur’s personality, managerial ability, style and financial position. In a way, a Stage I enterprise is an extension of the interests, abilities and limitations of the personality of its owner. The activities of such a business typically are concentrated in just one line of business. 

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SURVIVAL STRATEGY

When to adopt survival strategies? What are the routes of survival strategy? What is liquidation ?

 

SURVIVAL STRATEGY 

 

When the company is on the verge of extinction, it can follow several routes for renewing the fortunes of the company. These are discussed in the following sections. 

 

Divestment 

 

An organization divests when it sells a business unit to another firm that will continue to operate it. Threatened with bankruptcy between 1979 and 1982, Chrysler sold its U.S. Army tank division to General Dynamics, its Air Temp air conditioning unit to Fedders, and its European distribution units to Peugeot/Citroen. The purpose was to focus only on the U.S. auto market- its main market. In our country, the TATA group has, in some form or the other, been realigning its portfolio since the early 1990s. But in the past few years it had done this in a more structured manner. The divestment of Tomco and Tata Steel’s cement plant was a conscious decision. It was Tata Steel’s decision to concentrate on steel and get out of the cement business. As for Tomco, the company had reached a point where it required immediate attention, not only in financial terms but in terms of management as well. The group felt that it did not have the requisite managerial skills in the specific area where Tomco operated and hence decided to hive it off. 

 

Spin-Off

 

In a spin-off, a firm sets up a business unit as a separate business through a distribution of stock or a cash deal. This is one way to allow a new management team to try to do better with a business unit that is a poor or mediocre performer. For instance, Indian Rayon and Industries Ltd (IRIL), an Aditya Birla group enterprise, has decided to spin-off its insulators business under Jaya Shree Insulator Division, in favour of a new company - Vikram Insulators Private Ltd (VIPL). The net assets of Rs 92.98 crore of the insulators division were transferred in favour of VIPL and a 50:50 joint venture with the Japanese insulators giant - NGK Insulators Ltd - was forged. The joint venture with NGK Insulators Ltd was proposed in order to upgrade the quality of the existing insulators and to develop new and more technically advanced insulators. 

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TURNAROUND STRATEGY

TURNAROUND STRATEGY

 

Turnaround is a strategy adopted by firms to arrest the decline and revive their growth. A turnaround situation exists when a firm encounters multiple years of declining Financial performance subsequent to a period of prosperity (Bibeault, 1982; Hambrick & Schecter, 1983; Schendel et al., 1976; Zammuto & Cameron, 1985). Turnaround situations are caused by combinations of external and internal factors (Finkin, 1985; Heany, 1985; Schendel et al., 1976) and may be the result of years of gradual slowdown or months of precipitous financial decline. The strategic causes of performance downturns include increased competition, raw material shortages, and decreased profit margins, while operating problems include strikes and labour problems, excess plant capacity and depressed price levels. The immediacy of the resulting threat to company survival posed by the turnaround situation is known as situation severity (Altman, 1983; Bibeault, 1982; Hofer, 1980). Low levels of severity are indicated by declines in sales or income margins, while extremely high severity would be signaled by imminent bankruptcy. The recognition of a relationship between cause and response is imperative for a turnaround process and hence, the importance of properly assessing the cause of the turnaround situation so that it could be the focus of the recovery response is very important. 

 

Turnaround Process 

 

The Turnaround Process begins with a depiction of external and internal factors as causes of a firm’s performance downturn. If these factors continue to detrimentally impact the firm, its financial health is threatened. Unchecked financial decline places the firm in a turnaround situation. A turnaround situation represents absolute and relative-to-industry declining performance of a sufficient magnitude to warrant explicit turnaround actions. A turnaround is typically accomplished through a two stage process. The initial stage is focused on the primary objectives of survival and achievement of a positive cash flow. The means to achieve this objective involves an emergency plan to halt the firm’s financial haemorrhage and a stabilization plan to streamline and improve core operations. In other words, it involves the classic retrenchment activities: liquidation, divestment, product elimination, and downsizing the workforce. Retrenchment strategies are also characterized by the revenue generating, product/market refocusing or cost cutting and asset reduction activities. While cost cutting, asset reduction and product/market refocusing are easy to visualize, the idea of revenue-generating is best captured by a strategy that is characterized by increased capacity utilization, and increased employee productivity.

 

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RETRENCHMENT STRATEGIES

RETRENCHMENT STRATEGIES

Retrenchment is a short-run renewal strategy designed to overcome organizational weaknesses that are contributing to deteriorating performance. It is meant to replenish and revitalize the organizational resources and capabilities so that the organization can regain its competitiveness. Retrenchment may be thought as a minor surgery to correct a problem. Managers often try a minimal treatment first-cost cutting or a small layoff-hoping that nothing more painful will be needed to turn the firm around. When performance measures reveal a more serious situation, more drastic action must be taken to restore performance.

Retrenchment strategies call for two primary actions:

1.   Cost cutting and

2.   Restructuring.

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ORGANISATIONAL DECLINE CAUSES

CAUSES OF ORGANISATIONAL DECLINE OR DECAY:

Organizational Slack

Slack is uncommitted or committed (but underutilized) resources that are at the disposal of the organization. The existence of uncommitted slack (especially in the form of cash and liquid assets) is considered a necessary strategic factor for the survival of the declining organization because during decline, there are not enough sales to generate sufficient cash. On the other hand, slack may be a handicap during growth period and it may represent a high opportunity cost causing a drag on performance. While organizations in decline require high discretion and flexibility in using slack, in more stable or growing markets, high levels of slack (especially in the form of cash) may reduce performance. Hence, critical to the choice and the timing of retrenchment strategies and the likelihood of survival, is the amount of slack within the organization. Unfortunately this situation does not exist in many organizations facing decline or decay. In particular, while exercising retrenchment strategy as a strategic option, the existence of critical slack, will give the organization more flexibility in dealing with internal and external adversity.

Leadership

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STRATEGIC ALLIANCE

STRATEGIC ALLIANCE

From software to steel, aerospace to apparel, the pace of strategic alliances worldwide is accelerating. A strategic alliance is an agreement between firms to do business together in ways that go beyond normal company-to-company dealings, but fall short of a merger or a full partnership. Strategic alliances can be as simple as two companies sharing their technological and/or marketing resources. In contrast, they can be highly complex, involving several companies, located in different countries. Strategic alliances are becoming more and more prominent in the global economy.

 

Strategic alliances enable business to gain competitive advantage through access to a partner’s resources, including markets, technologies, capital and people. Teaming up with others adds complementary resources and capabilities, enabling participants to grow and expand more quickly and efficiently. Strategic alliances also benefit companies by reducing manufacturing costs, and developing and diffusing new technologies rapidly. Any firm opting for strategic alliance incurs certain costs and risks compared to a firm going alone. These risks include the loss of operational control and confidentiality of proprietary information and technology. In addition, the parties may deprive themselves of future business opportunities with competitors of their strategic partner. Alliances also raise the spectre of potential conflicts, loss of autonomy, difficulties in coordination and management, mismatch of cultures, etc.

 

TYPES OF STRATEGIC ALLIANCES 

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M & A AND STEPS IN M & A

WHAT IS M & A ? WHY M & A ? STEPS IN M & A DEAL ?

 

 

MERGERS AND ACQUISITIONS (M&A) 

Mergers and acquisitions and corporate restructuring - or M&A for short - are a big part of the corporate finance. One plus one makes three: this equation is the special alchemy of a merger or acquisition. The key principle behind buying a company is to create shareholder value over and above that of the sum of the two companies. Two companies together are more valuable than two separate companies -at least, that’s the reasoning behind M&A. This idea is particularly attractive to companies when times are tough. Strong companies will act to buy other companies to create a more competitive, cost-efficient company. The companies will come together hoping to gain a greater market share or achieve greater efficiency. Because of these potential benefits, target companies will often agree to be purchased when they know they cannot survive alone.

 

A corporate merger is essentially a combination of the assets and liabilities of two firms to form a single business entity. Although they are used synonymously, there is a slight distinction between the terms ‘merger’ and ‘acquisition’. Strictly speaking, only a corporate combination in which one of the companies survives as a legal entity is called a merger. In a merger of firms that are approximate equals, there is often an exchange of stock in which one firm issues new shares to the shareholders of the other firm at a certain ratio. In other words, a merger happens when two firms, often about the same size, agree to unite as a new single company rather than remain as separate units. This kind of action is more precisely referred to as a “merger of equals.” Both companies’ stocks are surrendered, and new company stock is issued in its place. When a company takes over another to become the new owner of the target company, the purchase is called an acquisition. From the legal angle, the ‘target company’ ceases to exist and the buyer “gulps down” the business and stock of the buyer continues to be traded.

 

 In summary, “acquisition” is generally used when a larger firm absorbs a smaller firm and “merger” is used when the combination is portrayed to be between equals. For the sake of discussion, the firm whose shares continue to exist (possibly under a different company name) will be referred to as the acquiring firm and the firm’s whose shares are being replaced by the acquiring firm will be referred to as the target firm. However, a merger of equals doesn’t happen very often in practice. Frequently, a company buying another allows the acquired firm to proclaim that it is a merger of equals, even though it is technically an acquisition. This is done to overcome some legal restrictions on acquisitions. 

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DIVERSIFICATION

WHAT IS DIVERSIFICATION ? TYPES OF DIVERSIFICATION AND WHY DIVERSIFICATION ? 

DIVERSIFICATION :

 

Diversification involves moving into new lines of business. When an industry consolidates and becomes mature, most of the firms in that industry would have reached the limits of growth using vertical and horizontal growth strategies. If they want to continue growing any further the only option available to them is diversification by expanding their operations into a different industry. Diversification strategies also apply to the more general case of spreading market risks: adding products to the existing lines of business can be viewed as analogous to an investor who invests in multiple stocks to “spread the risks”. Diversification into other lines of business can especially make sense when the firm faces uncertain conditions in its core product-market domain. 

While intensification limits the growth of the firm to the existing businesses of the firm, diversification takes it beyond the confines of the current product-market domain to uncharted and unfamiliar products- market territory. In other words, this strategy steers the organization away from both its present products and its present market simultaneously. Of the various routes to expansion, diversification is definitely the most complex and risky route. Diversification approach to expansion is complex since it seeks to enter new product lines, processes, services or markets which involve different skills, processes and knowledge from those required for the current business. It is risky since it involves deviating from familiar territory: familiar products and familiar markets. 

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INTERNATIONAL EXPANSION

INTERNATIONAL EXPANSION

 

An organization can “go international” by crossing domestic borders as it employs any of the strategies discussed above. International expansion involves establishing significant market interests and operations outside a company’s home country. Foreign markets provide additional sales opportunities for a firm that may be constrained by the relatively small size of its domestic market and also reduces the firm’s dependence on a single national market. Firms expand globally to seek opportunity to earn a return on large investments such as plant and capital equipment or research and development, or enhance market share and achieve scale economies, and also to enjoy advantages of locations. Other motives for international expansion include extending the product life cycle, securing key resources and using low-cost labour. However, to mold their firms into truly global companies, managers must develop global mind-sets. Traditional means of operating with little cultural diversity and without global competition are no longer effective firms (Kedia and Mukherji, 1999).

 

International expansion is fraught with various risks such as, political risks (e.g. instability of host nations) and economic risks (e.g. fluctuations in the value of the country’s currency). International expansions increases coordination and distribution costs, and managing a global enterprise entails problems of overcoming trade barriers, logistics costs, cultural diversity, etc.

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EXPANSION STRATEGIES

EXPANSION STRATEGIES

 

Every enterprise seeks growth as its long-term goal to avoid annihilation in a relentless and ruthless competitive environment. Growth offers ample opportunities to everyone in the organization and is crucial for the survival of the enterprise. However, this is possible only when fundamental conditions of expansion have been met. Expansion strategies are designed to allow enterprises to maintain their competitive position in rapidly growing national and international markets. Hence to successfully compete, survive and flourish, an enterprise has to pursue an expansion strategy. Expansion strategy is an important strategic option, which enterprises follow to fulfil their long-term growth objectives. They pursue it to gain significant growth as opposed to incremental growth envisaged in stability strategy. Expansion strategy is adopted to accelerate the rate of growth of sales, profits and market share faster by entering new markets, acquiring new resources, developing new technologies and creating new managerial capabilities. 

 

Expansion strategy provides a blueprint for business enterprises to achieve their long term growth objectives. It allows them to maintain their competitive advantage even in the advanced stages of product and market evolution. Growth offers economies of scale and scope to an organization, which reduce operating costs and improve earnings. Apart from these advantages the organization gains a greater control over the immediate environment because of its size. This influence is crucial for survival in mature markets where competitors aggressively defend their market shares.
 

Conditions for Opting for Expansion Strategy 

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STABILITY STRATEGY

STABILITY OR CONSOLIDATION STRATEGY

 

Nature Of Stability Strategy

 

A firm following stability strategy maintains its current business and product portfolios; maintains the existing level of effort; and is satisfied with incremental growth. It focuses on fine-tuning its business operations and improving functional efficiencies through better deployment of resources. In other words, a firm is said to follow stability/ consolidation strategy if:

 

1. It decides to serve the same markets with the same products;
2. It continues to pursue the same objectives with a strategic thrust on incremental improvement of functional performances; and
3. It concentrates its resources in a narrow product-market sphere for developing a meaningful competitive advantage. 

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CORPORATE STRATEGIES

CORPORATE STRATEGIES

 

Growth is essential for an organization. Organizations go through an inevitable progression from growth through maturity, revival, and eventually decline. The broad corporate strategy alternatives, sometimes referred to as grand strategies, are: stability/consolidation, expansion/growth, divestment/ retrenchment and combination strategies. During the organizational life cycle, managements choose between growth, stability, or retrenchment strategies to overcome deteriorating trends in performance.

 

Just as every product or business unit must follow a business strategy to improve its competitive position, every corporation must decide its orientation towards growth by asking the following three questions: 

v  Should we expand, cut back, or continue our operations unchanged?

v  Should we concentrate our activities within our current industry or should we diversify into other industries?

v  If we want to grow and expand nationally and/or globally, should we do so through internal development or through external acquisitions, mergers, or strategic alliances?

 

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MANAGEMENT STRATEGIES

MANAGEMENT STRATEGIES AT DIFFERENT BUSINESS LEVEL

 

Management Strategies deals with the issues, concepts, theories approaches and action choices related to an organization’s interaction with the external environment. Strategy, in general, refers to how a given objective will be achieved. Strategy, therefore, is mainly concerned with the relationships between ends and means, that is, between the results we seek and the resources at our disposal. For the most part, strategy is concerned with deploying the resources at your disposal whereas tactics is concerned with employing them. Together, strategy and tactics bridge the gap between ends and means.

 

Some organizations are groups of different business and functional units, each of them must be having its own set of goals, which may not necessarily be same as the goals of the corporate headquarters looking after the interests of the entire organization. Since the goals are different and the means to achieve them are different, strategies are likely to be different. This understanding has led to the hierarchical division of strategy at two levels: a business-level (competitive) strategy and a company-wide strategy (corporate strategy) (Porter, 1987). In addition to these strategies, many authors also mention functional strategies, practiced by the functional units of a business unit, as another level of strategy.

 

Corporate Strategies: These are concerned with the broad, long-term questions of “what businesses are we in, and what do we want to do with these businesses?” The corporate strategy sets the overall direction the organization will follow. It matters whether a firm is engaged in one or several businesses. This will influence the overall strategic direction, what corporate strategy is followed, and how that strategy is implemented and managed. Corporate strategies vary from drastic retrenchment through aggressive growth. Top management need to carefully assess the environment before choosing the fundamental strategies the organization will use to achieve the corporate objectives.

 

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