Strategic alliance is an arrangement or agreement under which two or more firms cooperate in order to achieve certain commercial objectives. (vi) In joint-venture, the managerial competence of co-venturers is integrated towards better managerial efficiency. Maintain an acceptable quality of life; 3. vertical integration with backward and forward linkages. These strategies are broadly classified as: The firm pursues intensive growth strategies with an objective to achieve further growth of existing products and/or existing markets. The market development can be achieved in any of the following ways: (a) By adding new distribution channels to expand the consumer reach of the product. (iii) It can avail of external economies in respect of transport, insurance, banking services etc. Diversification. Strategic alliances, which enable companies to increase resource productivity and profitability by avoiding unnecessary fragmentation of resources and duplication of investment and effort in R&D/technology. A licensing agreement is a commercial contract whereby the licenser gives something of value to the licensee in exchange of certain performance and payments. Where the company is closely held by small group of shareholders, the controlling interest is obtained by purchasing the shares of other shareholders. Image Guidelines 5. Growth can be achieved through direct expansion, a merger with similar firms, or diversification. The marketing efforts are made on existing products, to customers in related market areas, by adding different channels of distribution or by changing the current content of the advertising and promotional efforts. With forward integration, firms can acquire greater control over sales, distribution channels, prices, and can improve its competitive position through differentiation and customer support. Vertical integration may be either backward integration or forward integration. Takeover is an acquisition of shares carrying voting rights in a company with a view to gaining control over the assets and management of the company. Advantages of Diversification Growth Strategy: Following are some advantages of diversification, as an internal growth strategy: (i) Diversification enables a company to make better use of its resources like managerial personnel, technology, marketing network, research facilities etc. Share Your Word File Thus, cooperating with other firms is another strategy that is used to create value for a customer that exceeds the cost of creating that value and to create a favourable position in the marketplace relative to the five forces of competition. 4. Identify the objectives of your organization. The integrative growth strategies are designed to achieve increase in sales, assets and profits. These strategies are adopted when firms remarkably broaden the scope of their customer groups, customer functions and alternative technologies either singly or in combination with each other. Before selecting diversification strategy, one must have a clear understanding of the new product/service, the technology and the markets. Diversification strategies are becoming less popular as organizations are finding it more difficult to manage diverse business activities. You got into business to solve a problem for a certain audience. Identify your ideal customer.  Organisations select a growth strategy :  to increase their profits  to increase their market share or sales  to increase their scale of operations  to reduce the production cost per unit. (v) Joint venture strategy provides opportunity to small firms to become big through joining with others and add to their prospects of survival. Reliance Industry, a vertically integrated company covering the complete textile value chain has been repositioning itself to be a diversified conglomerate by entering into a range of businesses such as power generation and distribution, insurance, telecommunication, and information and communication technology services. (ii)Diversification helps to minimize risk associated with growth. Joint venture may give protective or participating rights to the parties to the venture. (b) Whether the market wants the new product or service which we offer? The main objective of a takeover bid is to obtain legal control of the company. For a more enjoyable learning experience, we recommend that you study the mobile-friendly republished version of this course. It may help the enterprise in developing strategies of product differentiation and beating powerful forces of competition. When two or more unrelated or dissimilar firms combine together; it is known as a conglomerate merger. A textile company manufacturing various kinds of cloth takes over wholesalers and retailers engaged in marketing its product. Firms adopting this strategy can have a regular and uninterrupted supply of raw materials components and other inputs and the quality is also assured. In strategic alliances, the focus is on �sharing� of resources rather than seeking change in control. Rights to produce a potential product or use a potential production process. Previous Topic Previous slide Next slide Next Topic. On the other hand, strategic management seeks competitive advantage and sustainable market growth by effectively managing all resources of the organization. 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