Types of Corporate Level Strategy/Grand Strategy
Mainly talking the types of corporate level strategy/grand strategy are of four types viz. stability, expansion, retrenchment, and mixed strategy.
The corporate-level strategy means the top-level strategy made by the top management of the organization. This strategy attempts to coordinate all of a firm’s resources to a corporate objective with external environment opportunities aiming to change the overall direction.
The below-mentioned grand strategies/corporate strategies are effective means to realize corporate objectives.
Stability Strategy
As the name stability speaks for itself, this strategy refers to when an organization continues its current operation without bringing any significant changes.
With this strategy, the organization stays on its current operation, direction, products, markets, or strategies. This might be the reason it wants to maintain its current market position, notices the environment as stable in near future, or the firm is happy with its current profitability.
The stability strategy is considered suitable for temporary only but a firm that follows it for too long might not achieve its growth and be in a state of loss.
Pause, no-change, and profit strategies are types of stability strategies.
- Pause Strategy – This is called a very temporary strategy, following this an organization takes a rest for some time.
- No-Change Strategy – It is exactly the stability strategy where the firm does nothing and persists in its operations as it is.
- Profit Strategy – It is something different, a firm tries to bring back its profit level to normal when some temporary difficulties arise.
Pros and cons of stability strategy.
- Pros:
- It is less risky and costly since the firm does not have to bring any changes.
- It is suitable when there is high competition and the growth is risky.
- It is simple to use.
- Cons:
- Following this strategy, a firm might lose upcoming opportunities.
- Not appropriate for the long term.
Growth/Expansion Strategy
Every firm wants to grow its business, and when they want they go for a growth or expansion strategy. This is the strategy when a firm seeks growth in its product, market, or activities and takes actions for growth.
This strategy is very reasonable to apply when the market is dynamic, competitive and reflects potential opportunities. In addition, when the product is in the growth stage of PLC the company needs to launch its growth strategy otherwise the product would not reach its maturity.
However, this strategy is not as easy & less risky as the stability strategy, and firms adopting a growth strategy need to invest. Within growth strategy, the following four strategies come.
- Market Penetration – This strategy refers to an attempt to maintain current market share through aggressive marketing efforts. This is suitable when the market is not saturated with industry performance and customer usage rate could be increased.
- Product Development – It refers to the development of products either innovative, modified, or imitated and serving existing markets.
- Market Development – It refers to entering a new market with current products with the aim to increase sales.
- Diversification – Here, diversification strategy means whether to enter into a new market or product.
Advantages and disadvantages of growth/expansion strategy.
- Pros:
- Suitable when the market is highly competitive.
- Suitable when the external environment brings opportunities.
- Provides strategic advantage through production and long exposure.
- Helps to expand productivity and efficiency.
- Cons:
- It is a riskier and more costly strategy than the above one.
- It needs thorough research on the external environment before taking any growth actions.
Retrenchment Strategy
A firm opts for a retrenchment strategy when it seeks to cut down or reduce some of its products or activities to reduce excessive expenses to attain financial stability.
When a firm’s performance continuously becomes poor and poorer, it attempts to partially or fully reduce the weak business activities, it can be product cut down or employee also.
Usually, firms do not want to go for retrenchment but when they need to they cut unproductive and unprofitable business units to reach their sustainable financial condition. For retrenchment, the following four strategies are used.
- Turnaround Strategy – This strategy refers to an attempt to turn around or convert weak performing business activities into healthy ones.
- Captive Company Strategy – This strategy is when the firm loses its independence by being fully dependent on some or one big buyer.
- Sell-Out/Divestment Strategy – In this strategy, the firm sells itself to another firm. This is when the firm can not adopt the above two strategies.
- Liquidation – This is the termination of the firm. It is when the firm can not adopt the above three strategies.
Advantages and Disadvantages of retrenchment strategy.
- Pros:
- When the environment is highly uncertain retrenchment seems suitable.
- It may improve business efficiency.
- In times of deep crisis, it is suitable.
- Cons:
- Adopting this strategy results in decreased profit.
- The company loses its existence.
- The fewer employees might not meet the market demands.
Combination/Mixed Strategy
A combination/mixed strategy is the last corporate strategy. The combination strategy is the combination of above mentioned three types of corporate-level strategies.
The organization following a mixed strategy simultaneously uses stability, expansion, and retrenchment strategies in its different business units. It fits to deal with the diverse environmental situation.
Typically, large organizations having multi-business adopt this strategy. In doing so, a firm may adopt an expansion strategy by acquiring new business, at the same time stability may be sought in another and retrenchment in the next.
It provides a base for the organization to deal with multiple business conditions. Following are the pros/cons of the combination strategy.
- Pros:
- It addresses the diverse environmental conditions of an organization.
- It is suitable for organizations with multi-business.
- This is suitable when the organization is going through financial problems.
- Cons:
- When followed a combination strategy, the focus of top management may be dispersed.
- It is not suitable for organizations doing similar business.
- It is also not suitable for small businesses.