Analysis of an organization’s strengths, weaknesses, opportunities, and threats, in order to identify strategic niche, the organization can exploit.
A merging of the externalities with the internalities results in an assessment of the organization’s opportunities. This merging is frequently called SWOT analysis because it brings together the organization’s Strengths Weaknesses, Opportunities and Threats in order to identify strategic niche that the organization can exploit. Having completed the SWOT analysis, the organization reassesses its mission and objectives. Based on the SWOT analysis and identification of the organization’s opportunities management reevaluates whether its mission and objectives are realistic, whether they need modification and where any needed changes are likely to originate. One the other hand, if no changes are necessary management is ready to begin the actual formulation of strategies.
How do you formulate strategies?
Grand strategies: The four primary types of strategies growth, stability, retrenchment and combination.
Strategies need to be set for all levels in the organization. Management needs to develop and evaluate alternative strategies and then select a set that is compatible at each level and will allow the organization to best capitalize on its resources an the opportunities available in the environment. For most organizations, four primary strategies are available. Frequently called the grand strategies, they are growth, stability, retrenchment and combination strategies.
One means of implementing a growth strategy is to focus on new locations to establish operations. At Music World, franchised locations around the country helped the company to grow and expand.
The growth strategy:
A strategy in which an organization attempts to increase the level of its operations; can take the form of increasing sales revenue, number of employees, or market share.
If management believes that bigger is better, then it may choose a growth strategy. A growth strategy is one in which an organization attempts to increase the level of the organization operations. Growth can take the form of more sales revenues, more employees, or more market share. Many growth organizations achieve this objective through direct expansion, new product development, quality improvement, or by diversifying/ merging with or acquiring other firms. Some, such as NIIT, use franchising opportunities to promote their growth strategies.
Growth through direct expansion involves increasing company size, revenues, operations, or workforce. This effort is internally focused and does not involve other firms. For example, AmeriSuites is pursuing a growth strategy when it expands. As opposed to purchasing other hotels AmeriSuites expands by opening hotels in new locations or by franchising to entrepreneurs who are willing to accept and do business the “AmeriSuites” way. Growth too can also come from creating business within the organization. When Big Bazaar was launched as a hypermarket, he adopted a growth strategy by offering everything from groceries and clothing to house ware and accessories under one roof and at heavily discounted prices. This caused competitors in all the areas to make price cuts to remain competitive.
Companies may also grow by merging with other companies or acquiring similar firms. A merger occurs when two companies usually of similar size combine their resources to form a new company. For example, when UB and Shaw Wallace recently merged, they did so to compete more effectively in the IMFL industry. Organizations can also acquire another firm, such as Dabur acquiring Balsara Hygiene Products, or HUL buying Kissan and Dollops and Milkfood ice cream brands. An acquisition, which is similar to a merger, usually happens when a larger company buys a smaller one – for a set amount of money or stocks, or both and incorporates the acquired company’s operations into its own. These acquisitions demonstrate a growth strategy whereby companies expand through diversification.–