The Four Kinds of Corporate Strategy

Strategy + Business: Stability in the Storm Summer 2009 Issue 55 Strategy & Business Magazine (Single Issue)There are four grand strategic alternatives. They are stability, expansion, retrenchment and any combination of these three. These strategic alternatives are also called as grand strategies. A brief description about them are as follows:

1. Stability Strategy– It is adopted by an organization when it attempts to improve functional performance. They are further classified as follows:

  • No change strategy 
  • Profit strategy 
  • Pause/Proceed with caution strategy

2. Expansion Strategy:– It is followed when an organization aims at high growth. They operate through

  • Concentration
  • Integration
  • Diversification
  • Cooperation
  • Internationalization

Mergers, takeovers, Joint ventures and strategic alliances come under expansion through cooperation. International strategies are further classified into global strategy, transnational strategy, international strategy and multidomestic strategy.

3. Retrenchment Strategy:- It is followed when an organization aims at a contraction of its activities. It is done through turnaround, divestment and liquidation in either of the following three modes:

  • Compulsory winding up
  • Voluntary winding up
  • Winding up under supervision of the court

4. Combination Strategies:- They are followed when an organization adopts a combination of stability, expansion and retrenchment either at the same time in different businesses or at different times in the same business. The well known companies of the TTK group, based in Southern India, adopted a restructuring
plan in the late 1980s involving following strategies.

  • Merger of TTK chemicals with TTK pharma.
  • TT industries & Textiles Ltd. Planned for expansion through joint venture.
  • TTK Ltd. diversified into the field of non stick cooking utensils.
  • TTK maps & publications expanded into the general publishing business after a turnaround.

Business strategies are of three types: Cost leadership (lower cost/ broad target), differentiation (differentiation / broad target) and focus (lower cost or differentiation / narrow target).