DEVELOPING

STRATEGIC
ALTERNATIVES
CHAPTER 6
COURSE INSTRUCTOR:
Dr. ASIMA FAISAL
 LEARNING OBJECTIVES
1. Understand the decision logic of strategy development and be able to discuss its steps.
2. Synthesize and integrate strategic thinking accomplished in situational analysis into a
strategic plan for an organization.
3. Identify the hierarchy of strategies and strategic decisions required in strategic planning.
4. Understand the nature of directional strategies, adaptive strategies, market entry strategies,
and competitive strategies.
5. Identify strategic alternatives available to health care organizations.
6. Provide the rationale as well as advantages and disadvantages for each of the strategic
alternatives.
7. Understand that strategies may have to be used in combination to accomplish the
organization’s goals.
8. Map strategic decisions showing how they are linked as an ends–means chain.
THE DECISION LOGIC OF STRATEGY
FORMULATION
 SCOPE AND ROLE OF STRATEGY TYPES IN STRATEGY
FORMULATION
1. DIRECTIONAL STRATEGIES
• The broadest strategies set the fundamental direction of the organization by establishing a
mission for the organization (Who are we?) and providing a vision for the future (What should
we be?). In addition, directional strategies specify the organization’s values and the broad goals
it wants to accomplish.

2. ADAPTIVE STRATEGIES
• These strategies are more specific than directional strategies and provide the primary methods
for achieving the vision of the organization – adapting to the environment.
• These strategies determine the scope of the organization and specify how the organization will
expand scope, contract scope, or maintain scope.
3. MARKET ENTRY STRATEGIES
• These strategies carry out the expansion of scope and the maintenance of scope
strategies through purchase, cooperation, or internal development.
• These strategies provide methods for access or entry to the market. Market entry
strategies are not used for contraction of scope strategies.
4. COMPETITIVE STRATEGIES
• Two types of strategies, one that determines an organization’s strategic posture
and one that positions the organization vis-à-vis other organizations within the
market.
• These strategies are market oriented and best articulate the competitive advantage
within the market.
5. IMPLEMENTATION STRATEGIES
• These strategies are the most specific strategies and are directed toward value added
service delivery and the value added support areas such as the culture, structure,
and strategic resources.
• In addition, individual organizational units develop action plans that carry out the
value added service delivery and value added support strategies.
STRATEGIC THINKING MAP
HIERARCHY OF STRATEGIC DECISIONS AND ALTERNATIVES
 DIRECTIONAL STRATEGIES
MISSION, VISION, VALUES, AND GOALS

• Mission, vision, values, and strategic goals and indicated that these elements are part of
both situational analysis and strategy formulation.

• They are a part of situational analysis because they describe the current state of the
organization and codify its basic beliefs and philosophy.

• In addition, mission, vision, values, and strategic goals are also a part of strategy
formulation because they set the boundaries and indicate the broadest direction for the
organization.
 ADAPTIVE
STRATEGIES

A- Expansion Of Scope B- Contraction Of Scope

• Diversification C- Maintenance Of Scope
• Vertical Integration • Divestiture
• Market Development • Liquidation • Enhancement
• Product Development • Harvesting • Status Quo
• Penetration • Retrenchment

These strategies are more specific than directional strategies and provide the primary methods for
achieving the vision of the organization – adapting to the environment. These strategies determine the
scope of the organization and specify how the organization will expand scope, contract scope, or
maintain scope.
ADAPTIVE STRATEGIES
DIVERSIFICATION
PENETRATION:
• An attempt to better serve current markets with current products or services is referred to as a
market penetration strategy. Similar to market and product development, penetration strategies are
used to increase volume and market share
VERTICAL INTEGRATION:
• A vertical integration strategy is a decision to grow along the channel of distribution of the core
operations. Thus, a health care organization may grow toward suppliers or toward patients.
• When an organization grows along the channel of distribution toward its suppliers (upstream) it
is called backward vertical integration. When an organization grows toward the consumer or
patient (downstream) it is called forward vertical integration.
MARKET DEVELOPMENT:
• Market development is a divisional strategy used to enter new markets with present products or
services. Specifically, market development is a strategy designed to achieve greater volume,
through geographic (service area) expansion or by targeting new market segments within the
present geographic area.
PRODUCT DEVELOPMENT:
• Product development is the introduction of new products/services to present markets (geographic
and segments). Typically, product development takes the form of product enhancements and
product line extension.
 B- CONTRACTION OF SCOPE STRATERGY

It decrease the size and scope of

operations either at the corporate level or
divisional level.
Contraction strategies include:
1. Divestiture (corporate level)
2. Liquidation (corporate level)
3. Harvesting (divisional level)
4. Retrenchment (divisional level)
1- DIVESTITURE:
 A contraction strategy in which an operating strategic service unit
is sold off as a result of a decision to permanently and completely
leave the market despite its current viability.
 Generally, the business to be divested has value and will continue
to be operated by the purchasing organization.
2- LIQUIDATION:
 Involves selling the assets of an organization.
 Common reasons for pursuing a liquidation strategy include
bankruptcy, the desire to dispose of nonproductive assets, and the
emergence of a new technology that results in a rapid decline in the
use of the old technology.
3- HARVESTING:
• It is selected when the market has entered long-term decline.
• The reason underlying such a strategy is that the organization has a
relatively strong market position but industry-wide revenues are
expected to decline over the next several years.
• Therefore the organization will “ride the decline,” allowing the
business to generate as much cash as possible.
• However, little in terms of new resources will be invested.
• In a harvesting strategy, the organization attempts to reap maximum
short-term benefits before the product or service is eliminated.
4- RETRENCHMENT:
A response to declining profitability, usually brought about by
increasing costs.
 C- MAINTAINANCE OF SCOPE STRATERGIES
Maintenance of scope does not necessarily mean that the organization will
do nothing; it means that management believes the organization is
progressing appropriately.
1- ENHANCEMENT:
 When management believes that the organization is progressing toward its vision
and goals but needs to “do things better,” an enhancement strategy may be used;
neither expansion nor contraction of operations is appropriate but “something needs
to be done.”
2- STATUS QUO:
 It is based on the assumption that the market has mature and periods of high
growth are over. Often, the organization has secured an acceptable market share
and managers believe the position can be defended against competitors.
 In a status quo strategy, the goal is to maintain market share.
MARKET ENTRY STRATEGIES

 PURCHASE STRATEGY
 CO-OPERATION STRATEGY
 DEVELOPMENT STRATEGY
 Market Entry Strategies
Purchase Strategies
ACQUISITION:
• Acquisitions are entry strategies to expand through the purchase of an existing organization, a
unit of an organization, or a product/service.
LICENSING:
• Acquiring a technology or product through licensing may be viewed as an alternative to
acquiring a complete company.
• License agreements obviate the need for costly and time-consuming product development and
provide rapid access to proven technologies, generally with reduced financial and marketing risk
to the organization.
VENTURE CAPITAL INVESTMENT:
• Venture capital investments offer an opportunity to enter or “try out” a market while keeping
risks low.
• Typically, venture capital investments are used to become involved in the growth and
development of a small organization that has the potential to develop a new or innovative
technology.
 COOPERATION STRATEGIES
MERGERS:
• Mergers are similar to acquisitions. In mergers, however, the two
organizations combine through mutual agreement to form a single new
organization, often with a new name. in health care has been to create
integrated delivery systems (vertical integration). There are four motives
underlying such mergers:
1. Improve efficiency and effectiveness
2. Enhance access
3. Enhance financial position
4. Overcome concerns about survival
ALLIANCES:
• Strategic alliances are loosely coupled arrangements among existing
organizations that are designed to achieve some long-term strategic purpose
not possible by any single organization.
JOINT VENTURES:
• When projects get too large, technology too expensive, internal resources, competencies or
capabilities too scarce, or the costs of failure too high for a single organization, joint
ventures are often used. The four most common organizational forms used in health care
joint ventures are:
1. Contractual Agreements. Two or more organizations sign a contract agreeing to work
together toward a specific objective.
2. Subsidiary Corporations. A new corporation is formed (called an equity JV), usually
to operate nonhospital activities.
3. Partnerships. A formal or informal arrangement in which two or more parties engage
in activities of mutual benefit.
4. Not-for-Profit Title-Holding Corporations. Tax legislation enacted in 19
 DEVELOPMENT STRATEGIES
Organizations may enter new markets by using internal resources in what are called
development strategies.
INTERNAL DEVELOPMENT:
Internal development uses the existing organizational structure, personnel, and capital to
generate new products/services or distribution strategies.
• Knowledge improvement: organic growth strategies improve the company’s knowledge
through direct involvement in a new market or technology.
• Investment spread: gradually growing internally helps to spread investment over time,
which allows a reduction of upfront costs and commitments, making it easier to reverse or
adjust a strategy if conditions in the market change
• No availability constraints: the company is not dependent on the availability of suitable 
acquisition targets or potential alliance partners. Organic developers also do not have to wait
for a perfectly matched acquisition target to come on to the market
--------continued
• Strategic independence: this means that a company does not need to make the same
compromises as might be necessary in an alliance, for example, which is likely to
involve constraints on certain activities and may limit future strategic choices
• Culture management: organic growth allows new activities to be created in the
existing cultural environment, which reduces the risk of culture clash—a common
difficulty with mergers, acquisitions, and alliances
• Internal growth strategies have a few disadvantages. For instance, developing internal
capabilities can be slow and time-consuming, expensive, and risky if not managed well.
INTERNAL VENTURES:
• Internal ventures typically set up separate, relatively independent entities within
the organization. Internal ventures may be most appropriate for products or
services that are unrelated to the current products or services.
• Home health care
• Online pharmacy during Covid
• Lab services at door step.
 Competitive Strategies
Having selected the adaptive strategies and market entry strategies, managers must decide the strategic posture
of the organization and how the products and services will be positioned vis-à-vis those of competitors.

Strategic Posture:
• Organizations may be classified by how they behave within their market segments or industry – their
strategic posture.
• Research by Miles, Snow, Meyer, and Coleman has shown that there are at least four typical strategic
postures for organizations –
• defenders, prospectors, analyzers, and reactors.

• Defenders, prospectors, and analyzers are explicit strategies that result in a pattern of consistent and
stable behavior within a market.
• Reactors, on the other hand, do not seem to have a strategy and demonstrate inconsistent behavior.
POSITIONING STRATEGIES – MARKET-WIDE OR FOCUS
• Michael Porter, a well-known strategic management writer, proposes that an organization
may serve the entire market using market-wide strategies or serve a particular segment of
the market using focus strategies.
•
 COMBINATION STRATEGIES
Combination strategies are often used, especially in larger complex organizations, because
no single strategy alone may be sufficient. For example, an organization may concurrently
divest itself of one of its divisions and engage in market development in another.
THANK YOU