Question

Question 4. Name and describe the expansion, reduction, and maintenance of scope strategies, Which of the adaptive strategies are corporate and which are division level? Under what conditions may each be appropriate?

Answer 1

The expansion, Reduction, and Maintenance of scope strategies are a part of Adaptive strategies that a firm can undertake depending upon its objectives.

Expansion Strategy:
Whenever a Firm decides to add more products or services to its portfolio it undertakes expansion strategy. This strategy involves sub-strategies which can be Diversification, Vertical Integration, Market Development, Product Development or Market Penetration. We see that all the strategies mentioned above require expansion of its already existing facilities or building new facilities to meet the needs.
We Pursue this strategy to increase our market share or to enter segments where regulations are not much and more profits can be generated.

Eg: A FMCG company coming up with a new product in already existing market to increase their market share. This will involve new manufacturing facility, new distribution strategies etc.

Reduction Strategy:
This strategy involves contracting its business by either selling the business unit or shutting it down by liquidating all the assets. This strategy is used when the firm wants to enter a new market and hence it liquidates it highly regulated business which is in decline state to fund its entry into the new market. This strategy requires selling off a unit, manufacturing facility which may still be operational. We pursue this strategy to offload loss-making or declining business and liquidating those assets to generate the cash needed to enter another market or business.

Eg: Closing off a loss-making manufacturing facility to another organization.

MAintenance of Scope:
This strategy is adopted when the firm is not able to achieve its required goals or achieve desirable operational efficiency. In this case, the firm invests its time in increasing its operational efficiency, reducing costs by implementing strict regulations to its operations. Many firms also invest in R&D and innovative practices to come up with innovative solutions that will drive the operational efficiency. Hence this strategy is implemented to improve the existing operations of the firm.

Eg: Implementing six sigma practices to firms manufacturing projects.

These are the sub-strategies which form the basis for adaptive strategies.