In today’s issue of Management Tips, we are going to cover generic business strategies, as theorized by Henry Mintzberg.
Among Mintzberg’s diverse contributions to strategic thinking, one of the most interesting comes from the article “Generic Strategies: Toward a Comprehensive Framework,” originally published in R.B. Lamb and P. Shivastava (eds.), Advances in Strategic Management (JAI Press, 1988, pp. 1-67), with a shorter version in The Strategy Process, Prentice-Hall, 1991. The article covers the generic business strategies of integrated chain, diversification, entry and control, combined integration and diversification, and withdrawal, as shown in Figure 1.
With integrated chain strategies organizations can extend their chains of operations upstream or downstream by incorporating the activities of their buyers and suppliers into their own operations on the fulfillment end, in the case of buyers, and on the receiving end in the case of suppliers.
Diversification strategies refer to entering a business that is not part of the company’s chain of operations. It may be “concentric diversification,” i.e., related to a competence or resource distinct from the essence of the business. It may also be “unrelated diversification” or “conglomerate diversification.”
In entry and control strategies chain integration, or chain diversification, can be achieved through internal development or acquisition. In other words, an organization can enter a new business by developing it or acquiring an organization already in operation. Both internal development and acquisition involve total ownership and formal control of the diversified business.
In the combined strategies of integration and diversification, organizations often enter whole networks of new businesses, diversifying the portfolio of products and services.
Finally, withdrawal strategies that reverse all diversification strategies are appropriate for organizations wishing to reduce the businesses they are in. Sometimes, organizations shrink their activities, cancel long-term licenses, cease selling by-products, and reduce their networks. In other situations, they abandon or liquidate their business.
See you next issue!