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STRATEGIC DEVELOPMENT METHODS - Coggle Diagram
STRATEGIC
DEVELOPMENT
METHODS
Types of strategic development methods
Organic (internal) development
Mergers & acquisitions
Joint development
Internal/Organic
development strategies
Definition
The reinvestment of previous years’ profits in the existing business
=> increasing capacity of the organisation using its own competences
Pros
Capacity to exploit firm core competencies
Avoid corporate culture integration problems
Lower control risks
Lower cash flow risks
Cons
Slower mechanism
Risk of resource andcompetency shortages
Implementation
M&A is prevented because of cost, unavailability of suitable targets orregulatory disapproval
Access to capital is limited to pursue alternative methods
Suitable partners for joint development are unavailable
The necessary resources and competencies are available internally
The directors want to maintain control
External development
strategies
Mergers and acquisitions (M&A): the consolidation of companies or their major business assets through financial transactions between companies to gain the greater achievements
Acquisition: one company purchases another outright
Merger: the combination of two firms, which subsequentlyform a new legal entity under the banner of one corporate name
Pros
Access to new markets & technical know-how
Access to established brands
Reducing competition
Exploiting economies of scale
Diversifying risks
Cons
Operational issues
Reducing organizational flexibility
Risks of corporate culture crash
Strictly regulated by anti-trust laws
Managerial incompatibility
Joint development strategies
Strategic alliances
Public-private partnership
Licensing & Franchising
Management contracts
Cooperative networks