A combination strategy is believed to be used by a business to accomplish various business goals using an integrated strategy. Strategies for business usually have goals like consolidation, growth, or stability. Combination strategies aim at improving the position of a business within the market.
Reliance utilized a lot of different petrochemicals within its business. Reliance consequently employed a mixture of vertical and horizontal integration. The company tries to meet two or more goals simultaneously in the combination strategy. For instance, Reliance Industries started as a manufacturer of textiles. But due to inefficiencies in distribution within the market, the company was forced into opening retail stores for its products using the trade”Vimal”. Reliance could bypass the wholesalers and retailers in the market that did not push its products through direct selling of its goods.
Reliance later decided to enter into the manufacturing of petrochemicals so that it could competitively sell its products. It led to the manufacturing of polyester staple Fibre (PSF). The company also entered into the refinery of crude oil and then set up a world-top oil refinery in Hazira.
Large companies diversifying their operations employ combinations of strategies to achieve their goals. It also aligns with the diverse requirements of all the strategic business units within the company. A business isn’t dependent on a single strategy but may implement multiple strategies simultaneously. A few units in a company may be working on an expansion strategy. Others may be experiencing a decline or the end of the product’s lifecycle and consequently be cutting back or stabilizing.
It can describe combination strategy as combining growth, stability, and reduction. It is because different business units within a corporation operate with different products at different phases of their product’s life cycle and face unique challenges.
Kinds of Combination Strategies
- Stability in certain parts of the business and growth in others.
- Stability in some industries and retrenchment or elsewhere in different areas.
- The growth of some companies and reduction in others.
- Growth, stability, and reductions in various companies.
Reasons to Adopt Combination Strategy
A business adopts the combination strategy because various business units face different challenges, and there is no one-size-fits-all solution to every one of them. The primary reasons for adopting the combination strategy are:
1) Different Products in Different Product Life Cycles
The various products a business offers are at different stages of a product’s lifecycle. For instance, products that remain in the development phase need significant advertising and sales marketing spending since the company is looking to attract more customers to test the product. Also, products at the end of the product life cycle need a stabilization strategy. Products in decline need to be changed. The company is trying to sell these products to make money without making any additional investments in these products.
2) Business Cycle
The economic cycle affects different products and divisions of the business. It can lead to growth opportunities for some companies, while it could cause catastrophe for others. Therefore, the company might opt to expand in certain businesses while there will be reductions in others.
3) Number of Businesses
The growth of companies can be so rapid that the number of companies and products becomes overwhelming. Therefore, it is sensible that the business’s management reduces the number of companies. It is also necessary since the resources available are insufficient and only available to businesses with the highest profits.
Essential Types of Combination Strategy
Combinational strategies can be simultaneous or sequential, depending on the specific business scenario. These are only some possible combination strategies: all businesses with multiple businesses and products employ a combination strategy. It is especially true when they are catering to multiple markets. Two varieties of combinations are:
1) Simultaneous Combination
This strategy is a good one to use in the following manner:
i) Removing a company or product line while adding an SBU or product line in another location.
ii) For a certain business or product, the business may choose to implement a turnaround plan, whereas other businesses could implement a growth plan.
iii) The business may be harvesting certain items while following an expansion strategy in other cases.
2) Sequential Combination
It could be utilized by the business to accomplish the following goals:
i) Initially, you will use the growth strategy and then change to a stability plan.
ii) First, employ a turnaround strategy and then implement the growth strategy when the situation improves.
What is a Combination Strategy & Why is it Important?
A combination strategy is a commercial tactic that combines two or more distinct approaches to accomplish a particular objective. It’s crucial because it enables businesses to capitalize on several methods’ advantages while minimizing each one’s disadvantages separately.
How do I Determine which Strategies to Combine?
You must set your business goals and objectives before deciding which techniques to combine. Finally, examine which strategies correspond with those aims and identify potential synergies or conflicts. Consider each combination’s potential dangers and benefits to make a wise choice.
What are some Common Examples of Combination Strategies?
Diversification, which combines various product or service offerings, and horizontal integration, which integrates multiple enterprises in the same industry, are typical examples of combination strategies. A further illustration is a cost leadership and differentiation approach combining affordable pricing with distinctive product attributes.
How can I Implement a Successful Combination Strategy?
You must thoroughly understand the advantages and disadvantages of each technique you combine to put one into practice. You must also be able to convey your approach to stakeholders and have a strong plan for how the strategies will interact. Finally, keep a close eye on the combo strategy’s performance and make any required revisions as needed.
What are the Risks of using a Combination Strategy?
The hazards of employing a combination approach include the potential for competing methods, which could reduce the combination’s overall efficacy, and the likelihood of increased complexity and execution difficulty. Also, compared to a single approach, there can be higher expenditures for implementing numerous strategies.