Contents of Complete Corporate strategy 2024.ppt

Complete Corporate Strategy

1. Co-ordinates the activity of
muscles, organs, senses and
actions
Performs the following function:
-Receives sensory input
-Integrate
-Dictates motor output

2

Strategy

2. Hierarchy of Strategy
Corporate Strategy
Business
(Division Level)
Strategy
Functional
Strategy

3. 1. Overview: Strategies
The typical business firm usually considers three types
of strategy include:
•Corporate Strategy: describes a company’s overall
direction in term of its general attitude toward
growth and the management of its various businesses
and products lines.
•Corporate strategy typically fit with the three main
categories of Growth, Stability, and Retrenchment.

4. 2. Corporate Level Strategies
Every corporation must decide its orientation
toward growth by asking the following three
questions:
•Should we expand, cut back, or continue our
operations unchanged?
•Should we concentrate our activities within our
current industry or should we diversify into other
industries?
•If we want to growth and expand nationally and/or
globally, should we do so through internal
development or through external acquisition,
mergers, or strategic alliances?

5. 2. Corporate Level Strategies
•Corporate Level Strategy:
A corporation level strategy is composed of
three general orientations:
1.Growth Strategy: expand the firm’s activities.
2.Stability Strategy: make no change to the company’s
current activities
3.Retrenchment Strategy: reduce the company’s level
of activities.

6. 2.1. Growth Strategies
•It is recalled that Growth Strategy means that expand
the firm’s activities.
•A corporation can grow internally by expanding its
operations both globally and domestically, or it can
grow externally through mergers, acquisitions, and
strategic alliances.
•Company that do business in expanding business
must grow to survive.
•The three basic growth strategy are
Concentration
Vertical integration
Diversification.

7. 2.1.1. Growth: Concentration
•Concentration is a strategy which emphasizes
growth through focusing on a particular line of
business.
•The idea is to focus on what you know best.
Concentration Options include:
Penetration
Product Development
Market Development

8. Growth: Concentration Options
PRODUCTS










C
U
S
T
O
M
E
R
S
Current New
Curren
t
Product/market
Exploitation
(Penetration)
Product
Development
New
Market
Development
Product/Market
Diversification

9. 2.1.2. Growth: Diversification
•Diversification occurs when a company
expands outward from its core business by
adding new but related businesses (concentric
diversification), or by adding new but
unrelated businesses (conglomerate
diversification)
•Concentric diversification adheres to the
concept of strategic fit, while conglomerate
diversification follows the concept of risk
management.

10. 2.1.2. Growth: Diversification
•Strategic Fit places a strong emphasis on
“relatedness”as being the key factor in
determining what businesses the
company should be in.
•In other words, a company should enter
or expand into new businesses/industries
only if they are related to its existing
business activities and specialized
knowledge / expertise

11. Why Diversify?
•Diversification is capable of building shareholder value if it
passes three tests
1.Industry Attractiveness Test — the industry presents
good long-term profit opportunities
2.Cost of Entry Test — the cost of entering is not so high as
to spoil the profit opportunities
3.Better-Off Test — the company’s different businesses
should perform better together than as stand-alone
enterprises, such that company A’s diversification into
business B produces a 1 + 1 = 3 effect for shareholders
1 + 1 = 31 + 1 = 3

To build shareholder value!

12. Key Characteristics:
Example:Example: Using a common physical distribution system Using a common physical distribution system
and sales force such as Procter & Gamble’s disposable and sales force such as Procter & Gamble’s disposable
diaper and paper towel divisionsdiaper and paper towel divisions
Example:Example: General Electric’s costs to advertise, sell and General Electric’s costs to advertise, sell and
service major appliances are spread over many different service major appliances are spread over many different
productsproducts
Sharing ActivitiesSharing Activities
Diversification StrategiesDiversification Strategies
Achieves economies of scaleAchieves economies of scale
Boosts efficiency of utilizationBoosts efficiency of utilization
Helps move more rapidly down Learning CurveHelps move more rapidly down Learning Curve
Sharing Activities often lowers costs or Sharing Activities often lowers costs or
raises differentiationraises differentiation
Sharing Activities can lower costs if it:Sharing Activities can lower costs if it:

13. Types of Strategic Fits
•Cross-business strategic fits can exist anywhere along the value chain
–R&D and technology activities
–Supply chain activities
–Manufacturing activities
–Sales and marketing activities
–Distribution activities
–Managerial and administrative support activities

14. Identifying Competitive Advantage
Potential of Cross-Business Strategic Fits

15. Related Diversification
•Related Diversification
–A strategy in which an organization operates in
several different businesses, industries, or markets
that are somehow linked.
•Bases of Relatedness in Implementing
Related Diversification
Basis of Relatedness Examples
Similar technology Phillips, Boeing, Compaq
Common distribution and marketing skills HUL, Phillip Morris, Procter & Gamble
Common name brand and reputation Canon, Sony
Common customers Merck, IBM, AMF-Head

16. 2.1.3. Growth: Vertical Integration
Vertical Integration is the degree to which a firm
operates vertically in multiple locations on an
industry’s value chain from extracting raw
material to manufacturing to retailing.
•Vertical Integration:
• includes both backward integration
– (i.e. moving into business activities which are closer to
the raw materials production supply stage)
•forward integration
–(i.e. moving into business activities which are closer to
the end user/customer stage).

17. 2.1.3. Growth: Vertical Integration
Step of Vertical Integration
Raw Materials
Primary
Manufacturing
Finished
Products
Wholesale Retailing
Backward Forward

18. 2.1.3. Growth: Vertical Integration
•Companies can be either”partially integrated”
(expanding either forward or backward) or
“fully integrated”( including virtually all
forward and backward linkages).
•Shell Oil Company is an example of a fully
integrated company(e.g.oil exploration drilling,
refining, wholesaling and retailing).
•Moving in too far in either direction (Backward
of Forward) will most likely reduce the degree
of strategic fit.

19. Vertical Integration
•Integration backward into supplier functions
–Assures constant supply of inputs.
–Protects against price increases.
•Integration forward into distributor functions
–Assures proper disposal of outputs.
–Captures additional profits beyond activity costs.

20. 2.2. How to Implement
Growth Strategy
•A corporation can grow internally by expanding its
operations both globally and domestically, or it can
grow externally through mergers, acquisitions, Joint
Ventures and strategic alliances.
•Mergers involve the joining together of 2 or more
companies into one organization.
•Mergers can be described as a “corporate marriage”in
that the ownership and top management of both
companies usually agree to the merger which they view
as creating a stronger entity

21. 2.2. How to Implement Growth Strategy
•Acquisitions involve one company buying or taking
over another company.
•The rationale for Mergers and Acquisition (M&A)
is that it can be used as a a quick way to achieve
growth strategies such as diversification and
integration.
•In addition, mergers can also be used as a
defensive strategy (I.e. a weak company merges
with a strong company in order to ensure its
survival)

22. 2.2. How to Implement
Growth Strategy
•Strategic alliance occurs when two or more
companies unite for purposes of achieving a
common goal.
•Examples of common goals include:
 Influencing government policy (e.g. taxation,
trade, etc.)
 Product promotion with regards to a
particular industry (e.g. dairy industry)
 Entry into new markets (Joint Ventures)

23. 2.3. Stability Strategies
•Company may choose Stability over growth by
continuing its current activities without any
significant change in direction.
•It is sometimes viewed as a lack of strategy, the
stability can be appropriate for success.
•They are very popular with small business who the
owners found a niche and are happy with success
and manageable size of firm.
•Stability strategy can be very successful with short
run, but too dangerous with long run.

24. 2.3. Stability Strategies
Some popular Stability strategies are:
•Pause/ Proceed with Cautious Strategy: is an
opportunity to rest before continuing a growth or
retrenchment strategy.
•No Change Strategy: is a decision to do nothing new, a
choice to continue current operations for the
foreseeable future.
•Profit strategy: is a decision to do nothing new in a
worsening situation, but instead to act as though the
company problems are only temporary. The profit
strategy is an attempt to artificially support profit
when a company’s sale are declining by reducing
investment and short-term discretionary expenditures.

25. 2.4. Retrenchment Strategies
A company may pursue Retrenchment strategies
when it has a weak competitive position in some
or all of its products line resulting in poor
performance and profits are becoming losses.
These strategies impose a great deal of pressure
to improve the performance.
In attempt to eliminate the weaknesses that are
dragging the company down, management may
follow one of several retrenchment strategies:

26. 2.4. Retrenchment Strategies
•Turnaround: this strategy involves trying to turnaround
the performance of a company through a process of
restructuring “down sizing”or “re-engineering”
•Examples include the closing of manufacturing plants
(or stores in the case of a large retail chain). laying-off
of staff, reductions in salaries, etc.
•E.g. IBM in the early 1990’s, GM in late 2000’s and
Nokia in the early 2010

27. 2.4. Retrenchment Strategies
•Divestiture: involves the selling off of business units
or divisions of a company in order to regain a more
strategic focus. Divestiture is the direct opposite of
acquisition.
•Google acquired Motorola Mobility, the mobile
devices division of Motorola, in 2012.
•Divested Motorola Mobility in 2014
•Sold it to Lenovo, a Chinese MNC.

28. •Bankruptcy: is a legal means by which a company
can seek protection from its creditors when it is
unable to pay its debts and meet other contractual
obligations.
•Voluntary or Involuntary Bankruptcy
–debt resolution through asset liquidation/ debt restructuring/
or discharge of debts.
2.4. Retrenchment Strategies

29. Retrenchment Strategies
•Liquidation: occurs when a company is
forced to sell off all of its assets in order to
pay its outstanding creditors.
•Companies which are able to file for
bankruptcy, but unable to successfully
restructure, are forced to liquidate.
•Liquidation represents the end of the
company.

30. 2. Corporate Level Strategies
GROWTH
STABILITY
RETRENCHMENT
CORPORATE
LEVEL
STRATEGIES
Concentration
Vertical
Integration
Diversification
Turnaround
Divestiture
Bankruptcy
Liquidation

31. Types of Grand Strategies
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 Consortia
 Concentrated Growth
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Market Development
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Product Development

Innovation
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Horizontal Integration
 Vertical Integration
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Concentric Diversification
 Conglomerate Diversification

Turnaround

Divestiture

Liquidation

Bankruptcy
 Joint Ventures
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Strategic Alliances