CORPORATE STRATEGY IN DETAIL GRAND STGY BCG GE.ppt

CORPORATE STRATEGY GRAND STRATEGY IN DETAIL

1. Prentice Hall, Inc. © 2006 7-1
STRATEGIC MANAGEMENT & BUSINESS POLICY
10
TH
EDITION
THOMAS L. WHEELEN J. DAVID HUNGER
CHAPTER 7 Strategy
Formulation: Corporate
Strategy

2. Prentice Hall, Inc. © 2006 7-2
Corporate Strategy
3 Key Issues –
–Firm’s directional strategy
The firm’s overall orientation towards growth,
stability or retrenchment
–Firm’s portfolio strategy
The industries or markets in which the firm competes
–Firm’s parenting strategy
The manner in which management coordinates activities
and transfers resources and cultivates capabilities among
product lines and business units

3. Prentice Hall, Inc. © 2006 7-3
Corporate Strategy
Directional Strategy –
3 Grand Strategies
•Growth strategies
– Concentration or diversification
– Internal development or acquisitions,
mergers, or alliances
•Stability strategies
-status quo
•Retrenchment strategies
-contraction

4. Prentice Hall, Inc. © 2006 7-4
Corporate Directional Strategies

5. Prentice Hall, Inc. © 2006 7-5
Corporate Strategy
Growth Strategies --
–External mechanisms
•Mergers
•Acquisitions
•Strategic alliances

6. Prentice Hall, Inc. © 2006 7-6
Corporate Strategy
Growth Strategies --
–2 Basic forms
•Concentration
»Vertical growth
»Horizontal growth
•Diversification
»Concentric Diversification (RELATED)
»Conglomerate Diversification (UNRELATED)

7. Prentice Hall, Inc. © 2006 7-7
Corporate Strategy
Vertical Growth --
–Vertical integration
•Full integration
•Taper integration
•Quasi-integration
•Long-term contract

8. Prentice Hall, Inc. © 2006 7-8
Corporate Strategy
Vertical Growth --
–Backward integration
–Forward integration

9. Prentice Hall, Inc. © 2006 7-9
Corporate Strategy
Concentration --
–Horizontal Growth
– New Geographic Markets
– Acquiring New Companies

10. Prentice Hall, Inc. © 2006 7-10
Corporate Strategy
Basic Diversification Strategies --
–Concentric Diversification (RELATED)
»Growth into related industry
»Search for synergies
–Conglomerate Diversification (UNRELATED)
»Growth into unrelated industry
»Concern with financial considerations

11. Prentice Hall, Inc. © 2006 7-11
Corporate Strategy
International Entry Options --
–Exporting
–Licensing
–Franchising
–Joint Ventures
–Acquisitions
–Green-Field Development
–Production Sharing (Outsourcing)
–Turnkey Operation
–BOT Concept (Build, Operate, Transfer)
–Management Contracts

12. Prentice Hall, Inc. © 2006 7-12
Corporate Strategy
CONTRAVERSIES IN DIRECTIONAL
GROWTH STRATEGIES
Although research in not in complete agreement, growth
into areas related to a company’s current product
lines is generally more successful than in growth
into completely unrelated areas
Cisco’s three criteria for takeover:
-It must be relatively small
-It must be comparable in organizational culture
-It must be physically close to one of the existing affiliates

13. Prentice Hall, Inc. © 2006 7-13
Corporate Strategy
Stability Strategies --
–Pause/proceed with caution
–No change
–Profit strategies

14. Prentice Hall, Inc. © 2006 7-14
Corporate Strategy
Retrenchment Strategies --
–Turnaround
–Captive Company Strategy
–Selling out
–Bankruptcy
–Liquidation

15. Prentice Hall, Inc. © 2006 7-15
Corporate Strategy
Portfolio Analysis --
–Resource commitment on best products to
ensure continued success
–Resource commitment on new costly products
high risk

16. Prentice Hall, Inc. © 2006 7-16
Corporate Strategy
Portfolio Analysis --
…Puts the corporate headquarters into the
role of an internal banker
…Top management views its product lines and
business units as a series of investments from
which it expects a profitable return

17. Prentice Hall, Inc. © 2006 7-17
BCG Matrix (Portfolio Analysis)

18. Prentice Hall, Inc. © 2006 7-18
GE Business Screen (Portfolio Analysis)
A
Winners Winners
B
C
Question
Marks
D
F
Average
Businesses
E
Winners
Losers
G
Losers
H
Losers
Profit
Producers
Strong Average Weak
Low
Medium
High
Business Strength/Competitive Position
I
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t
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y

A
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19. Prentice Hall, Inc. © 2006 7-19
Corporate Strategy
Portfolio Analysis --
Disadvantage:
because it tends to primarily view matters
financially, it regards business units and
product lines as separate and independent.
It fails to deal with the question of :
-- what industries a corporation should enter or
-- with how a corporation can attain synergy among its
product lines and business units.
These questions are addressed by;
“Corporate Parenting Strategy”

20. Prentice Hall, Inc. © 2006 7-20
Corporate Strategy
Corporate Parenting Strategy –
…views a corporation in terms of resources
and capabilities that can be used to build
business unit value as well as generate
synergies across business units …
–Strategic factors
Examine each business unit in terms of its
strategic factors
–performance improvement
Examine each business unit in terms of areas in
which performance can be increased
–Analyze fit
Analyze how well the parent corporation fits with the
business unit