CHAPTER 7 Strategy Formulation Corporate Strategy 1 Corporate

CHAPTER 7 Strategy Formulation: Corporate Strategy 1

Corporate Strategy 3 Key Issues – –Firm’s directional strategy –Firm’s portfolio strategy –Firm’s parenting strategy 2

Corporate Directional Strategies 3

Corporate Strategy Directional Strategy – –Orientation toward growth • Expansion, contraction, status quo • Concentration or diversification • Internal development or acquisitions, mergers, or alliances 4

Corporate Strategy Directional Strategy – – 3 Grand Strategies • Growth strategies • Stability strategies • Retrenchment strategies 5

Corporate Strategy Growth Strategies -–External mechanisms • Mergers • Acquisitions • Strategic alliances 6

Corporate Strategy Growth Strategies -– 2 Basic forms • Concentration • Diversification 7

Corporate Strategy Basic Concentration Strategies -–Vertical growth –Horizontal growth 8

Corporate Strategy Vertical Growth -–Vertical integration • Full integration • Taper integration • Quasi-integration • Long-term contract 9

Corporate Strategy Vertical Growth -–Backward integration –Forward integration 10

Corporate Strategy Concentration -–Horizontal Growth • Horizontal integration 11

Corporate Strategy Basic Diversification Strategies -–Concentric Diversification –Conglomerate Diversification 12

Corporate Strategy Concentric Diversification -–Growth into related industry –Search for synergies 13

Corporate Strategy Conglomerate diversification -–Growth into unrelated industry –Concern with financial considerations 14

Corporate Strategy International Entry Options -–Exporting –Licensing –Franchising –Joint Ventures –Acquisitions –Green-Field Development 15

Corporate Strategy International Entry Options -–Production Sharing –Turnkey Operation –BOT Concept (Build, Operate, Transfer) –Management Contracts 16

Corporate Strategy Stability Strategies -–Pause/proceed with caution –No change –Profit strategies 17

Corporate Strategy Retrenchment Strategies -–Turnaround –Captive Company Strategy –Selling out –Bankruptcy –Liquidation 18

Corporate Strategy Portfolio Analysis -–Resource commitment on best products to ensure continued success –Resource commitment on new costly products high risk 19

BCG Matrix (Portfolio Analysis) 20

GE Business Screen (Portfolio Analysis) High Winners A Winners B C Question Marks Industry Attractiveness D Winners E Medium Average Businesses F Losers G Low Profit Producers Strong H Losers Average Weak Business Strength/Competitive Position 21

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 –Performance improvement –Analyze fit 22