CHAPTER 7 Strategy Formulation Corporate Strategy STRATEGIC MANAGEMENT

CHAPTER 7 Strategy Formulation: Corporate Strategy STRATEGIC MANAGEMENT & BUSINESS POLICY 11 TH EDITION THOMAS L. WHEELEN J. DAVID HUNGER 1

Corporate Strategy 3 Key Issues – –Firm’s directional strategy (Growth, Stability, Retrenchment) –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 -–Strategic factors –performance improvement –Analyze fit 22