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Corporate Strategy

Corporate Strategy. Three Key Issues: Firm’s directional strategy Growth Stability Retrenchment Firm’s portfolio strategy BCG Matrix Firm’s parenting strategy Parenting-Fit Matrix. Corporate Directional Strategies. Corporate Strategy. Directional Strategy: Orientation toward growth

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Corporate Strategy

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  1. Corporate Strategy Three Key Issues: Firm’s directional strategy • Growth • Stability • Retrenchment • Firm’s portfolio strategy • BCG Matrix • Firm’s parenting strategy • Parenting-Fit Matrix Chapter 6 Wheelen/Hunger

  2. Corporate Directional Strategies Chapter 6 Wheelen/Hunger

  3. Corporate Strategy Directional Strategy: • Orientation toward growth • Expand (Growth) • Cut back (Retrenchment) • Status quo (Stability) • Concentrate • Within current industry (Concentric) • Diversify into other industries (Conglomerate) • Growth and expansion • Through internal development or acquisitions, mergers, or strategic alliances? Chapter 6 Wheelen/Hunger

  4. Corporate Strategy Growth Strategies: • Most widely pursued strategies • External mechanisms: • Mergers • Transaction involving two or more firms in which stock is exchanged but only one firm survives. • There is some accepted gain by the dissolved company • Acquisition • Purchase of a firm that is absorbed as an operating subsidiary of the acquiring firm. • Not mutually accepted or agreed upon • Strategic Alliance • Partnership of two or more firms to achieve strategically significant objectives that are mutually beneficial. • Joint Ventures • Both Companies remain Chapter 6 Wheelen/Hunger

  5. Corporate Strategy 2 Basic Growth Strategies: • Concentration • Current product line in one industry • Vertical Growth • Backward Integration • Forward Integration • Horizontal Growth • Horizontal Integration • Diversification • Into other product lines in other industries • Concentric • Conglomerate Chapter 6 Wheelen/Hunger

  6. Corporate Strategy Basic Concentration Strategies: • Vertical growth • Taking over of operations previously run by suppliers or distributors • Company growth • Control over vested operations • Based on the value chain model • Horizontal growth • Increasing the range of products and services • Entering into new markets with your current products Chapter 6 Wheelen/Hunger

  7. Corporate Strategy Basic Diversification Strategies: • Concentric Diversification • Diversification into a related industry • Strong Competitive Position • Take advantage of current strengths • Looking for synergies • Conglomerate Diversification • When the current industry is no longer attractive • Organization may lack the skill set to maintain the market • There is an opportunity in unrelated products for the corporation to succeed • Based mostly on financial gains Chapter 6 Wheelen/Hunger

  8. Corporate Strategy Exporting Licensing Franchising Joint Ventures Acquisitions Green-Field Development Production Sharing Turnkey Operations BOT Concept Management Contracts International Entry Options Chapter 6 Wheelen/Hunger

  9. Corporate Strategy Stability Strategies: • Pause/proceed with caution • Deliberate attempt to make incremental improvements until an environmental situation changes • No change • Based on the encouragement of the companies relative position and no major changes occurring • Profit strategies • To internally support a declining market and maintain profits Chapter 6 Wheelen/Hunger

  10. Corporate Strategy Retrenchment Strategies: • Turnaround • Contraction • Consolidation • Captive Company Strategy • Relegating to one market’s needs • Selling out • Maintaining shareholder wealth • Bankruptcy • Turning over management to the courts • Settlement of obligations • Liquidation • Total termination of the firm Chapter 6 Wheelen/Hunger

  11. Corporate Strategy Portfolio Analysis • How much of our time and money should we spend on our best products to ensure that they continue to be successful? • How much of our time and money should we spend developing new costly products, most of which will never be successful? Chapter 6 Wheelen/Hunger

  12. Corporate Strategy Portfolio Analysis BCG (Boston Consulting Group) Matrix Product life cycle and funding decisions • Question marks • New products with potential for success • Stars • Market leaders with high market share and capital • Cash cows • Bring in large revenues, since the monies are not needed to maintain the market • Dogs • Low market share and little potential to succeed Chapter 6 Wheelen/Hunger

  13. BCG Matrix Chapter 6 Wheelen/Hunger

  14. Corporate Strategy Corporate Parenting: • Views the 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 • Those elements of a company that determine its strategic success or failure • Performance improvement • Analyze fit Chapter 6 Wheelen/Hunger

  15. Corporate Strategy Corporate Parenting: • Parenting-Fit Matrix • Summarizes the various judgments regarding corporate/business unit fit for the corporation as a whole. • Parenting-Fit Matrix • 2 Dimensions • Positive contributions parent can make • Negative effects parent can have Chapter 6 Wheelen/Hunger

  16. Parenting-Fit Matrix Low Heartland Ballast Edge of MISFIT between critical success factors and parenting characteristics Heartland Alien Territory Value Trap High Low High FIT between parenting opportunities and parenting characteristics Chapter 6 Wheelen/Hunger

  17. Corporate Strategy Horizontal Strategy: • Corporate strategy that cuts across business unit boundaries to build synergy across business units to improve the competitive position of one or more business units. Chapter 6 Wheelen/Hunger

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