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Corporate Strategy Formulation: Directional, Growth, Portfolio Strategies

Explore corporate strategy formulation including directional strategies, growth strategies, and portfolio analysis. Understand key issues and strategic factors affecting firms. Learn about vertical growth, concentration, and international entry options.

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Corporate Strategy Formulation: Directional, Growth, Portfolio Strategies

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  1. CHAPTER 7 Strategy Formulation: Corporate Strategy

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

  3. Corporate Directional Strategies

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

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

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

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

  8. Corporate Strategy • Basic Concentration Strategies -- • Vertical growth • Horizontal growth

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

  10. Corporate Strategy • Vertical Growth -- • Backward integration • Forward integration

  11. Corporate Strategy • Concentration -- • Horizontal Growth • Horizontal integration

  12. Corporate Strategy • Basic Diversification Strategies -- • Concentric Diversification • Conglomerate Diversification

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

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

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

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

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

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

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

  20. BCG Matrix (Portfolio Analysis)

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

  22. 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

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