Strategy Formulation - Corporate Level Strategies c3h5l

Strategy Formulation: Corporate Strategy

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Corporate Strategy

Three Key Issues:

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• Firm’s directional strategy • Firm’s portfolio strategy • Firm’s parenting strategy 2

Corporate Directional Strategies

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Corporate Strategy Directional Strategy:

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– Orientation toward growth • Expand, cut back, status quo? • Concentrate within current industry, diversify into other industries? • Growth and expansion through internal development or acquisitions, mergers, or strategic alliances? 4

Corporate Strategy

Directional Strategy:

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– Three Grand Strategies: • Growth strategies • Stability strategies • Retrenchment strategies

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Corporate Strategy Growth Strategies:

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– Most widely pursued strategies – External mechanisms: • Mergers – Transaction involving two or more firms in which stock is exchanged but only one firm survives.

• Acquisition – Purchase of a firm that is absorbed as an operating subsidiary of the acquiring firm.

• Strategic Alliance – Partnership of two or more firms to achieve strategically significant objectives that are mutually beneficial. 6

Corporate Strategy 2 Basic Growth Strategies:

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– Concentration – Current product line in one industry

– – Diversification – Into other product lines in other industries

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Corporate Strategy Basic Concentration Strategies:

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– Vertical growth – – Horizontal growth –

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Corporate Strategy Concentration:

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Vertical growth – – Vertical integration • Full integration • Taper integration • Quasi-integration •

– Backward integration •

– Forward integration – 9

Corporate Strategy 

Concentration:

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Horizontal Growth – – Horizontal integration –

–

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Corporate Strategy   

Basic Diversification Strategies: – – Concentric Diversification – – Conglomerate Diversification

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Corporate Strategy 

Diversification:

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Concentric: – – Growth into related industry – Search for synergies

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Corporate Strategy 

Diversification:

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Conglomerate: – – Growth into unrelated industry – Concern with financial considerations

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Corporate Strategy

Internat ional Entry Options

Exporting Licensing Franchising t Ventures Acquisitions Green-Field Development Production Sharing Turnkey Operations BOT Concept Management Contracts

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Corporate Strategy Stability Strategies:

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– Pause/proceed with caution – – No change – – Profit strategies 15

Corporate Strategy Retrenchment Strategies:

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– Turnaround – – Captive Company Strategy – – Selling out – – Bankruptcy – – Liquidation 16