Professional Documents
Culture Documents
How?
What is the current strategy, implicit or explicit? What assumptions have to hold for the current strategy to be viable? What is happening in the larger, social, political, technical and financial environments? What are our growth, size, and profitability goals? In which markets will we compete? In which businesses? In which geographic areas?
What is the current strategy, implicit or explicit? What assumptions have to hold for it to be viable? What is happening in industry, competitors, and in general? What are growth, size, and profitability goals? What products and services will we offer? To what customers or users? How will selling/buying decisions be made? How will we distribute our products and services? What capabilities and capacities will we require? Which ones are core? What will we make, what will we buy, and what will we acquire through alliance? What are our options? On what basis will we compete?
Corporate Strategy
y
Includes decisions regarding the flow of financial and other resources to and from a companys product lines and businesses
Directional Strategy
y
Key Questions
Should we expand, cut back or continue our operations unchanged? Should we concentrate our activities within our current industry or should we diversify into other industries? How do we grow? Through internal development or through external acquisitions, mergers or strategic alliances?
General orientations
Growth strategies Stability strategies Retrenchment strategies
Directional Strategy
Growth Concentration Vertical Growth Horizontal Growth Diversification Concentric Conglomerate Stability Pause/ Proceed with caution No change Profit Retrenchment Turnaround Captive company Sell-out/ Divestment Bankruptcy/ Liquidation
Growth Strategies
y y
Growth Strategies
y
Diversification
x Concentric x Conglomerate
Vertical Integration
y y y y
Vertical growth can be achieved by taking over a function previously done by a supplier or by a distributor resulting in vertical integration Key drivers of vertical growth: gain control over resources, guarantee quality of a key input, access to potential customers Vertical integration types
Backward or forward
Horizontal Integration
y
Expanding the firms products into other geographic locations and/or by increasing the range of products/ services offered to current markets
Diversification Strategies
y
Concentric diversification
Strong competitive position Search for synergy to generate more profits together than they could separately Common thread through all businesses
Conglomerate diversification
Primary concern is with financial considerations of cash flow or risk reduction Cash-rich company with few opportunities to grow in the current industry Smoothening out of seasonal business, prevent threat to the current business
Exporting Licensing Franchising Joint Ventures Acquisitions Green-field development Production sharing (combining higher labor skills with low cost operations e.g. outsourcing) Turnkey operations (production setup) BOT concept (govt. contracts) Management Contracts (e.g. TCIL)
Stability Strategies
Pause/ proceed with caution strategy y No change strategy y Profit strategy
y
Retrenchment strategies
y
Turnaround strategy
Contraction to quickly stop the bleeding Consolidation Frequently involves management change, ->situation
analysis -> emergency action plan -> business structuring -> return to normalcy
y y
Portfolio Analysis
BCG Growth-share matrix y GE Business Screen y International Portfolio analysis
y
GE Business Screen
y
Market Attractiveness
Growth Rate Mkt Size Demand variability Industry profitability Industry rivalry Global opportunities Macroenvironmental factors
Hold
Corporate Parenting
y y y y
y y
Primarily for multi-business organizations Focus on core competencies of the parent organization Primarily driven by the corporate headquarters Not only define what new businesses to start but also defining the way the businesses will be managed Obtain synergy with various businesses Role is to facilitate and transfer the knowledge assets from the corporate company to the individual businesses
Corporate hq must be aware of its strengths and weaknesses in terms of skills, resources and capabilities