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Strategies: Unit - 3
Strategies: Unit - 3
Unit - 3
Corporate Level Strategy
Corporate-Level Strategy should allow a company, or
one of its business units, to perform the value-creation
functions at lower cost or in a way that allows for
differentiation and premium price.
Corporate strategy is used to identify:
1. Businesses or industries that the company should
compete in
2. Value creation activities which the company should
perform in those businesses
3. Method to enter or leave businesses or industries
in order to maximize its long-run profitability
Corporate Strategy/Grand Strategy
Corporate Strategy / Grand Strategy provides overall
direction for the firm irrespective size, whether its is
small or large firm. It can be evolved by
Stability Strategy ( no changes in the company’s
current activities)
Growth Strategy (Expansion of the firm)
Retrenchment Strategy (reduce the level of company’s
activities)
Directional/Corporate Strategies
Growth
Concentration
Vertical Growth
Horizontal Growth
Diversification
Concentric
Conglomerate
Stability Retrenchment
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Retrenchment Strategy-TURNAROUND
STRATEGIES
Reversing a negative trend
Retrenchment - internal/external - improve internal
efficiency - Divestment/liquidation
Danger signs:
Persistent negative cash flows
Negative profits
Declining market share
Deterioration in physical facilities
High turnover, low morale, Mismanagement
Uncompetitive products, sick company
Retrenchment Strategy-Divestment
Divestment
- (divestiture or cutback) - sale of or
liquidation of a portion of business
- SBU or profit center
1. Spinning it off - financially and managerially
independent company with stake
2. Sell a unit outright
Kelvinator India - spin-off - Avanti scooters - high
production cost
Retrenchment Strategy-Liquidation
Rarely - large companies liquidate
Buyers rare for purchase of assets
Court, voluntary, subject to supervision of court
Business Level Strategy
Business-level strategy
A plan of action to use the firm’s resources and
distinctive competencies to gain competitive advantage.
Abell’s “Business Definition” process
Customer needs – product differentiation (what)
Customer groups – market segmentation (who)
Distinctive competencies – competitive actions (how)
Choosing a Generic Business-Level Strategy
Product/Market/Distinctive-Competency Choices and
Generic Competitive Strategies
Cost
Leadership Differentiation Focus
Product Low High Low to high
Differentiation (principally (principally by (price or
by price) uniqueness) uniqueness)