ENCG - Casablanca

Strategic Management
Theme 3

Corporate Strategy and Business Strategy

S8/2020

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Theme 3 Overview and Objectives
• The fundamentals of Corporate Strategy;

• The implementation of Corporate Strategy;

• Examples of Corporate Strategy;

• Basic and Fundamental Concepts on Generic Strategies (How to Build

Competitive Advantage through Basic Strategies);

• The fundamentals of the cost-based strategy;

• The fundamentals of the strategy based on differentiation;

• The fundamentals of the strategy based on concentration.

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 PART I

Corporate Strategy

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 Corporate Strategy ?

“…Corporate strategy is the way an

enterprise creates value through the
configuration and coordination of its
multimarket activities…”

Collis and Montgomery, 1997, p. 5

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 Corporate Strategy ?

« …. Refers to all projects and policies

defining the growth and development
modes of the company ....»
Michel Marchesnay, 2004

Corporate Strategy # Business Strategy

Preliminary

Corporate Strategy Business Strategy

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 From Business Strategy to Corporate
Strategy: The scope of the Development

• Corporate Strategy is concerned with where a firm

competes, i.e. the scope of its activities. This is
about the destiny of SBU.

• Business Strategy is concerned with how a firm

competes within a particular market.

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Corporate Strategy (Basic Questions 1/2)

• Question 1: How about the The business

portfolio of the Entreprise ?

• Should we move towards

DIVERSIFICATION of activities? Or,
should we focus on some activities?
(CONCENTRATE)/(RETRENCHMENT=
disengagement)
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Corporate Strategy (Basic Questions 1/2)
• Question 2: In which country, zone,
region/Market are we going to settle
next?

• Question 3: How will be the allocation of

resources divided between the different
activities ?

• Question 4: How about the modalities

of Growth?
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 Corporate Strategy
Synthesis on General Questions

- Activities: Concentration/
Diversification/Retrenchment.
- The nature of Integration: Vertical /
Horizontal.
- Scope: Nationalization/ Internationalization.
- Resource allocation.

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 Basic Concepts of
Diversification
“….Diversification is a form of growth
strategy. Growth strategies involve a
significant increase in performance
objectives (usually sales or market
share) beyond past levels of
performance…”
Michel Marchesnay, 2004

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 The reasons for Diversification

GROWTH --The desire to escape stagnant or declining industries

is a powerful motive for diversification.

RISK --Diversification reduces variance of profit flows

SPREADING

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Basic Concepts of
Diversification
Pattern of Diversification

Core
business
Closely related
businesses
Increasingly unrelated
businesses

Collis and Montgomery, 2005

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 Basic Concepts of
Diversification
Level of Diversification

Low Levels of Diversification Moderate Levels of

Diversification

A A A
A
B
B C B C
Single Dominant Related Related linked
Business Business

Very High Levels of

Diversification
A

B C
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 Basic Concepts of
Diversification
Type of Diversification

Concentric diversification occurs

when a firm adds related
Concentric products or markets. The goal of
such diversification is to achieve
strategic fit. Strategic fit allows an
organization to achieve synergy
Type of
DIVERSIFICATION
Conglomerate diversification occurs
when a firm diversifies into areas
that are unrelated to its current line
of business. The primary purpose of
Conglomerate conglomerate diversification is
improved profitability of the
acquiring firm.
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Basic Concepts of
Diversification
Examples
Core business: Low level of diversification
Drink/Soft Drink

Core business: Low level of diversification

Cement Factory

Core business:
Operating System
Related business: Meduim level of diversification
IT Applications

Core business:
Searching
Related business: High level of diversification
Emails, etc….
Unrelated business:
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Basic Concepts of
Diversification Examples
Core business: Low level of diversification
Drink/Soft Drink

Core business: Low level of diversification

Cement Factory
Concentric
Core business: Diversification
Operating System
Related business: Meduim level of diversification
IT Applications

Core business: Conglomerate

Searching Diversification
Related business:
High level of diversification
Emails, etc….
Unrelated business:
Cars
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 Basic Concepts of
Diversification
How to operate (Mode) DIVERSIFICATION ?

Internal External
Internal diversification occurs when a External diversification may achieve
firm enters a different, but usually the same result; however, the
related, line of business by company enters a new area of
developing the new line of business business by purchasing another
itself. Internal diversification company or business unit. Mergers
frequently involves expanding a firm's and Acquisitions are common forms
product or market base. of external diversification.

1- Market existing products in new
markets;
2- Market new products in existing
markets (using existing channels of
distribution to market new products)
1- Mergers occur when two or more firms
combine operations to form one corporation;
2- Acquisitions occur when the purchased
corporation loses its identity. The acquiring
company absorbs it.

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 Basic Concepts of
Diversification
Vertical Integration

Raw Materiels

Manufacturing
Production
Backward
Integration
Distribution

Forward
Integration
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How External Growth is performing ?

• Merger and Acquisition;

• Simple or cross-shareholding;

• Strategic Alliance.

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 (Mergers and Acquisitions)
Simplified Mechanism

Merged companies

Entreprise A Entreprise B

Goals
of the merged entity

Capital and Finance Consolidation - Optimizing Workforce and Structures

Organizational.

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 Strategic Alliance
entreprise A Entreprise B

Specific objectives Alliance Specific objectives

Common objectives

Group of Economic Joint Venture

contractualization
interests

Joint creation
Franchise Consortium
Entreprise
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Strategic Alliance Examples

Contractualization

Joint Venture

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 Concentration and Retrenchment
Strategy
• Concentration strategy? A strategic approach in
which a business focuses on a single market or product.
This allows the Entreprise to invest more resources in
production and marketing in that one area, but carries
the risk of significant losses in the event of a drop in
demand or increase in the level of competition.

Retrenchment Strategy ?A strategy used by Entreprise to

reduce the diversity or the overall size of the operations.
This strategy is often used in order to cut expenses with
the goal of becoming a more financial stable business.

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