FACULTY OF MANAGEMENT SCIENCES

DEPARTMENT OF BUSINESS
ADMINISTATION

B.SC. (BUSINESS ADMINISTRATION)

CORPORATE LEVEL STRATEGIES

By: S.E. Ifere, Ph.D., FNIM

 CORPORATE LEVEL STRATEGIES
Corporate Strategy (CS)

A Firm’s decision and intentions with regard to the

scope of its activities (its choices in relation to
industry, national markets, and vertical activities
within which it participates) and the resources
allocation among these. (Grant, 2019)
 CORPORATE LEVEL STRATEGIES
It deals with three key issues (Wheelen & Hunger,
2004): 1) Directional strategy – firm’s overall
orientation towards growth (expanding company
activities), 2) stability (make no change to current
activities), or 3) retrenchment (reducing the level
of activities); ii) Portfolio strategy – Industry or
markets in which the firm competes - through its
products or business units; iii) The manner in
which management coordinates activities,
including resources among product lines and
business units
 CORPORATE LEVEL STRATEGIES
a) GROWTH
Expansion – i) Concentration, ii) Diversification
and iii) Integration
i). Concentration (intensification) - Usually first
consideration in expansion, involving converging
resources in one or more of the firm’s business in
terms of customer needs or technologies which
results in expansion. One of the drivers of
concentration is Scale Economies.
 The concept also deals with the dominance of
firms in an industry - the proportion of output
accounted for by the largest firms.
 CORPORATE LEVEL STRATEGIES
ii). Diversification - A firm’s strategy that involves
expansion of current set of markets, products,
technologies, or geographic region (Fitzroy &
Hulbert, 2005).

Two issues to consider in diversification: i) How

attractive is the industry of interest; ii)
Establishing competitive advantage in that
industry (Grant, 2019).
 CORPORATE LEVEL STRATEGIES
Two types of Diversification:
Related (or Concentric) Diversification – When
the extension permits some sharing of current
resources, benefits from economies of scope.

Unrelated (or Conglomerate) Diversification –

When expansion does not permit resource sharing,
no economies of scope, usually conglomerate
strategy, leading to conglomerate discount (eg,
headquarter cost).
 CORPORATE LEVEL STRATEGIES

Benefits of diversification include:

- Efficiency gains from applying present
resources to new markets or products / services
(Economies of Scope).
- Minimises negative effect of loss due to poor
performance of a product/service line or
seasonal fluctuation in demand of some of the
firms’ products or services.
- Market power – Subsidizing one product from
the surplus earned by another.
 CORPORATE LEVEL STRATEGIES
iii). Integration – Deals with integrating value
chains. Vertical integration is backward or
forward integration into adjacent activities in the
value chain. Backward integration is development
into activities concerned with inputs (eg, raw
materials) and Forward integration is development
into activities concerned with outputs (eg,
distribution, repairs etc). Horizontal integration
is developing into activities which are Comple-
mentary to present activities , e.g., acquisition of a
firm offering similar products or services (Textile
Mills (TM) vs TM or Coffee vs coffee mate)
 CORPORATE LEVEL STRATEGIES
iv). Cooperation – Link which brings
organizations together that enhances their abilities
to compete in the market place. This strategy
implies companies working with rivals or related
companies to achieve mutual benefits or agreed
objective. This cooperative game has positive
payoff for all participants (Lynch, 2012). Example
– JVs.
 CORPORATE LEVEL STRATEGIES
v). Digitalization – Is introducing digital
technology in business models. It involves
converting analog source materials into numerical
format to facilitate computer data processing or
general operation. For example, from manual to
computer based filling.
 CORPORATE LEVEL STRATEGIES
vi. Internationalization – Expansion beyond
domestic market through
- Direct export through distributors or branch
- Indirect export through intermediary that export
the product from home country
- Licensing through knowledge, technology or
patent transfer
- Franchising
- Foreign direct investment, including JVs
 CORPORATE LEVEL STRATEGIES
2. Stability
Stability strategy involves maintaining a firm’s
current position and focusing on incremental
change or improvement only. The strategy is
common among firms that do not want to take
risks associated with expansion.
 CORPORATE LEVEL STRATEGIES
3. Retrenchment
This is a strategy that involves reduction in a
firm’s size in order to reduce cost and ensure
profitability. It entails withdrawing from some
products or markets to achieve turnaround
objectives.
 CORPORATE LEVEL STRATEGIES
Others
1. Restructuring - This may involve
Organizational Restructuring or Organizational
Redesign involving the structure (tasks, formal
hierarchical relationships and coordination),
processes (decision making, planning, budgeting,
etc.), human resource (decisions on selection,
motivation, compensation, training, succession
planning for managers, appropriate organizational
culture, downsizing) or financial restructuring –
e.g., altering debt-for-equity swap.
 CORPORATE LEVEL STRATEGIES
2. Combination – A mixture of stability,
expansion and Retrenchment strategies at the same
time in the firm’s different businesses or at
different times in one of its businesses, to improve
performance