CORPORATE LEVEL

STRATEGIES
INTRODUCTION
The essence of corporate strategy is the
determination of the overall direction that will
enable the organisation to achieve its strategic goal
trough its operation
“Corporate level strategy” is specifies actions
taken by the firm to gain a competitive advantage
by selecting and managing a group of different
business competing in several industries or
product market
 Three Levels of Strategy in Organizations
Corporate-Level Strategy:
What business arewe in?
Corporation

Business-Level Strategy:
How dowecompete?

Textiles Unit Chemicals Unit Auto Parts Unit

Functional-Level Strategy:
Howdowesupport the business-level strategy?

Finance R&D Manufacturing Marketing

5
Classification of Strategies
⚫Once a company completes its mission
formulation, environment scan & internal
appraisal, it has to think about the choice of
strategy alternatives toachieve its objectives.
⚫Strategy can be classified as Corporate/ Grand /
Generic / Master / Root strategies which deal
with overall strategic action, or programmed
strategies that deal with implementation on
corporate strategy.
⚫ Our focus will beon Corporate/Grand strategies.
Classification of Corporate Strategies
⚫ Stability Strategy
⚫ Growth Strategy
⚫ Retrenchment Strategy
⚫ Combination Strategy
 Keeping the organisation
where it is

RETRENCHMENT STABILITY GROWTH

Moving theorganisation
Allowing theorganisation fall ahead
back
Stability Strategy
⚫ Also referred toas the Defensive Approach.
⚫ Basic principle is “Maintain the presentcourse”.
⚫Itcan be implemented when theco. is comfortably
satisfied with its current performance and there is
no significant environment threat i.e. it offers
scope forsafe business.
⚫Some top level managements are reluctant to
change, take risks and hence adopt Stability
strategy.
Stability Strategy
⚫ If a co. has passed through turbulentenvironment. It
tends toadopt Stability Strategy.
⚫ If thecostof changing strategy isvery high, a co. will
adopt Stability Strategy.
⚫ Though small amount of adjustments can be made to
the present strategies, it isvery insignificant and small.
NO CHANGE STRATEGY
Several small and medium sized firms operating in a familiar market
more often niche market that is limited in scope and offering products or
services trough a time tested technology relyon the nochangestrategy.

PROFIT STRATEGY
In a situation where the profitability is drifting lower, firms undertake
measures to reduce investments, cut costs, raise prices, increase productivity, or
adopt some such measures to tide over what are supposed to be temporary
difficulties.

PAUSE/PROCEED WITH CAUTION STRATEGY

Wish to rest while before moving ahead . FMCG sector
(HUL,BATA..etc)
 Expansion/Growth Strategies
⚫A strategy in which an organization increases its
level of objectives upward in significant
increments, much higher than an exploration of its
past achievement level. It indicates on objective to
raise the market share or sales objectives
significantly.
⚫It should be differentiated from Normal Growth
which can beachieved by Learning Curve.
⚫No strategy can however grow more that 1/3rd of
the Market Share. Why?
Expansion/ Growth Strategies
When & Whydocos. adopt Growth Strategies :
⚫ If an org. has stabilized after variousgrowth strategies.
Growth – Stability – Growth…
⚫ If theenvt. offers and permitsgrowth. (FERA / FEMA etc )
⚫ Org. has excess funds ( Plough back profits )
⚫ Present products are in thedecline stage – High costs and
low revenues.
⚫ Growth mayoffer economies of scale.
⚫ Will & skill of management permitsgrowth.
⚫ Increase prestige, goodwill, reorganization etc.
Internal Growth Routes
> Expansion. The processof expansion :
1. Determineoptions forcapacity expansion
2. Access future cost & demand of inputs.
3. Access probable technological change
4. Predictcapacity addition bycompetitors
5. Accessdemand & supply in industry
6. Determineexpected cash flow from expansion.
7. Test theanalysis forconsistency.
 Diversification
Concentration

Integration

Cooperation

Expansion
strategy
Internationalization
Expansion through concentration
⚫ First level form of expansion grand strategy that
involves the investment of resources in the product
line, catering to the needs of identified market with
the helpof proven and tested technology.

⚫ Simply, the strategy followed when an organisation

coincides its resources into one or more of its
businesses in the contexts of CN,CF.AT either singly or
jointly.
Concentrated Growth
⚫ Concentrated growth is the strategyof the firm that
directs its resources to the profitable growth of a
dominant product, in a dominant market, with a
dominant technology
⚫ Concentrated growth strategies lead toenhanced
performance
⚫ Specific conditions favorconcentrated growth
⚫ The risksand rewardsvary
The org. May follow any of the ways to
practice expansion trough concentration.
Market
Development

Product
Development
Ansoff Matrix
 Integration Strategies
Vertical Integration :
⚫Backward Integration : Takes place when a
company looks forvarious options through which
itcan own an important source of raw material.
⚫Forward integration : Takes place when a
company looks forvarious options through which
itcan own a distribution network for its products.
Horizontal integration : Entering similar products
or product lines.
Vertical and Horizontal Integrations
 Diversification

• Economies of scope
• corporate managerial capabilities
• Increase market power
• Respond to environmental change
• Spread risk
• Expectations of powerful stake- holders
Types of diversification :
1. Concentric Diversification : Some similar factors can be
used bydiversification. E.g. : A teacompanystarts producing
other food products to take advantage of its distribution
networketc.
 Marketing related (R-pdt UR-tech)
(sewing machine-kitchenware &homeappliance-sold to
housewives-chain of retail store)
 Technology related(R-tech UR-product)
a leasing firm offering-HP service to institutional customers-
customer finance for the purchase of durables to individual
customers
 Marketing and technology related( R-pdt R-tech)
raincoat manufacture makesotherrubber based items( shoes ,
gloves.etc) –sold trough sameretail outlets)
Types of diversification
2. Conglomerate diversification : Companyenters
entirelydifferentproduct – market segments.
Forexample
ITC (Cigarette ,hotel , FMCG Goods)
ESSAR GROUP( Shipping , Marine Construction , oil Support
Services, and Iron and Steel)
POLAR GROUP(Fans ,marbles and Granite)
COOPERATION STRATEGIES
Onecompanycan benefitat thecostof others-
(win-lose win-win situation)
 Mergers
 Take Over
 JointVenture
 Strategic Alliance
Why :
⚫ Quick entry into business
⚫ Fastergrowth rate
⚫ Diversification advantage
⚫ Reduction in competition(limited marketshare)
⚫ Tax advantage
⚫ Synergeticeffect.
Mergers
⚫ Horizontal Merger : Both cos. have similarproducts /
product lines. FOOTWEAR  FOOTWEAR
⚫ Vertical Merger : Oneco. is a supplierof the other.
FOOTWEARLEATHER TANNERY
⚫ Concentric Merger : Twocos. are either related
technology wise or market wise.
FOOTWEARSOCKS
⚫ Conglomerate Merger : Twocos. haveentirelydifferent
productsand markets
FOOTWEAR  PHARMACEUTICAL FIRM
Reasons for Mergers
Buyer
• To increase value of stock
• To increase growth rate
• To improve stability
• To balance, complete and diversify
• To reduce competition
• To acquire a needed resource quickly
• To avail tax concessions

Seller
• To increase the owner’s value and stock
• To increase the growth rate
• To acquire resources to stabilize operations
• To benefit from tax legislation
Important Issues
• Strategic Issues
• Financial Issues
• Managerial Issues
• Legal Issues

How do Mergers take place?

• Spell out the objective
• Indicate how the objective will be achieved
• Assess managerial quality
• Check the compatibility of the business styles
• Anticipate and solve problems early
• Treat people with dignity and concern
External Growth Routes
Acquisition / Takeover Strategy :
⚫Takesplacewhen onecompany takescontrol over
theother;
⚫ Can bea Mutual takeoverora Hostile takeover.
JointVentures :
⚫ Combined effortof twocos. to form a newco.
⚫ 3 types of objectives for JV cos. :
Objectivesof the 1st co, 2nd co & of the newcompany.
⚫ Arbitration most important.
Potential Benefits of SA
Strategic Alliance
⚫ The firms combine or unite to perform a set of business
operations, but function independently and pursue the
individualised goals.
⚫ Generally, the strategic alliance is formed to capitalise on
the expertise in technology or manpower of either of the
firm.
⚫ Theyare 4 types ICICI Bank and Vodafone India announces
 Pro competitive strategic alliance to launch ‘m-pesa’
Mumbai: ICICI Bank and Vodafone India through
 Non competitive
its 100% subsidiary, Mobile Commerce Solutions
 Competitive Ltd.(MSCL) have finalized plans to launch mobile
 Pre competitive payment services this year, under the brand name
‘m-pesa”.
Types of Strategic Alliances
Failed Alliances
• Mc donalds and Heinz
• Kraft and Starbucks
• Apple and PayPal
• Ford and Mahindra
• Suzuki and TVS
• Mahindra and Renault
Joint Ventures
• A joint venture (JV) is a business arrangement in which two or more parties
agree to pool their resources for the purpose of accomplishing a specific
task. This task can be a new project or any other business activity.

• In a JV, each of the participants is responsible for profits, losses, and costs
associated with it. However, the venture is its own entity, separate from the
participants' other business interests.

Triggers of JV’s
• Technology
• Geography
• Regulation
• Sharing of risk and capital
• Intellectual exchange
Types of Joint Ventures
- Intra-Industry- Airtel-Vodafone- FireFly networks; TajGVK
- Inter-Industry- Paytm General Insurance
- Home Brand-International Brand in Home country- Bharti AXA;
Fratelli wines; Mahindra-Renault; Air Asia India
- Home Brand-International Brand in that foreign country- Chery-
Jaguar Land Rover
- Home Brand-International Brand in third country- Tim Hortans;
Eicher-Volvo
- Public-Private Partnerships- Indian Airport
Joint Venture Drawbacks
• Restricted Flexibility
• The entire burden rests on the shoulders of one partner
• Uncertain business goals
• Poor coordination
• Extra research and planning function
• Untrustworthy partners
• Quarrels and disagreements
Joint Venture Benefits
• More Assets
• Increased expert knowledge and business observations
• All parties engaged in economic share the costs and risks
• A joint venture flexibility:
• Lower marketing and advertising charges
• Enhanced possibilities:
• Lowered opportunities for failure
Expansion through Internationalisation
⚫ Aims toexpand beyond the national market
⚫ When an org. has explored all the potential to expand
domestically and look for the expansion opportunities
beyond the national boundaries.
⚫ Going to global is not an easy task, the org. Has to
comply with the stringent benchmark of price, quality
and timely delivery of goods and services, that may
vary from country tocountry
Porter’s Model of Competitive
Advantage of Nations
 High

Global Transnational
strategy strategy
Cost pressure

Multi-
International
domestic
strategy
strategy

Low High
Local responsiveness
International Entry Modes
Export entry modes
- Direct exports
- Indirect exports

Contractual entry modes

- Licensing
- Franchising
- Other forms like contractual agreement

Investment entry modes

-Joint ventures & Strategic Alliances
Independent ventures & wholly owned subsidiaries
Strategic Decisions for
Internalisation
- Which markets to enter?
- Timing of entry
- Scale of entry into international
markets
Retrenchment Strategies
⚫Comes from the HR when a co. cuts its size of
employees due to recession / reorganization.
⚫Retrenchment strategy follows the saying “Slow
down and take a breath, we have todo better”.
⚫In this strategy a co. decides to improve its
performance in reaching its objectives by focusing
on functional improvement, reduction in costs,
reduction in number of functions it performs by
becoming a captive co, reduction in the number of
products and markets it serves and also liquidation
of business.
Types of Retrenchment Strategies

Turn around

Retrenchment
Divestment
strategy

Liquidation
Types of Retrenchment Strategies
Turnaround Strategy : when org feels that the decision
made earlier is wrong and needs to be undone before it
damages the profitabilityof theco. Dell Computer
⚫ Revenuegenerating : Only promote those products
having high demand.
⚫ Costcutting : EncourageVRS, lowerpromotioncosts
etc.
⚫ Asset Reduction : Sell off assets thatare
underperforming.
⚫ Combination : Of all of theabove three.
Conditions of Turnaround
actions
• Persistent negative cash flow
• Negative profits
• Declining market share
• Deterioration of physical facilities
• Overmanning, high turnover of employees and low morale
• Uncompetitive products and services
• Mismanagement
Types of Turnaround actions
• Pursuing cost efficiencies
• Undertaking asset retrenchment
• Focusing on core activities
• Building for the future
• Reinvigorating leadership within organization
• Initiating cultural change
Types of Retrenchment Strategies
Divestment Strategies : downsizing the scopeof
business .
Tatacommunications-datacenter business-reduce
debt burden
⚫ Organization decides togetoutof a certain business &
sellsoff SB units / divisions.
Probable reasons :
⚫ Inadequategrowth rateor market potential
⚫ Technologychange
⚫ Management unable tocontrol business
Reasons of Divestment
Mismatched Business
Persistent negative cashflows
Intense Competition
Inability to invest in Technology upgradation
A better opportunity is available
Types of Retrenchment Strategies
Liquidation Strategy :
⚫ Sell off business. Winding up
⚫ It is the most crucial and the last resort
Probable reasons :
⚫ Very uncertain future.
⚫ Accumulated losses.
⚫ Someco. offers high price.
⚫ Less resources tocontinue.
⚫ Diversify intoother businesses.
Combination strategy
A baby diaper manufacturing co augments its offering
of diapers for the babies to have a wide range of its
products (Stability) and at the same time, it also
manufactures the diapers for old age people, thereby
covering the other market segment (Expansion). In
order to focus more on the diapers division, the co
plans to shut down its baby wipes division and allocate
its resources to the most profitable division
(Retrenchment).
S+E+R=C