CHAPTER 7 Corporate strategy
-“ strategy ” comes from the Greek
word “ strategia ” which refers to the art of a
troop leader or a general.
- Dess et al. (2012) – defines the strategy as the
analysis,
decision, and action that enables a company to
succeed.
- Wheelen and Hunger (2010)- define it as the
comprehensive plan that states how a company
will achieve its mission and objectives
Strategy
- defines as a plan formulated after an
extensive critical analysis of a company ’ s
resources which is then implanted in order for a
company to achieve its mission and objectives
effectively.
1. Defenders
- these are businesses with few product
lines, and they intend to defend them from new
products entering the market.Their foremost
concern is how to improve their operating
activities in terms of cost reduction.
2. Prospectors
- these are the companies with broad
lines of products. Product development
innovation, and a new market are the essence of
their strategy orientation.
3. Analyzers
- these are multi-divisional companies
that compete in at least two types of industries,
one stable and one variable, while maintaining
stability and flexibility.
4. Reactors
- these are the businesses that do not
have the firm or consistent strategic orientations.
They adopt piecemeal or quick-response
strategies which are oftentimes
ineffective to meet the pressures, changes, and
challenges of the environment.
- usually formulated by the top-level
management, is a comprehensive master plan
that describes the overall direction of a
company.
- It is concerned with the overall
direction of a company and is considered the
general or grand strategy of the company
Growth strategy
- is a corporate strategy that a company
may adopt if it aims to expand its present
operating activities.
Internal growth- occurs when a company
expands its operation domestically or globally.
External growth- happens when a company
enters into mergers, acquisition, or strategic
alliances.
Business strategy
-occurs at the business or product unit,
and describes how a company improves its
competitive position in a specific industry.
- A concentration strategy is appropriate to adopt
when a company can reasonable determine that
its current product lines have real growth
potentials
Functional strategy
- a plan taken by functional areas that is
intended to maximize the productivity of a
resource to achieve competitive advantage
Horizontal growth strategy- business expands
its operations in two ways as follows:
1. By entering into other geographic locations
2. By increasing the range of product lines for
the current market
VERTICAL GROWTH STRATEGY
- A company takes over the functions of
a supplier and a distributor in a vertical growth
strategy. It results in a vertical integration where
a company takes full responsibility of all
activities in the value chain.
1. Exporting- a company ships goods to other
foreign countries.
2. Licensing- a company enters into an
agreement with another company from another
country to produce or sell the products of the
former.
3. Franchising- a company enters into an
agreement with a franchiser to use the name and
system of the latter.
4. Joint venture- a company combines its
resources with other companies from foreign
countries to produce new products.
5. Acquisition- a company purchases a foreign
company.6. Green-field development- a
company constructs its own plant and invests
with other assets in a foreign country.
7. Turnkey operations- a company constructs
operating facilities and transfers the same to the
host country when completed.
8. BOT (build, operate, transfer) scheme- a
company constructs facilities, operates them
when completed, and turns them over to the host
country.
The degrees of vertical integration are
categorized as follows:
1. Full integration- a company takes 100%
control of the value chain.
2. Taper integration (backward integration)-
a company acquires not more than 50% of its
requirement from outsiders.
3. Quasi-integration (forward integration)- a
company purchases most of its requirements
from outsiders.
4. Long-term contracts- a company enters into
an agreement with other companies to provide
goods to each other over a specified period of
time
Diversification strategy
- is an appropriate growth strategy when the
original industry appears to have matured,
plateaued, and consolidated already.
Concentric diversification strategy
- more appropriate in a less attractive industry
and for a company with a strong competitive
position
- a company has a greater chance to succeed by
utilizing its core competency in exploiting a
related industry
Conglomerate diversification strategy
- happens when a company enters another
industry which is not related to the industry
where it presently
belongs
- a company may consider this strategy as its
growth strategy when its present industry is no
longer attractive and it lacks the required
abilities to transfer resources to related products
or services
Stability Strategy
- company plans to continue its current activities
without substantial change in its direction. It is
effective for short-term planning but may be
detrimental if used for long-term planning.
Small businesses can benefit using this strategy
because they usually belong to a predictable
environment.
Pause or Proceed-with-Caution Strategy
- a company takes a temporary timeout from its
major activities while observing changes in its
external environment. it is a temporary
strategy
-adopted by most companies when there is a
financial crackdown and a pessimistic economic
outlook
- does not imply that a company will shut down
its operations
- it only temporarily stops major critical
activities before shifting to the growth or
retrenchment strategy
No-Change Strategy
- is effective when an industry is relatively
stable with little expected growth, and
consolidation is not expected to occur in the
foreseeable future.
Profit Strategy
- temporary plan for a company in its desire to
increase its profits when revenues are declining.
It is a cost-cutting mechanism to address a
decline in profit because of
a decrease in sales.
RETRENCHMENT STRATEGY
- The third type of corporate strategy that a top-
level management may formulate is the
retrenchment strategy. This is the strategy to be
adopted when a company experiences poor
competitive position and operating
performance and competitive disadvantage.

Turnaround strategy
-is adopted when a company is not yet critically
bleeding financially. A company intends to
improve its operational efficiency by adopting
drastic actions for a learner organization. It
undergoes two basic phases–
contraction and consolidation.

Captive company strategy

- is adopted by a company that has a weak
competitive position in an industry and does not
have the capability to implement a complete
turnaround strategy.
- In this strategy, a weak company becomes the
captive of a strong company, which usually its
customers, in order to have continued existence

SELL-OUT DIVESTMENT STRATEGY

- adopted when a company has a weak
competitive position in an industry and is not
able to look for a strong partner to whom its
business unit can be
captive.
- A sell-out or divestment strategy is a
favorable option when a company is able to look
for a good price for the company.

Bankruptcy or liquidation strategy

- is adopted when a company that is
suffering heavy losses terminates its operations.
In bankruptcy, a company gives up management
to a court and settles some financial obligations
in return. Meanwhile, liquidation involves the
conversion of non-cash assets to cash through
selling to settle financial obligation