Corporate Strategy

Management
Dr. Rupali Singh

16-01-2024
Course Outline
• Themes to be discussed in this course – Strategic Mgt, Competitive
Strategy, Strategy Models, Strategy Formulation, Strategy
Implementation, Strategic Control and Strategic Evaluation
• Books –
1. Concepts in Strategic Management and Business Policy by Thomas
L.Wheelen, J.David Hunger
2. Exploring Corporate Strategy: Text and Cases by Gerry Johnson,Kevan
Scholes and Richard Whittington + HBR’s 10 must reads on Strategy
• Individual assignments – one pager case analysis individually
• Group assignments – phased submission and final group presentation
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What is Strategic Management ?

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Strategic Management
• Strategic management is a set of managerial decisions and actions that
help determine the long-term performance of an organization
• A firm generally evolves through the following four phases of
strategic management:
• environmental scanning (both external and internal),
• strategy formulation (strategic or long-range planning),
• strategy implementation,
• and evaluation and control.
• Benefits – long term success, adaptability, competitive advantage and
resource optimization
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Strategic Management
• Globalization and Sustainability
• Challenges in strategic management – environmental uncertainty,
implementation gap, resistance to change, dynamic competitor
landscape
• Vision, Mission, programs/tactics, budgets, procedures
• Henry Mintzberg’s typical modes of strategic decision making –
entrepreneurial mode, adaptive mode, planning mode + logical
incrementalism

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Levels of Strategy

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Levels of strategy
• Corporate Level Strategy:
• Scope: Concerned with the overall direction of the entire organization.
• Key Decisions: Involves choices related to the industries to operate in,
allocation of resources, and overall organizational structure.
• Example: Diversification, mergers and acquisitions, and overall portfolio
management.
• Business Level Strategy:
• Scope: Focuses on a specific business unit or product/service line.
• Key Decisions: Involves competitive positioning, target market, and
differentiation strategies.
• Example: Cost leadership, differentiation, and focus strategies within a
business segment.

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Levels of strategy
• Functional Level Strategy
• Scope: Concentrates on specific functions or departments within the
organization.
• Key Decisions: Pertains to how each functional area supports the overall
business strategy.
• Example: Marketing strategy, operations strategy, and human resources
strategy.
• Operational Level Strategy
• Scope: Deals with day-to-day operations and processes.
• Key Decisions: Focuses on improving efficiency, quality, and productivity.
• Example: Supply chain optimization, production scheduling, and quality
control.

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Levels of Strategy
• Interconnected Nature: These levels are interrelated and must align
to ensure coherence in organizational strategy. Decisions at one level
should support and enhance decisions at other levels.
• Coordination and Alignment: Successful organizations ensure
coordination and alignment across all levels of strategy to avoid
conflicts and to optimize the use of resources.
• Adaptability and Dynamic Environment:Given the dynamic nature
of business environments, organizations must be agile and able to
adapt their strategies at each level to meet changing conditions.

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Process and Roles

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Strategic Decision-Making Process
• Evaluate current performance results
• Review corporate governance
• Scan and assess the external environment
• Scan and assess the internal corporate environment
• Analyze strategic factors
• Generate, evaluate and select the best alternate strategy
• Implement selected strategies
• Evaluate implemented strategies

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Strategic Management
Model

• Basic elements
1. Environment Scanning
2. Strategy Formulation
3. Strategy Implementation
4. Evaluation and Control
5. Feedback and learning

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Companies Act, 2013
• Foundation: The Companies Act, 2013 forms the cornerstone of
corporate governance in India.
• Key Provisions: Defines roles and responsibilities of directors, audit
committees, and other governance structures.
• Compliance: Companies are mandated to adhere to the Act's
provisions, ensuring fair and transparent corporate practices

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SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015
• SEBI's Role: Securities and Exchange Board of India (SEBI) plays a
pivotal role in regulating corporate governance for listed companies.
• Listing Requirements: Mandates disclosure norms, composition of
boards, and committees, promoting transparency and investor
confidence.
• Continuous Compliance: Listed entities are required to comply with
ongoing disclosure requirements to maintain market integrity.

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Others
• National Financial Reporting Authority (NFRA)
• Independent Directors
• Audit Committees
• Board of Directors
• Code of conduct
• Shareholder’s rights

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People involved in strategic management
• Leadership and executives • IT specialists
• Strategists and Planners • Risk Managers
• Functional Managers • Communications Professionals
• Project Managers • Performance Analysts
• Financial Experts • Human Resources
• Marketing and Sales Teams
• Operations Leaders

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The Fit Concept

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The Fit Concept
• The concept of "fit" in strategy is crucial for organizations aiming to
create a sustainable competitive advantage.
• Dimensions of Fit:
1.Internal Fit: Alignment within the organization is key. Culture, structure,
processes, and capabilities should work in harmony to support strategic
objectives.
2.External Fit: Understanding and responding to the external environment is
essential. A good fit ensures the organization is well-positioned to capitalize on
opportunities and navigate industry challenges.
3.Resource Fit: Successful strategy execution requires the right resources in the
right amounts. Aligning financial, human, and technological resources is
critical.

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The Fit Concept

4. Activity Fit: Coherence between different activities or functions is vital.

Synergy between marketing, operations, and finance contributes to overall
strategic success.
5. Strategic Fit: The overarching alignment between the chosen strategy and
the external environment. Strategic fit ensures the organization's strategy is
well-suited to capitalize on opportunities and navigate challenges.
• Benefits – Competitive advantage, adaptability and efficiency and
effectiveness

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Environmental Analysis

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Pop quiz
• Who are the people involved in strategic decision ?
• How many phases of strategic management ?
• How levels at which strategies are made?
• What is competitive advantage?

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Environmental scanning
• Environmental uncertainty – degree of complexity and degree of
change that exists in an organization’s external environment
• Identify external environmental variables in company’s natural,
societal and task environments
• Natural environment = physical resources, wildlife and climate
• Societal environment = economic, technological, political-legal,
sociocultural forces
• Task environment = govt.,local communities, suppliers, competitors,
customers, trade associations

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STEEP/PESTEL Analysis
• Sociocultural forces
• Technological
• Economic
• Ecological
• Political-legal forces

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STEEP Analysis
• What are sociocultural trends in Indian consumer market?
• What is the technological situation in India?
• Economic trends ?
• Ecological trends?
• Political-legal trends?

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 Competitive Strategy
CSM Session 2

08-03-2024
Pop quiz
• Environmental scanning – what is it?
• What is STEEP analysis?
• What is Porter’s five forces model?

08-03-2024
Identifying external strategic factors
• The origin of competitive advantage lies in the ability to identify and
respond to environmental change well in advance of competition
• Well defined system of integrating planning, budgeting and business
reviews.
• Willingness to reject unfamiliar and negative information – strategic
myopia

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Industry Analysis: Analyzing the task
environment - Porter's Five Forces Model
• Industry = a group of firms that produces a similar product or service
• Definition: Porter's Five Forces is a framework for analyzing the
competitive forces that shape an industry, helping organizations
understand the intensity of competition and formulate effective
strategies.
• Purpose: To assess the attractiveness of an industry and make
informed decisions about entering, staying in, or exiting a market.
• Any corporation is concerned about the intensity of competition within
its industry – the level of intensity is decided by basic competitive
forces

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Overview of Five Forces

•Threat of New Entrants:

•Definition: Examines the ease with which new competitors can enter the market.
•Factors: Entry barriers, economies of scale, brand loyalty.
•Bargaining Power of Buyers:
•Definition: Evaluates the influence customers have on prices and terms.
•Factors: Volume of purchases, standardization of products, availability of
substitutes.
•Bargaining Power of Suppliers:
•Definition: Assesses the influence suppliers have on input prices.
•Factors: Number of suppliers, uniqueness of inputs, supplier concentration.

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 Overview of Five Forces

•Threat of Substitute Products or Services:

•Definition: Considers the availability of alternative products or services.
•Factors: Switching costs, buyer propensity to substitute, perceived level
of differentiation.
•Intensity of Competitive Rivalry:
•Definition: Analyzes the degree of competition among existing firms.
•Factors: Number of competitors, industry growth, product/service
differentiation.

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 Figure 1: Porter’s five forces model
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Threat of New Entrants
• Key Considerations:
• High entry barriers discourage new entrants.
• Economies of scale can create cost advantages.
• Brand loyalty and customer switching costs impact new entry.
• Strategic Implications:
• Focus on building strong brand loyalty.
• Invest in technology and unique capabilities.
• Establish relationships that create high switching costs for customers.

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Bargaining Power of Buyers
• Key Considerations:
• High buyer power can lead to price pressure.
• Standardized products give buyers more choices.
• Volume of purchases influences bargaining power.
• Strategic Implications:
• Differentiate products to reduce price sensitivity.
• Create customer loyalty programs.
• Diversify customer base to reduce dependence on a few large buyers.

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Bargaining Power of Suppliers
• Key Considerations:
• Limited supplier options increase their power.
• Uniqueness of inputs impacts dependency.
• Supplier concentration affects bargaining power.
• Strategic Implications:
• Diversify suppliers to reduce dependency.
• Build strong relationships with key suppliers.
• Invest in alternative sources for critical inputs.

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Threat of Substitute Products or Services
• Key Considerations:
• Availability of alternatives impacts competitiveness.
• Switching costs influence the likelihood of substitution.
• Perceived differentiation affects substitution.
• Strategic Implications:
• Continuously innovate to maintain uniqueness.
• Monitor market trends and emerging technologies.
• Focus on creating products/services with high customer value.

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Intensity of Competitive Rivalry
• Key Considerations:
• Number of competitors impacts rivalry.
• Industry growth rates influence competition.
• Product or service differentiation affects rivalry.
• Strategic Implications:
• Differentiate products to stand out in the market.
• Explore niche markets with lower competition.
• Monitor and respond to changes in market dynamics.

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Diversification strategy

• Diversification is a strategic approach where a company expands its

business activities into new markets or adds new products/services to
its existing portfolio. The goal is to reduce risk and enhance long-term
growth opportunities. Example: Amazon – e-commerce,
entertainment, smart devices

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Reasons for Diversification
1. Risk Mitigation:
• Diversification helps spread risk across different markets or industries,
reducing vulnerability to economic downturns or industry-specific
challenges.
2. Revenue Stability:
• By entering multiple markets or offering a variety of products/services, a
company can achieve more stable and consistent revenue streams.
3. Capitalizing on Opportunities:
• Diversification allows organizations to capitalize on emerging opportunities
in new markets or industries.
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Types of Diversification
1. Horizontal Diversification:
• Involves expanding into related products or services. Example: A smartphone
manufacturer entering the market for smartwatches.
2. Vertical Diversification:
• Encompasses moving into different stages of the supply chain. Example: A
clothing retailer acquiring a textile manufacturing company.
3. Concentric Diversification:
• Expansion into businesses that share similarities with the existing business in
terms of technology, distribution, or marketing. Example: A software company
diversifying into IT consulting.
4. Conglomerate Diversification:
• Involves entering businesses with no apparent connection to the current business.
Example: A food and beverage company acquiring a telecommunications firm.
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Benefits of Diversification
1. Risk Reduction:
• Spreading activities across different markets or industries mitigates the
impact of economic downturns or industry-specific risks.
2. Synergy and Cost Savings:
• Diversification can lead to synergies, such as shared resources or cost
efficiencies, improving overall operational effectiveness.
3. Improved Competitive Positioning:
• A diversified portfolio enhances a company's ability to adapt to
changing market conditions and strengthens its competitive position.

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Challenges of Diversification
1. Integration Difficulties:
• Successfully integrating new businesses or products into existing
operations can pose challenges.
2. Resource Allocation:
• Allocating resources effectively among diverse business units requires
careful strategic planning.
3. Lack of Expertise:
• Venturing into unfamiliar industries may expose the company to a lack
of industry-specific expertise.

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Related Diversification
• Definition:
• Related Diversification occurs when a company expands its business
within the same industry or value chain. The new ventures share similarities
with the existing business, creating strategic synergies.
• Examples:
1.A smartphone manufacturer diversifying into the production of
smartwatches.
2.An automobile company adding electric vehicles to its product line.
• Strategic Rationale:
• Capitalizing on existing knowledge, technology, or distribution channels to
create operational synergies and reduce risk.
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Advantages of Related Diversification
1. Synergy:
• Shared resources, technologies, and distribution channels can result in
cost savings and operational efficiencies.
2. Cross-Selling Opportunities:
• Leveraging existing customer relationships to cross-sell new products
or services.
3. Risk Mitigation:
• Building on core competencies helps mitigate risks associated with
entering entirely new markets.

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Challenges of Related Diversification
1. Integration Complexity:
• Successfully integrating new ventures into existing operations can be
challenging.
2. Overdependence:
• Overdependence on a single industry or market can expose the
company to industry-specific risks.
3. Strategic Fit:
• Ensuring a strong strategic fit between the existing and new businesses
is crucial.

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Unrelated Diversification
• Definition:
• Unrelated Diversification involves expanding into businesses with no
apparent connection to the existing business. The new ventures may
operate in different industries or market segments.
• Examples:
1.A food and beverage company acquiring a technology firm.
2.A clothing retailer entering the energy sector.
• Strategic Rationale:
• Achieving risk reduction by participating in varied industries and
markets.
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Advantages of Unrelated Diversification
1. Risk Reduction:
• Spreading activities across diverse industries can mitigate risks
associated with economic downturns or industry-specific challenges.
2. Portfolio Management:
• Creating a balanced portfolio that is less vulnerable to external shocks
in specific industries.
3. Opportunities for Growth:
• Tapping into new markets and industries can provide additional
avenues for growth.

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Challenges of Unrelated Diversification
1. Integration Challenges:
• Managing diverse businesses may result in difficulties in integration
and resource allocation.
2. Lack of Synergy:
• Limited synergies between unrelated businesses may lead to missed
operational efficiencies.
3. Strategic Focus:
• Maintaining a clear strategic focus becomes challenging with a
diversified portfolio.

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Business Portfolio Analysis
• Business Portfolio Analysis is a strategic management tool that helps
organizations assess and manage their collection of businesses or
product lines. It involves evaluating each business unit's contribution
to overall objectives and making decisions about resource allocation
and strategic focus.

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Importance of Business Portfolio Analysis
• 1. Resource Allocation:
• Ensures efficient allocation of resources based on the strategic
importance and performance of each business unit.
• 2. Risk Management:
• Helps in managing risk by diversifying the business portfolio and
minimizing dependence on a single business or industry.
• 3. Strategic Planning:
• Guides strategic planning by identifying growth opportunities,
divestment possibilities, and areas for improvement.

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Business Portfolio Models
1. Boston Consulting Group (BCG) Matrix:
• Classifies business units into four categories: Stars, Cash Cows,
Question Marks, and Dogs, based on their market growth rate and
market share.
2. General Electric (GE) / McKinsey Matrix:
• Evaluates business units using factors such as industry attractiveness
and competitive position, helping prioritize investment decisions.
3. Product Life Cycle Analysis:
• Considers the life cycle stages of products or business units to
determine appropriate strategies, from introduction to decline.

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BCG Matrix - Overview
1. Stars:
• High market share and high market growth rate. Requires heavy investment
but has the potential for high returns.
2. Cash Cows:
• High market share and low market growth rate. Generates significant cash
flow and requires less investment.
3. Question Marks:
• Low market share but high market growth rate. Requires strategic
consideration - invest or divest.
4. Dogs:
• Low market share and low market growth rate. May require divestment or
restructuring.
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GE/McKinsey Matrix - Factors
1. Industry Attractiveness:
• Evaluates the overall attractiveness of the industry in which the business
operates.

2. Competitive Position:
• Assesses the business unit's competitiveness within its industry.

3. Business Unit Classification:

• Based on the combination of industry attractiveness and competitive
position, units are classified into categories like Invest, Grow, Harvest, or
Divest.

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Product Life Cycle Analysis
1. Introduction Stage:
• High investment, low returns. Focus on product development and
marketing.
2. Growth Stage:
• Increased market acceptance. High investment for market share expansion.
3. Maturity Stage:
• Stable market. Focus on efficiency, cost control, and maintaining market
share.
4. Decline Stage:
• Market saturation or decline. Consider exit strategies, divestment, or
innovation.

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Implementation of Portfolio Strategies
1. Invest:
• Allocate resources to Stars and Question Marks with growth potential.
2. Grow:
• Focus on strategies to maintain and expand the market share of Cash Cows.
3. Harvest:
• Extract maximum cash flow from mature businesses with limited growth
potential.
4. Divest:
• Exit or divest from Dogs or business units with low growth potential and
market share.

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Firm resources
• Resource – assests of an organization – tangible, intangible and human assests
• Capabilities – a corporation’s ability to exploit its resources. They consist of business processes
• and routines that manage the interaction among resources to turn inputs into outputs.

• Dynamic capabilities - capabilities are constantly

• being changed and reconfigured to make them more adaptive to an uncertain environment
• Core competency - a collection of competencies that crosses divisional
• boundaries, is widespread within the corporation, and is something that the corporation can
• do exceedingly well.
• Core ridigity/deficiency - a strength that over time matures and may
• become a weakness

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Barney’s VRIO framework
• 1. Value: Does it provide customer value and competitive advantage?
• 2. Rareness: Do no other competitor possess it?
• 3. Imitability: Is it costly for others to imitate?
• 4. Organization: Is the firm organized to exploit the resource?

• Distinctive competencies – core competencies superior to competition

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Competitive advantage
• Competitive Advantage:

“The unique qualities that enable an organization to outperform its rivals

by producing goods or services more efficiently, innovatively, or
distinctively.”

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Types of Competitive Advantage

• Cost Leadership:
• Achieving the lowest production and distribution costs.
• Economies of scale, operational efficiency, and cost-effective processes.

• Differentiation:
• Offering unique and high-quality products or services.
• Building brand loyalty and customer preference through innovation.

• Focus Strategy:
• Concentrating on a specific market segment.
• Tailoring products or services to meet the unique needs of a niche market.

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Dynamics of Competitive advantage
• Competitive Advantage Dynamics: The ever-changing factors and
forces that influence an organization's ability to gain and sustain a
competitive advantage in the marketplace.
• Dynamic Environment: Market turbulence and Globalization
• Key dynamics:
• technological innovation (rapid changes and adaptability)
• Customer centricity (changing customer expectations and relationship
building)
• Agile strategies (flexibility in strategies and iterations)

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Dynamics of Competitive advantage
• Competitive Intelligence – continuous monitoring, data driven
decisions
• Strategic alliances and partnerships – Collaborative advantage and
adaptive ecosystems
• Organizational culture – innovation culture and agility and learning
• Sustainable practices – environmental and social responsibility and
consumer awareness
• Future Outlook – anticipating future trends and strategic foresight

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Strategy Formulation:
Situation Analysis and
Business Strategy
23.02.2024
Strategy Formulation
• Strategy Formulation, often referred to as strategic planning or
long-range planning, is concerned with developing a corporation’s
mission, objectives, strategies, and policies
• It begins with situation analysis: the process of finding a strategic fit
between external opportunities and internal strengths while working around
external threats and internal weaknesses
• SWOT approach – internal and external environment analysis
• Strategic Alternative equals Opportunity divided by Strengths minus
Weaknesses
• IFAS and EFAS Matrix leading to SFAS Matrix – overcomes some limits of
SWOT by reducing the numbers and adding weights to the factors and allows
for listing a factor both as O and T
Review of Mission and Objectives
• Reexamination of an organization’s current mission and
objectives must be made before alternative strategies can be
generated and evaluated.
• The mission statement outlines the fundamental purpose of the
organization, including its primary objectives and the means by
which it aims to achieve them.
• The vision statement articulates the long-term aspirations and
desired future state of the organization.
Example of mission and vision statements
Business Strategies
• Business strategy – to improve the competitive position of a
company’s or business unit’s products or services within the
specific industry or market segment that the company or business
unit serves
• Two types – competitive and cooperative business strategies
• Competitive strategies again means two options –
• Lower cost/price or product differentiation ?
• Large market share or niche customer segment ?
Porter’s Competitive Strategies
• 3 generic competitive strategies:
1. Cost leadership - ability of a company or a business unit to
design, produce, and market a comparable product more
efficiently than its competitors
2. Differentiation - ability of a company to provide unique and
superior value to the buyer in terms of product quality, special
features, or after-sale service
3. Focus - ability of a company to provide unique and superior
value to a particular buyer group, segment of the market line, or
geographic market
4 generic competitive strategies
• Lower cost and differentiation strategies with broad target market
= cost leadership and differentiation
• Lower cost and differentiation strategies with narrow target market
= cost focus and differentiation focus
• Examples:
• Cost leadership
• Differentiation
• Cost focus
• Cost differentiation
Industry Structure and Competitive
strategies
• Fragmented industry – more focus strategies dominate, later on
when fragmentation is less, differentiation and cost leadership
strategies emerge
• Consolidated industry – cost leadership and differentiation
strategies dominate
• Hypercompetition – D’Aveni – competitive advantage doesn’t
remain for long – several short term tactics used – importance of
dynamic capabilities
Cooperative Strategies
• Collusion - active cooperation of firms within an industry to
reduce output and raise prices to get around the normal
economic law of supply and demand
• Explicit collusion
• Collusion can also be tacit, in which case there is no direct
communication among competing firms
• Examples of collusion
Tacit collusion
• According to Barney, tacit collusion in an industry is most likely to
be successful if
• (1) there are a small number of identifiable competitors,
• (2) costs are similar among firms,
• (3) one firm tends to act as the price leader,
• (4) there is a common industry culture that accepts cooperation,
• (5) sales are characterized by a high frequency of small orders,
• (6) large inventories and order backlogs are normal ways of dealing with
fluctuations in demand, and
• (7) there are high entry barriers to keep out new competitors
Cooperative Strategies
• Strategic alliance - a long-term cooperative arrangement
between two or more independent firms or business units that
engage in business activities for mutual economic gain
• Reasons for strategic alliance -
• To obtain or learn new capabilities
• To obtain access to specific markets
• To reduce financial risk
• To reduce political risk
Cooperative Strategies
• Mutual service consortia -a partnership of similar companies in
similar industries that pool their resources to gain a benefit that is
too expensive to develop alone, such as access to advanced
technology
• It is a fairly weak and distant alliance—appropriate for partners
that wish to work together but not share their core competencies
• Joint venture - a “cooperative business activity, formed by two or
more separate organizations for strategic purposes, that creates
an independent business entity and allocates ownership,
operational responsibilities, and financial risks and rewards to
each member, while preserving their separate identity/autonomy
Cooperative Strategies
• A licensing arrangement is an agreement in which the licensing
firm grants rights to another firm in another country or market to
produce and/or sell a product
• The licensee pays compensation to the licensing firm in return for
technical expertise
• Value chain partnerships - value-chain partnership is a strong
and close alliance in which one company or unit forms a long-
term arrangement with a key supplier or distributor for mutual
advantage
• What are the strategic alliance success factors? Read Table 6.1.
on page no. 200 in Wheelen textbook
Strategy Formulation:
Corporate Strategy
Corporate Strategy
• It does three things:
• Directional strategy: firm’s overall orientation towards growth, stability
and retrenchment
• Portfolio analysis: decision on markets where firms competes through
products and business units
• Parenting analysis: coordination of activities and transfer resources and
cultivates capabilities among product lines and business units
• Corporate strategy – is about the choice of direction for a firm as a
whole and its management of its business or product portfolio
Directional strategy (orientation towards
growth)
• Growth strategies expand the company’s activities.
• Stability strategies make no change to the company’s current
activities.
• Retrenchment strategies reduce the company’s level of
activities.
Growth strategies
• Two main growth strategies – concentration and diversification
• Concentration growth strategies - current product portfolios with
good growth potential – then it is better to concentrate
• Vertical growth – take over a function previously provided by a
supplier/distributor - to reduce costs, gain control over a scarce resource,
guarantee quality of a key input, or obtain access to potential customers
• Vertical integration – two types of it – backward and forward integration
• Taper integration/concurrent sourcing
• Quasi integration
• Long term service contracts
• Outsourcing
• Horizontal growth – expand operations in other geographic
locations and/or by increasing the range of products/services
offered to current markets
• Done through internal development or externally through
acquisitions and strategic alliances with other firms in the same
industry
• International entry options – exporting, licensing, franchising, joint
ventures, acquisitions, green-field development, production
sharing, turnkey operations, BOT (Build-Operate-Transfer)
concept, management contracts
Diversification strategies
• Rumelt – Diversification happens when companies’ growth has
plateaued and opportunities for growth in current business is
finished
• Two main diversification strategies – concentric (related) and
conglomerate diversification
• Concentric diversification into a related industry is appropriate
corporate strategy when a firm has a strong competitive position
but industry attractiveness is low
• Conglomerate (unrelated) diversification – current industry is
unattractive and firm lacks outstanding abilities or skills that it
could easily transfer to related products or services in other
industries
• Excellent management systems + sound investment + value
oriented management
• [Is internal growth better than external growth?] – acquisition
versus internal growth – discuss – page no. 216
Stability strategies
• Appropriate for a successful company in a stable environment
• 3 common types:
• Pause/proceed-with-caution = timeout [opportunity to rest before growth
or retrenchment strategy]
• No-change = decision to do nothing [continue same operations for
foreseeable future]
• Profit = artificially support profits with sales declining by reducing
investment and short -term discretionary expenditures
Retrenchment Strategies
Retrenchment strategies
• Followed when company has a weak competitive position in
some/all of its product lines resulting in poor performance
• Some of these strategies –
• Turnaround strategy – contraction and consolidation
• Captive company strategy – giving up independence in exchange for
security
• Sell out/divestment strategy – done if management can obtain good
price for its shareholders and employees
• Bankruptcy/liquidation strategy – giving up management to the courts in
return for some settlement of company’s obligations / termination of the
firm and convert assets to cash
Portfolio analysis – coordination of cash
among units
• Top management views its product lines and business units as a
series of investments from which it expects a profitable return
• The product lines/business units form a portfolio of investments
that top management must constantly juggle to ensure the best
return on the corporation’s invested money
• Two popular portfolio techniques – BCG Growth-Share Matrix and
GE Business Screen
• BCG Growth-Share Matrix – page 221-223 – challenges and
limitations of using this technique
Strategic Alliance portfolio management

1. Developing and implementing a portfolio strategy for each business unit

and a corporate policy for managing all the alliances of the entire company

2. Monitoring the alliance portfolio in terms of implementing business unit

strategies and corporate strategy and policies

3. Coordinating the portfolio to obtain synergies and avoid conflicts among

alliances

4. Establishing an alliance management system to support other tasks of

multi-alliance management
Corporate parenting
• Corporate parenting views a corporation in terms of resources and
capabilities that can be used to build business unit value as well as
generate synergies across business units
• It views a corporation in terms of resources and capabilities that can be
used to build business unit value as well as generate synergies across
business units
• The steps of corporate parenting are:
• Examine each business unit (or target firm in the case of acquisition) in terms of
its strategic factors. eg: a centre of excellence
• Examine each business unit (or target firm) in terms of areas in which
performance can be improved
• Analyze how well the parent corporation fits with the business unit (or target
firm)
Corporate parenting
• A horizontal strategy is a corporate strategy that cuts across
business unit boundaries to build synergy between business units
and to improve the competitive position of one or more business
units.
• In multipoint competition, large multibusiness corporations
compete against other large multibusiness firms in a number of
markets.
• Multipoint competition and the resulting use of horizontal strategy
may actually slow the development of hypercompetition in an
industry.
Strategic Formulation:
Functional Strategy and
Strategic Choice