Strategic Management

Business Strategies
and
Corporate Strategies

Prof Bharat Nadkarni

Business Level Strategies
• Growth & Expansion

• Economic profits

• Quality

• Market share

• Employee development

• Productivity

• Knowledge generation
Corporate Level Strategies
• Shareholder return

• Economic profit

• Growth & Expansion

• Net income

• Income diversity

• Synergy

• Corporate citizenship, Ethics, CSR

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Corporate Level Strategies or simply corporate strategies
are basically about decisions related to:
• Allocating resources among the different businesses of a
firm.

• Transferring resources from one set of businesses to others.

• Managing and Nurturing a portfolio of businesses.

These decisions are taken so that the overall corporate
objectives are achieved.
Corp strategies help to exercise the choice of direction that an
organisation adopts. There could be a small business firm
involved in a single business or a large, complex and
diversified conglomerate with several different businesses. The
corp strategy in both these cases would be about the basic
direction of the firm as a whole. In the case of a small firm
having a single business, it could mean the adoption of
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Courses of action that yield better profitability for the firm. In
the case of the large, multi business firm, the corp strategy
would also be about managing the various businesses for
maximising their contribution to the overall corporate
objectives and transferring resources from one set of
businesses to others.
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Strategic alternatives for Corporates
1. Expansion

2. Stability

3. Turnaround / Downsizing / Retrenchment

4. Any combination of these three

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Major reasons for adopting different Coroporate strategies
1. Expansion strategy is adopted because :
a. It may become imperative when the environment
demands increase in pace of activity.
b. Psychologically, strategists may feel more satisfied with
the prospects of growth from expansion: CEO may take
pride in presiding over organisation perceived to be growth
oriented.
c. Increasing size may lead to more control over the market
vis-à-vis competitors.
d. Advantages from the experience curve and scale of
operations may accrue.
2. Stability strategy is adopted because :
a. It is less risky, involves less changes and people feel
comfortable with things as they are.
b. The environment faced is relatively stable.
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c. Expansion may be perceived as being threatening.
d. Consolidation is sought through stabilisation after a
period of rapid expansion.
3. Turnaround/ Downsizing strategy is adopted because
a. The management no longer wishes to remain in business
either partly or wholly, due to continuous losses and the
organisation becomes unviable.
b. The environment faced is threatening.
c. Stability can be ensured by reallocation of resources from
unprofitable to profitable businesses.
4. Combination strategy is adopted because :
a. The organisation is large and faces complex environment
b. The organisation is composed of different businesses,
each of which lies in a different industry, requiring a different
approach.
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1. Expansion Strategies
Expansion through concentration

Expansion through integration

Expansion through diversification

Expansion through internationalisation

Expansion through cooperation

Expansion through digitalisation

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Expansion through concentration
Simple, first level type of expansion strategy.
Market Penetration, Market Development,
Product Development.
Advantages
Require minimal changes, euphoria, success and more
motivation.
Towards specialisation and more in depth knowledge.
Intense focusing on utilisation of resources.
Decision making process is under less strain as there is a
high level of predictability. Past experience is valuable as it
is replicable.
Disadvantages
“Putting all eggs in one basket has its own problems”.
Industry growth, attractiveness and maturity.
Recession, Market fickleness, new technologies.
Too much knowing/ expertise creates inertia.
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Expansion through integration

• Horizontal integration
When an organisation takes up a same type of products at
the same level of production or marketing process, it is said
to follow a strategy of horizontal integration. A horizontal
integration strategy results in a bigger size with concomitant
benefits of a stronger competitive position in the industry. It
may be frequently adopted with a view to expand
geographically, by buying a competitor’s business, to
increase the market share or to benefit from economies of
scale. Yet, it does not take the organisation beyond its
existing business definition. It still remains in the same
industry, serving the same markets and customers through
its existing products, by the means of the same
technologies. Horizontal integration is quite similar to
mergers and acquisitions since these are one of the means
for integrating horizontally.
Ex. Bridgestone Tyres, Tata Corus, Mittal Arselor etc.
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Expansion through integration

• Vertical integration
Any new activity undertaken with the purpose of either
supplying inputs (such as raw materials) or serving as a
customer for outputs (such as marketing of firm’s products)
is a vertical integration. It is of two types – Backward and
Forward integration.
Backward integration means retreating to the source of raw
materials.
Forward integration moves the organisation ahead, taking it
nearer to the ultimate customer.
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Expansion through diversification
• Diversification
Diversification involves substantial change in business
definition – singly or jointly – in terms of customer functions,
customer groups or alternative technologies of one or more of
a firm’s businesses. When new products are made for new
markets then diversification takes place. The notion of
diversifying is therefore related to the newness of products or
markets or both. By adopting diversification, an organisation
does something novel in terms of making new products or
serving new markets or doing both simultaneously.
1. Concentric or Related diversification
a. Marketing related concentric diversification
ex. Company in sewing machine biz entering
into household appliances biz.
b. Technology related concentric diversification
ex. A leasing firm offering hire-purchase services to
institutional customers also starts consumer financing for
purchase of durables to individual customers.
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c. Marketing and technology related concentric
diversification
ex. A synthetic water tank manufacturer makes other
synthetic items such as pre-fabricated doors and
windows, while the technology relatedness is in the
common technology of plastic processing and
engineering required for manufacturing these products.
2. Conglomerate or unrelated diversification
When an organisation adopts a strategy which requires
taking up those activities which are unrelated to the existing
business definition of any of its businesses, either in terms
of their consumer groups, customer functions or alternative
technologies, it is conglomerate diversification.
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Reasons for Conglomerate Diversification
1. Spreading business risks by investing in different
industries.
2. Maximising returns by investing in profitable businesses
and selling out unprofitable ones.
3. Leveraging competancies in corporate restructuring by
turning round loss making companies.
4. Stabilising returns by avoiding economic upswings and
downswings through having stakes in different industries.
5. Taking advantage of emerging opportunities afforded by an
expanding economy and encouraging government policies.
6. Migrating from businesses under threat from the business
environment.
7. Exercising of personal choice by industrialists and
managers to create industrial empires by owning
businesses in diverse sectors.
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Risks of Diversification
1. Diversification, especially unrelated, is a complex strategy to
formulate and implement. It demands a very high level of
managerial, operational and financial competence to be
successful.
2. Diversification strategies demand a wide variety of skills.
Different businesses operating in diverse industries would
require dissimilar sets of skills to manage them successfully.
3. Diversification results in decreasing commitment to a single or
few businesses and diverting it to several of them at the same
time. This phenomenon often results in a situation where
businesses that need more attention get less and the ones
needing little get more. Imbalance of commitment does not
help to realise the many benefits of diversification such as
maximum returns.
4. Diversification often does not result in the promised rewards.
Experience around the world shows that it is easy to be lured
by the glamour of diversification and not be able to reap the
benefits of synergies and strategic advantage
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ultimately. In fact, cases are legion where the shareholders
value instead of being enhanced, has been lost due to
diversification.
5. Diversification increases the administrative costs of
managing, integrating and controlling a wide portfolio of
businesses. This can often offset the savings expected
through synergies in the case of related diversification or
decreasing risks anticipated in unrelated diversification.
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Expansion through Internationalisation
International strategies are a type of expansion strategies that
require orgnisations to market their products or services
beyond the domestic or national market. For doing so, an
organisation would have to assess the international
environment, evaluate its own capabilities and devise
strategies to enter foreign markets.
Porter’s National Competitive Advantage Theory
According to Porter, four national characteristics create an
environment that is conducive to creating globally competitive
firms in particular industries.
1. Factor conditions
2. Demand Conditions
3. Related and Supported Industries
4. Firm strategy, structure and rivalry
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Expansion through Co-operation
Rising above competitive situations and creating a “Win Win”
Situation.
1. Mergers & Acquisitions

2. Joint Ventures
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Expansion through Digitalisation
Digitalisation is defined as digital coding of information and the
growing productivity gains in processing and transmission it
enables.
It is a technical term denoting the conversion on analogue
electrical signals into digital signals, a process that takes
place, for instance, in the case of recording music on a
compact disk, when physical sound waves in the form of
electrical sound signals get converted into digital electronic
signals. Computerisation can help in compressing huge
amounts of analogue data into digital data making it possible
for organisations to amplify, transmit, modulate, store, retrieve
and reconvert data. Computerisation also makes it possible to
deal with data in its various forms: text, audio, still images,
animation, video and other forms that we call multimedia.
Digitalisation helps creating e-business or e-commerce which
is a vital aspect of globalisation. It is a futuristic strategy.
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Questions

1. According to Gluek, which are the basic strategic

alternatives adopted by organisations? Highlight each one
with their significance.

2. Which are the different Expansion strategies adopted by

most admired organisations? Explain each one in brief.

3. Which are the different Expansion strategies adopted by

most admired organisations? Which one do you think is
appropriate for Indian companies today and why?

4. “Adopt stability and safety first policy, rest leave it to

emerging markets.” Do you believe in this strategy. If yes,
why? If not, why not?
Thank you