2

WEEK TWO
Corporate Strategy Decisions and Their
Marketing Implications

McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
Components of a Corporate Strategy

o Overall scope and mission of the

organization
o Company goals and objectives
o Source of competitive advantage
o Development strategy for future
growth
o Allocation of corporate resources
across firm’s various businesses
o Sources of synergy

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Corporate Scope—Defining the Firm’s Mission

o Clearly stated mission can help instill:

o A shared sense of direction
o Relevance
o Achievement among employees
o Positive image of the firm

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Exhibit 2.2

Characteristics of Effective Corporate Mission Statements

Broad Specific
Functional Transportati Long-distance
Based on on business transportation for
customer large-volume
needs producers of low-
value, low-density
products
Physical Railroad Long-haul, coal
Based on business carrying railroad
existing
products or
technology
Source: Adapted from Strategy Formulation: Analytical Concepts, 1st edition, by
C. W. Hofer and D. Schendel, Thomson Learning 1978. 1-4
Social Values and Ethical Principles

o Ethics
-Is concerned with the development of moral
standards by which actions and situations can
be judged
-Is more proactive than the law
o Important to craft mission statements specifying
explicit social values, goals and programs

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The Marketing Implications of Ethical Standards

o Unethical practices can:

oDamage the trust between a firm
and its suppliers or customers
oDisrupt the development of long-
term exchange relationships
oResult in the likely loss of sales
and profits over time

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Corporate Objectives

o Components of an objective:
oA performance dimension
oA measure or index for evaluating
progress
oA target or hurdle level to be achieved
oA time frame within which the target is
to be accomplished

oSpecific, Measurable, Attainable,

Relevant, and Time-bound

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The Marketing Implications of Corporate
Objectives

o Managers can reconcile conflicting

goals by:
o Prioritizing them
o Stating one of them as a
constraint or hurdle
o Consistent customer-focused
objectives are:
o Satisfaction
o Retention
o Loyalty
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 Alternative Corporate Growth Strategies
(Ansoff Matrix)
Current products New products
Market penetration Product development
strategies strategies
• Increase market share • Product improvements
Current
markets

• Increase product usage • Product-line extensions

Increase frequency of use • New products for same
Increase quantity used market
New applications

Market development Diversification strategies

strategies • Vertical integration
Forward/backward integration
markets

• Expand markets for

• Diversification into related
New

existing products businesses

Geographic expansion (concentric diversification)
Target new segments • Diversification into unrelated
businesses
(conglomerate diversification)

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Allocating Corporate Resources

o Two sets of analytical tools are

used:
o Portfolio models
o Value-based planning

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BCG’s Market Growth Relative Share Matrix

High
Stars Question marks

5
2
4 1

Market 6
growth 3
rate
(in constant 10%
dollars) Cash cows Dogs
7
8 11 12

9 10 13

Low
10 0.1
1

Relative market share

Source: From Long Range Planning, Volume 10 (February 1977), Barry Hedley, “Strategy and the Business Portfolio,”
Copyright 1977, Elsevier Science. Reprinted with permission.

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Cash Flows across Businesses in BCG Portfolio Model
Growth rate (cash use)

Stars Question
High
marks

Cash
Flows

Low Dogs
Cash cows

High Low
Relative market share

Desired direction of business development

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Portfolio Models

o The Boston Consulting Group’s (BCG) Growth-

Share Matrix
o Resource Allocation and Strategy Implications
o Question marks–Businesses in high-growth
industries with low relative market shares
o Stars–Market leader in a high-growth
industry
o Cash cows–Businesses with a high relative
share of low-growth markets
o Dogs–Low-share businesses in low-growth
markets

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Value-Based Planning Methods

o Assess the economic value of a

strategy by examining the cash
flows it will generate
o Estimate the shareholder value
produced by discounting its
forecasted cash flows by the
business’s risk-adjusted cost of
capital

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Sources of Synergy

o Knowledge-Based Synergies
o Corporate Identity and the
Corporate Brand

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Corporate Branding Strategy
o A firm might pursue one of three options
concerning the corporate brand:
o Might serve as the brand name of all or most
of the firm’s products in markets around the
world
o Dual branding strategy where each offering
carries both a corporate identifier and an
individual product brand.
o Each product offering might be given a
unique brand and identity
o A second potential source of corporate synergy
is inherent in sharing operational resources

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