Post on 02-Jun-2018
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CORPORATE LEVELSTRATEGIESStrategic Management Module 2 Session
3
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Family tree of strategies
Stability
Retrenchment
Agenda
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Corporate level
strategies
Corporatelevel
strategies
Stability Retrenchment Expansion
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Stability
strategies
Stability
No-change Profit
Proceed
with caution
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Retrenchment
strategies
Retrenchment
Turnaround Divestment Liquidation
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Expansion
strategies
Expansion
Concentration
Integration
Diversification
Internationalization
Cooperation
Digitalization
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Stability Strategy
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Stability
strategies
Stability
No-change Profit
Proceed
with caution
Stability strategy implies continuing the current
activities of the firm without any significant change in
direction.
Why do companies pursue a stability strategy?
The firm is doing well or perceives itself as successful
1) It is less risky
2) It is easier and more comfortable
3) The environment is relatively unstable
4) Too much expansion can lead to inefficiencies
Situations where a stability strategy is moreadvisable than the growth strategy:
1) If the external environment is highly dynamic and
unpredictable
2) Strategic managers may feel that the cost of
growth may be higher than the potential benefits
3) Excessive expansion may result in violation of antitrust laws
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Stability
strategies
Stability
No-change ProfitProceed
with caution
A no change strategy is
a decision to do nothingnew i.e continue current
operations and policies
for the foreseeable
future.
Some organizations
pursue stability strategyfor a temporary period of
time until the particular
environmental situation
changes, especially if
they have been growing
too fast in the previousperiod.
The profit strategy is an
attempt to artificiallymaintain profits by
reducing investments
and short-term
expenditures.
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Retrenchment Strategy
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Retrenchment
strategies
Retrenchment
Turnaround Divestment Liquidation
A strategy used by corporations to
reduce the diversity or the overall size
of the operations of the company. This
strategy is often used in order tocut expenses with the goal of becoming
a more financial stable business.
Typically the strategy involves
withdrawing from certain markets or the
discontinuationof selling certain products or service in
order to make a beneficial turnaround.
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Retrenchment
strategies
Retrenchment
Turnaround Divestment Liquidation
Conditions
Persistent negative cash flow
Negative profit Declining market share
Deterioration in physical facilities
Over manning, high turnover of employees and low morale
Uncompetitive products and services
Mismanagement
Turnaround strategy means to
convert, change or transform a
loss-making company into a profit-
making company.
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Retrenchment
strategies
Retrenchment
Turnaround Divestment Liquidation
Conditions
Business is a mismatch and cannot be integrated within the
company Persistent negative flows
Severity of competition
Not possible to in technology upgradation
Selling off a part of business to survive
May be as part of a merger plan
Divestment is a form of
retrenchment strategy used by
businesses when they downsize
the scope of their businessactivities. Divestment usually
involves eliminating a portion of a
business
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Retrenchment
strategies
Retrenchment
Turnaround Divestment Liquidation
Lead to serious consequences including loss of employment,
termination of opportunities etc
Compulsory winding-up by court order Voluntary winding- up
Voluntary winding- up under court supervision
Liquidation is the process by
which a company (or part of a
company) is brought to an end,
and the assets and property of thecompany redistributed.
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