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7Strategic Management in Action
Mary Coulter
Corporate Strategies
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Learning Outline
A brief overview of corporate strategy Define corporate strategy. Explain a single-business organization and multiple-
business organization. Discuss how corporate strategy is related to the other
organizational strategies. Organizational growth
Define growth strategy. Describe the various growth strategies. Explain how growth strategies can be implemented.
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Learning Outline (contd.)
Organizational stability Define stability strategy. Describe when stability is an appropriate strategic
choice. Explain how a stability strategy is implemented.
Organizational renewal Describe the two renewal strategies. Explain how renewal strategies can be implemented.
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Learning Outline (contd.)
Evaluating and changing corporate strategy Describe the four approaches to corporate strategy
evaluation. Discuss the three portfolio analysis techniques. Explain what’s involved with changing corporate
strategy.
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What is Corporate Strategy?
Those strategies concerned with the broad and long-term questions of what business(es) the organization is in and what it wants to do with those businesses
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Single and Multiple-Business Organizations
Single-business organizationOperates primarily in one industry
Multiple-business organizationOperates in more than one industry
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Growth Strategy
Involves the attainment of specific growth objectives by increasing the level of an organization’s operations
Typical growth objectives for businesses Increases in sales revenues Profits Other performance measures
Growth objectives for not-for-profits Increasing clients served or patrons attracted Broadening the geographic area Increasing programs offered
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Figure 7.2 Possible Growth Strategies
OrganizationalGrowth
Concentration
Vertical Integration• Backward• Forward
Horizontal Integration
Diversification• Related• Unrelated
International
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Concentration Strategy
Organization concentrates on its primary line of business and looks for ways to meet its growth objectives through increasing its level of operation in this primary business
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Figure 7.3 Concentration Options
Customers
Current
New
Current New
Product-MarketExploitation
ProductDevelopment
MarketDevelopment
Product/MarketDiversification*
Product(s)
* not a concentration option
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Vertical Integration Strategy
An organization’s attempt to gain control of
Its inputs (backwards)
Its outputs (forwards)
Or both
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Table 7.1
Major Benefits and Costs of Vertical Integration
BenefitsBenefits CostsCosts
• Reduced purchasing and selling costs
• Improved coordination among functions and capabilities
• Protected proprietary technology
•Reduced flexibility as organization is locked into product(s) and technology
•Difficulties in integrating various operations
• Financial costs of acquiring or starting up
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Horizontal Integration Strategy
Combining operations with competitors
Horizontal integration is appropriate when it Enables the company to meet its growth
objectives Can be strategically managed Satisfies legal and regulatory guidelines
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Diversification
Organization expands its operations by moving into a different industry
Related (concentric) diversification
Unrelated (conglomerate) diversification
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Figure 7.4 Types of Related Diversification
RelatedDiversification
OperationalSkills-Capabilities
DistributionChannels
CustomerUse
SimilarTechnology
ProductSimilarities
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International Strategy
Organization can pursue international growth while pursuing other corporate growth strategies
International growth issuesAdvantages and drawbacksGeneral approachWays to enter a foreign market
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Figure 7.5 Approaches to International Expansion
Global Integrationof Operations
High
Low
Local MarketResponsiveness
Low High
MultidomesticApproach
GlobalApproach
TransnationalApproach
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Ways to Enter a Foreign Market
Exporting
Importing
Licensing
Franchising
Direct investment
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Implementing Growth Strategies
Mergers-Acquisitions Mergers Acquisitions Takeover
Internal development – starting a new business from scratch
Strategic Partnering Joint venture Long-term contract Strategic alliance
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Organizational Stability
Stability strategy – the organization maintains its current size and current level of business operations
When is stability an appropriate strategic choice?
Implementing the stability strategy
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Organizational Renewal
Renewal strategies – used to reverse organizational decline and put the organization back on a more appropriate path to successfully achieving its strategic goals
Organizational decline – main reason for decline is poor management
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Figure 7.6 Possible Causes of Corporate Decline
PoorManagement
UncontrollableCosts or TooHigh Costs
NewCompetitors
UnpredictedShifts in Consumer
Demand
Slow or No Responseto Significant External
or Internal Changes
Over expansionor Too Rapid
Growth
InadequateFinancialControls
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Techniques for Evaluating Corporate Strategy
Corporate objectives or goals
Efficiency, effectiveness, and productivity measures
Benchmarking
Portfolio analysis
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Figure 7.7 Types of Corporate Goals
CorporateGoals
MaximizedStockholder
Wealth
IncreasedMarketShare
StrongGlobal
Presence
IncreasedProductivity
PositiveReputation-
Image
StrongCustomer
Satisfaction
HighProductQuality
IncreasedRevenues
IncreasedEarnings
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Evaluating Corporate Strategies
EfficiencyMinimize use of resources in achieving
objectives
EffectivenessAbility to complete or reach goals
Productivity MeasuresHow many inputs it takes to produce outputs
BenchmarkingSearch for best practices contributing to
performance
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Figure 7.8 BCG Matrix
Industry Growth Rate(in constant sales dollars)
High(faster thanthe economyas a whole)
Low(slower thanthe economyas a whole)
Relative MarketShare Position
High (above 1.0) Low (below 1.0)1.0Stars Question Marks
Cash Cows Dogs
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Figure 7.9 McKinsey-GE Stoplight Matrix
Indu
stry
(Pro
duct
-Mar
ket)
Attr
activ
enes
s
Business Strength-Competitive Position
Strong Average Weak(5) (3) (1)
High (5)
Medium(3)
Low (1)
Winners
Winners Winners
ProfitProducers
AverageBusiness
Questionmarks
Losers Losers
Losers
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Figure 7.10 Product-Market Evolution Matrix
Strong Average Weak
The Business Unit’s Competitive Position
Industry’sStagein the
EvolutionaryLife Cycle
Development
Growth
Decline
CompetitiveShakeout
Maturity
Saturation
A
BC
D
E
F
G
H
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When to Change Corporate Strategies?
When evaluation shows Growth objectives aren’t being attained Organizational stability causes organization
to fall behind Organizational renewal efforts aren’t
workingPossible strategies to change
Functional Competitive Corporate direction
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Chapter Seven
Questions
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