Strategic Management in Action

1. Strategic Management in Action 7 Corporate Strategies

2. Learning Objectives 1.Define corporate strategy. 2.Explain a single-business organization and a multiple-business organization. 3.Discuss how corporate strategy is related to the other organizational strategies. 4.Define growth strategy. 5.Describe the various organizational growth strategies. 6.Explain how growth strategies can be implemented. (continued on next slide)

3. Learning Objectives 7.Define stability strategy. 8.Describe when stability is an appropriate strategic choice. 9.Explain how a stability strategy can be implemented. 10.Define renewal strategy. 11.Describe the two main types of renewal strategies. 12.Explain how renewal strategies can be implemented. 13.Discuss how corporate strategies are evaluated and changed. 14.Describe the three main portfolio analysis matrices.

4. BRIEF OVERVIEW OF 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 • What Is Corporate Strategy? • •

5. BRIEF OVERVIEW OF CORPORATE STRATEGY • Single-business organization • operates primarily in one industry • •Single and multiple-business organizations • • • • • • • • • Multiple-business organization • operates in more than one industry • Relating corporate strategy to other strategies • Possible corporate strategic decisions

6. ORGANIZATIONAL GROWTH • Growth Strategy • One that 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

7. Types of Growth Strategies International Concentration • Possible • Growth • Strategies • Figure 7-2 Organizational Growth Diversification Vertical Integration •Related •Unrelated •Backward •Forward Horizontal Integration

8. Concentration 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.

9. Concentration Product(s) Current New • Concentration • Options • Figure 7-3 Product-Market Exploitation Product Development Current New Customers Market Development Product/Market Diversification

10. Vertical Integration(Forward and Backward) Vertical Integration Strategy • • An organization’s attempt to gain control of • Its inputs (backward) • Its outputs (forward) • Or both

11. Vertical Integration(Forward and Backward) Table 7-1 Major Benefits and Costs of Vertical Integration Benefits Costs • Reduced flexibility as organization is locked into product(s) and technology • Reduced purchasing and selling costs • Difficulties in integrating various operations • Financial costs of acquiring or starting up • Improved coordination among functions and capabilities • Protected proprietary technology

12. Horizontal Integration 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

13. Diversification Diversification Strategy Organization expands its operations by moving into a different industry • • Related (concentric) diversification Unrelated (concentric) diversification

14. Diversification Operational Skills-Capabilities • Types • of • Related • Diversification • Figure 7-4 Product Similarities Related Diversification Distribution Channels Similar Technology Customer Use

15. International International Strategy Organization can pursue international growth while pursuing other corporate growth strategies • International growth issues • Advantages and drawbacks • General approach • Ways to enter a foreign market

16. International High Low Global Approach Transnational Approach • Approaches • to • International • Expansion • Figure 7-5 Global Integration of Operations Multidomestic Approach Low High Local Market Responsiveness

17. International Ways an Organization Enters a Foreign Market • • • • Exporting Licensing Franchising Direct investment

18. Implementing Growth Strategies Mergers-Acquisitions • • • • • • • Merger Acquisition Takeover Internal Development Starting a new business from scratch Strategic Partnering Joint venture Long-term contract Strategic alliance

19. 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

20. 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

21. ORGANIZATIONAL RENEWAL Inadequate Financial Controls • Possible • Causes • of • Corporate • Decline • Figure 7-6 Overexpansion or Too Rapid Growth Uncontrollable Costs or Too High Costs Poor Management Slow or No Response to Significant External or Internal Changes New Competitors Unpredicted Shifts in Consumer Demand

22. ORGANIZATIONAL RENEWAL Types of Renewal Strategies • • • • • • • • • • Retrenchment Turnaround Implementing the Renewal Strategies Cost Cutting Restructuring Divestment Spin-off Liquidation Reengineering Downsizing Bankruptcy

23. EVALUATING AND CHANGING CORPORATE STRATEGY Four main evaluation techniques • Evaluating Corporate Strategies • • • Corporate objectives • Efficiency, effectiveness, and productivity measures • Benchmarking • Portfolio analysis

24. Evaluating Corporate Strategies Increased Earnings Maximized Stockholder Wealth Increased Revenues • Types • of • Corporate • Goals • Figure 7-7 High Product Quality Increased Market Share Corporate Goals Strong Customer Satisfaction Strong Global Presence Positive Reputation- Image Increased Productivity

25. Evaluating Corporate Strategies • Minimize use of resources in achieving objectives • Effectiveness • Efficiency • • • • • • • • • Ability to complete or reach goals • Productivity Measures • How many inputs it takes to produce outputs • Benchmarking • Search for best practices contributing to performance

26. Portfolio Analysis Relative Market Share Position High (above 1.0) Low (below 1.0) 1.0 High (faster than the economy as a whole) Low (slower than the economy as a whole) Stars Question Marks • BCG • Matrix • Figure 7-8 Industry Growth Rate (in constant sales dollars) Cash Cows Dogs

27. Portfolio Analysis Business Strength-Competitive Position Strong Average Weak (5) (3) (1) Winners Winners • McKinsey • GE • Stoplight • Matrix • Figure 7-9 High (5) Medium (3) Low (1) Question marks Average Business Winners Industry (Product-Market) Attractiveness Losers Profit Producers Losers Losers

28. Portfolio Analysis The Business Unit’s Competitive Position Strong Average Weak Development Growth Decline A • Product- • Market • Evolution • Matrix • Figure 7-10 C B Industry’s Stage in the Evolutionary Life Cycle D F Competitive Shakeout E Maturity  Saturation G H

29. Changing Corporate Strategies Change Corporate Strategies When Evaluation Shows • • • • • • Growth objectives aren’t being attained Organizational stability causes organization to fall behind Organizational renewal efforts aren't working Possible Strategies to Change Functional Competitive Corporate direction

30. Chapter Seven ? Questions

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