Strategic Management


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Strategic Management

  2. 2. CORPORATE-LEVEL STRATEGY  Specifies actions a firm takes “ to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets.”  Those strategies concerned with the broad and long-term questions of what business(es) the organization is in or wants to be in & what it wants to do with those businesses
  3. 3. CORPORATE-LEVEL STRATEGY CONCERNS:  The scope of the markets and industries the firm competes in.  How the firm manages their portfolio of businesses  Mode of entry into new businesses Internal development, acquisitions/merger, joint venture/strategic alliance  Level and type of diversification  Capturing synergies between business units  Allocating corporate resources
  4. 4. GROWTH STRATEGIES An organization substantially broadens the scope of one or more of its business in terms of their respective customer group, customer functions and alternative technologies to improve its overall performance. BASIC GROWTH STRATEGIES: CONCENTRATION:- • Company’s product lines have real growth potential • And concentration of those product lines makes sense as a strategy for growth.
  5. 5. Continued… Vertical growth: • Achieved by taking over a function previously provided by a supplier or by a distributor. Horizontal growth • Achieved by expanding its operations into other geographic locations and /or by increasing the range of products and services offered to current makers
  6. 6. DIVERSIFICATION STRATEGIES • Diversification is a corporate strategy to increase sales volume from new products and new markets. • Diversification can be expanding into a new segment of an industry that the business is already in, or investing in a promising business outside of the scope of the existing business. • Diversification is part of the four main growth strategies defined by Igor Ansoff's Product/Market matrix.
  7. 7. BASIC DIVERSIFICATION STRATEGIES: 1.CONCENTRIC DIVERSIFICATION: • Into a related industry, when a firm has a strong competitive position but industry attractiveness is low. 2.CONGLOMERATE DIVERSIFICATION: • Into an industry unrelated to its current one.
  8. 8. STABILITY STRATEGIES • Corporation continues its current activities without any significant change in direction. • Are useful in short run, but can be dangerous if followed for too long.
  9. 9. Pause strategy: • Incremental improvements are made until a particular environment situation changes. No-Change Strategy: • A decision to do nothing new-a choice to continue current operations and policies for the foreseeable future. Profit Strategy: • An attempt to artificially support profits when a company ‘s sales are declining by reducing investment and short-term discretionary expenditures.
  10. 10. RETRENCHMENT STRATEGIES Strategy reduced by the corporations to reduce diversity or the overall size of the operations of company. When a company has weak competitive position Companies try to become more financially stable.
  11. 11. TYPES 1.TURNAROUND STRATEGY:  Have problems bur aren’t critical yet  Backing out or retreating from  Cutting expenses or selling assets.  Great for catching problem early on!
  12. 12. PHASES OF TURNAROUND STRATEGY Contraction:  Initial effort  Sony corp. eliminated 10,000 jobs  Closed 11 of 65 plants. Consolidation:  Crucial phase  Implements a program to stabilize new leaner firms.  Crucial because if not conducted right could loose good employees.
  13. 13. 2.CAPTIVE COMPANY STRATEGY • Giving up independence for security • Management searches for an angel • Weaker company offers to be captive company to its largest customer in order to guarantee that the company stays open Example: to become a sole supplier of an auto part to GENERAL MOTORS. SIMPSON INDUSTRIES of Brimingham agreed to let a special team from GM to inspect its engine parts facilities and imterview its employees
  14. 14. Sell-out Strategy • Sell company to another firm. • Have resources that will return its corporation to profitability. • Weak competitive position. • Example: Northwest Airline Divestment strategy: Multi-unit corporation sells off units that don’t fit into their new strategy • Example: Lego’s turnaround strategy when management decided to divest its theme parks to concentrate more on its core business of making toys.
  15. 15. BANKRUPTCY  When a company finds it self in the worst  possible situation.  No one wants to buy a weak company in an unattractive industry.  Give up to the courts in exchange for settlement LIQUIDATION STRATEGY:  Sell all assets for cash  Pay off shareholders  Better than bankruptcy but still not great Example:Circuit city
  16. 16. PORTFOLIO ANALYSIS • “ the strategic units that make up the company and the attempts to evaluate current effectiveness and vulnerabilities” (McDonald et al, 1992) • Requires the continual evaluation of a firms portfolio of business units • This involves: – Assessing the attractiveness of the industries the firm competes in – Assessing the competitive strength of a firm's business units – Checking the competitive advantage potential of sharing activities and/or transferring competencies across business units – Checking the potential for capturing financial economies
  17. 17. Examples of Portfolios • Unilever: ice cream, tea, spreads, • Proctor & Gamble: Detergents, nappies, • Gillette: batteries, Shaving products • Virgin; trains, planes, cola, music stores • Useful Tools for Portfolio Analysis Include: – Nine cell industry attractiveness and competitive strength matrix – BCG growth share matrix
  18. 18. BCG-MATRIX • Simplest way to portray a corporation’s portfolio of investments.
  19. 19. RELEVANCE & IMPORTANCE OF BCG MATRIX • To ensure long-term value creation, a company should have a portfolio of products that contains both High-growth products in need of cash inputs and Low-growth products that generate a lot of cash. • Used to determine what priorities should be given in the product portfolio of a business unit. • The BCG Matrix has 2 dimensions : Relative Market share and Market growth. The basic idea behind it is : if a product has a bigger market share or if the product's market grows faster, it is better for the company.
  20. 20. ADVANTAGES AND LIMITATIONS OF PORTFOLIO ANALYSIS Advantages: • Encourages top management to evaluate each of the corporations businesses individually and to set objectives and allocate resources for each. • Stimulates the use of externally oriented data to supplement management’s judgment. • Raises the issue of cash flow availability for use in expansion and growth. • Its graphic depiction facilitates communication.
  21. 21. LIMITATIONS • Defining product/market segments is difficult. • It suggest the use of standard strategies that can miss opportunities or be impractical. • It provides an illusion of scientific rigor when in reality positions are based on subjective judgments. • It is not always clear what makes an industry attractive or where a product is in its life cycle.
  22. 22. CORPORATE PARENTING • Views a corporation in terms of resources and capabilities that can be used to build business unit value as well as generate synergies across business units. • Corporate parenting generates corporate strategy by focusing on the core competencies of the parent corporation and on the value created from the relationship between the parent and its businesses.