Corporate strategy


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Corporate strategy

  1. 1. A.A.MOHAMED FAISAL Corporate strategy
  2. 2. INTRODUCTION <ul><li>According to Michael Porter, a firm must formulate a business strategy that incorporates either cost leadership, differentiation or focus in order to achieve a sustainable competitive advantage and long-term success in its chosen areas or industries. </li></ul><ul><li>According to W. Chan Kim and Renée Mauborgne, an organization can achieve high growth and profits by creating a Blue Ocean Strategy that breaks the previous value-cost trade off by simultaneously pursuing both differentiation and low cost. </li></ul>
  3. 3. <ul><li>Firms must learn to compete differently if they are to achieve strategic competitiveness in the 21 st -century competitive landscape. To provide an idea of what this means, new ways of competing may include: </li></ul><ul><li>bringing new good and services to market more quickly </li></ul><ul><li>The use of new technologies (e.g., </li></ul><ul><li>Diversifying the product line (e.g., Barnes and Nobles into music as a catalyst for growth) </li></ul>The New Reality - #1
  4. 4. <ul><li>Shifting product emphasis (e.g., U-Haul’s new focus on accessory sales) (i.e., Dual Branding) </li></ul><ul><li>Consolidation (e.g., the merger of Exxon and Mobil) </li></ul><ul><li>Combining online selling with physical stores (e.g., CompUSA’s new strategy) </li></ul>The New Reality - #2
  5. 5. <ul><li>Dell Model for Growth </li></ul><ul><li>Have New Business Model (maybe changes every 5 years?) </li></ul><ul><li>Identify Core Competencies and then improve the four capabilities </li></ul><ul><li>Outsource non-core competencies </li></ul><ul><li>Create a “Brand Management Company” </li></ul>The New Reality - #3
  6. 6. Brief Overview of Corporate Strategy <ul><li>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 </li></ul>
  7. 7. 1. What businesses should the corporation/enterprise be in? 2. How should the corporate/G.O. office manage the array of business units (GBU’s/SBU’s/ Wholly owed subsidiaries) Corporate Strategy is what makes the corporate whole add up to more than the sum of its business unit parts Key Questions of Corporate/Firm-level Strategies
  8. 8. 21 st Century Organization Strategies for Growth and Profitability Multi-International: One Consumer Products Company (Corporate Level) Driving Growth (8) Funding Growth (5) Creating the Best Place To Work (10) Global Scope Consumer Promotion 360 0 Marketing Superior Knowledge of Customers/Consumers Strong Alliances/ Partnerships with Customers Coverage of Trade Acquisitions/JV’s Focus on Product Quality Innovative New Products/Services Vision Direction : Guiding Core Values, Philosophies, Principles, Mission, & Others Regionalization With Local Control Lean & Flat Structures Shared Leadership, Coaching & Feedback Horizontal, Structures, Systems, & Processes: Integration/communication/coordination Empower People Stimulating Careers Streamline and obtain A Seamless Supply Chain/ Demand Side (Value Chain) Integration Use of Technologies to create Cost Savings IS/SAP/ Consolidated Partnership Move to “Global” And “Local” Regional Business HPWS Community Involvement Recognition & Financial Rewards Demand Side Strategies: Supply Chain Strategies: Source: Barry A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA (forthcoming)
  9. 9. Corporate (and International) Strategies <ul><li>Three directions for corporate strategy </li></ul><ul><ul><li>Growth </li></ul></ul><ul><ul><ul><li>M&A , JV, and SA (external growth) </li></ul></ul></ul><ul><ul><ul><li>International (internal growth) </li></ul></ul></ul><ul><ul><li>Stability (internal growth) </li></ul></ul><ul><ul><li>Renewal (internal growth) </li></ul></ul><ul><ul><ul><li>Retrenchment </li></ul></ul></ul><ul><ul><ul><li>Turnaround </li></ul></ul></ul><ul><ul><ul><li>Increase the four capabilities via core competencies </li></ul></ul></ul>
  10. 10. Organizational Growth: External and/or Internal <ul><li>External and Internal Growth Strategy </li></ul><ul><ul><li>One that involves the attainment of specific growth objectives by increasing the level of an organization’s capabilities </li></ul></ul><ul><ul><li>Typical growth strategies include goals for: </li></ul></ul><ul><ul><ul><li>Increase in sales revenues </li></ul></ul></ul><ul><ul><ul><li>Profits </li></ul></ul></ul><ul><ul><ul><li>Other balanced scorecard performance measures </li></ul></ul></ul>
  11. 11. Types of Growth Strategies Organizational Growth Horizontal Integration: Along Value Chain International Concentration <ul><li>Diversification </li></ul><ul><li>Related Businesses </li></ul><ul><li>Unrelated Businesses </li></ul><ul><li>Vertical Integration </li></ul><ul><li>Related Businesses </li></ul><ul><li>Unrelated Businesses </li></ul>
  12. 12. Concentration Customers Product(s) Product-Market Exploitation Product Development Market Focused Development Product/Market Diversification
  13. 13. Another Possible Way for Growth
  14. 14. The “Right” People or the “Right” Organization? <ul><li>What are our basic Principles, Philosophies </li></ul><ul><li>and Core Values? </li></ul><ul><li>What do we believe in? </li></ul><ul><li>What policies and practices are consistent </li></ul><ul><li>with these Values and Philosophies? </li></ul><ul><li>What can we do for the customer better </li></ul><ul><li>than our competitors? </li></ul><ul><li>Given our core capabilities, how can we deliver </li></ul><ul><li>value (EVA) to customers in a way our </li></ul><ul><li>competitors cannot easily imitate? </li></ul><ul><li>Senior management “manages” the values </li></ul><ul><li>and culture of the firm. </li></ul>A Values-Based View of Strategy Fundamental Values or Beliefs Design Management Practices That Reflect and Embody These Values Use These to Build Core Capabilities Invent a Strategy That is Consistent with the Values and Uses the Talents & your four Capabilities to Compete in New and Unusual Ways Senior Management’s Role
  15. 15. Another Way: Diversification Related Diversification Product Similarities Distribution Channels Value Chain Capabilities/ Core Competencies Customer Use Similar Technology
  16. 16. Levels and Types of Diversification Low Levels of Diversification Moderate to High Levels of Diversification Very High Levels of Diversification Related linked (mixed) < 70% of revenues from dominant business, and only limited links exist A B C Single business > 95% of revenues from a single business unit A Dominant business Between 70% and 95% of revenues from a single business unit B A Unrelated-Diversified Business units not closely related A B C < 70% of revenues from dominant business; all businesses share product, technological and distribution linkages Related constrained A B C
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