Strategic management 12
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Strategic management 12

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Strategic management 12 Strategic management 12 Presentation Transcript

  • Strategic Management BHRM 31124 R.A.Ishanka Chathurani Lecturer (prob) Department of Human Resource Management Faculty of Commerce & Management Studies University of Kelaniya
  • Corporate Level and International Strategy
    • Learning outcomes
    • After completing of this topic students should be able to,
    • Understand why organizations might increase their product and geographic diversity
    • Understand what is meant by related and unrelated diversification
    • Explain how different extents of product and geographic diversity might affect performance
  • Introduction
    • What is diversity ?
    • Diversity is a strategy that takes the organization into both new markets and products or services
    • If an organization has under-utilized resources or capabilities that it cannot effectively close to other potential users, it can make sense to use these resources or capabilities by diversification into a new activity
  • Potentially value creating reasons for diversification
    • If an organization has under-utilized resources or capabilities that it cannot effectively close to other potential users, it can make sense to use these resources or capabilities by diversification into a new activity
    • There may also be gains from applying corporate managerial capabilities to new markets and products and services. In a sense this extends the point above, but highlights skills that can easily be neglected
  • Cont… Potentially value creating reasons for diversification
    • Having a diverse range of products or services can increase market power with a diverse of products or services, an organization can afford to cross subsidies one product from the surpluses earned by another, in a way competitors may not be able to
  • Related diversification
    • Related diversification is strategy development beyond current products and markets, but within the capabilities or value network of the organization
    • Vertical integration is backward or forward integration into adjacent activities in the value network
    • Backward integration is development into activities concerned with the inputs into the company’s current business
  • Cont… Related diversification
    • Forward integration is development into activities which are concerned with a company’s outputs
    • Horizontal integration is development into activities which are complementary to present activities
  • Related diversification option for a manufacturer Manufacturer Competitive product Complementary product By-product Financing Product/process research/design Machinery manufacture Machinery supply Components supply Components manufacturer Raw materials manufacture Raw materials supply Repair and servicing Marketing Information Transport Distribution outlets Transport Backward integration Horizontal integration Forward integration
  • Unrelated diversification
    • Unrelated diversification is the development of products or services beyond the current capabilities or value network
  • Diversification and performance
    • Many scholars and policy-makers have been concerned to establish whether diversified companies really perform better than undiversified companies
    • Early research suggest that firms which developed through related diversification outperformed both those that remained specialized and also those which developed through unrelated diversification
    • In the research work on diversification and performance since then the most generalization finding is that the diversification- performance relationship follows in inverted U-shape.
  • Cont… Diversification and performance
    • In other words, related limitedly diversified companies perform better on average than both undiversified companies and heavily diversified companies or conglomerates
  • Diversity and performance High Low Performance Undiversified Related limited diversification Unrelated extensive diversified
  • Managing the Corporate Portfolio
    • One of the most common and long-standing ways of conceiving of the balance of a portfolio of business is in terms of the relationship between the market share and market growth identified by BCG.
  • Growth-Share Matrix Developed by the Boston Consulting Group
  • BCG Matrix
    • A star is a business unit which has a high market share in a growing market.
    • A question mark or problem child is a business unit in a growing market, but without a high market share
    • A cash cow is a business unit with a high market share in a mature market
    • Dogs are business units with a low share in static or declining markets
  • - The End-