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lecture slides

  1. 1. Week 7 Strategy Formulation: Corporate Strategy 5-
  2. 2. Three Levels of Strategy 5- Corporate Strategy Business (Division Level) Strategy Functional Strategy
  3. 3. Corporate Strategy <ul><li>Two choices at corporate level (affect business level and functional levels): </li></ul><ul><ul><li>Corporate directional strategies of growth, stability or retrenchment </li></ul></ul><ul><ul><li>Portfolio strategy analysis techniques to guide decisions to enter and exit businesses </li></ul></ul>5-
  4. 4. Directional Strategies <ul><ul><li>Three choices . . . </li></ul></ul><ul><ul><ul><li>Growth strategies </li></ul></ul></ul><ul><ul><ul><li>Stability strategies (status quo) </li></ul></ul></ul><ul><ul><ul><li>Retrenchment strategies (shrink) </li></ul></ul></ul>5-
  5. 5. Directional Strategy # 1: Growth <ul><li>2 Basic Growth Strategies: </li></ul><ul><ul><li>Concentration (Current product line in one industry) </li></ul></ul><ul><ul><ul><li>Vertical Growth -> same market, along supply chain </li></ul></ul></ul><ul><ul><ul><li>Horizontal Growth -> new markets </li></ul></ul></ul><ul><ul><li>Diversification (New product lines in other industries) </li></ul></ul><ul><ul><ul><li>Diversification -> related industry </li></ul></ul></ul><ul><ul><ul><li>Conglomerate -> unrelated industry </li></ul></ul></ul>5- Name companies that have successfully used these strategies to grow.
  6. 6. Directional Strategy #2: Stability <ul><ul><li>Pause/proceed with caution </li></ul></ul><ul><ul><li>No change </li></ul></ul><ul><ul><li>Profit strategy </li></ul></ul>5- When would you choose to adopt a stability strategy for your company?
  7. 7. Directional Strategy #3: Retrenchment <ul><ul><li>Turnaround </li></ul></ul><ul><ul><li>Captive Company Strategy </li></ul></ul><ul><ul><li>Sell-out </li></ul></ul><ul><ul><li>Bankruptcy </li></ul></ul><ul><ul><li>Liquidation </li></ul></ul>5- Name companies that have recently chosen (or been forced to) adopt these retrenchment strategies?
  8. 8. Retrenchment: Turnaround Strategy <ul><li>Emphasizes the improvement of operational efficiency </li></ul><ul><li>Most appropriate when problems are severe but not critical </li></ul><ul><li>Two Phases: </li></ul><ul><ul><li>Contraction </li></ul></ul><ul><ul><ul><li>“ stop the bleeding” </li></ul></ul></ul><ul><ul><ul><li>Across-the-board cutbacks in size and costs </li></ul></ul></ul><ul><ul><li>Consolidation </li></ul></ul><ul><ul><ul><li>Stabilize the now leaner organization </li></ul></ul></ul><ul><ul><ul><li>Reduce overhead, justify costs of functional activities </li></ul></ul></ul>5-
  9. 9. Portfolio Strategies <ul><li>Portfolio Analysis </li></ul><ul><ul><li>How much of our time and money should we spend on our best products to ensure that they continue to be successful? </li></ul></ul><ul><ul><li>How much of our time and money should we spend developing new costly products, most of which will never be successful? </li></ul></ul>5-
  10. 10. Portfolio Strategies <ul><li>BCG (Boston Consulting Group) Matrix </li></ul><ul><ul><li>Product life cycle and funding decisions </li></ul></ul><ul><ul><ul><li>Question marks </li></ul></ul></ul><ul><ul><ul><li>Stars </li></ul></ul></ul><ul><ul><ul><li>Cash cows </li></ul></ul></ul><ul><ul><ul><li>Dogs </li></ul></ul></ul>5-
  11. 11. BCG Matrix 5-
  12. 12. Portfolio Strategies <ul><li>Portfolio Analysis </li></ul><ul><ul><li>Advantages: </li></ul></ul><ul><ul><ul><li>Top management evaluates each of firm’s businesses individually </li></ul></ul></ul><ul><ul><ul><li>Externally-oriented data is used to supplement management judgment </li></ul></ul></ul><ul><ul><ul><li>Raises issue of cash flow availability </li></ul></ul></ul><ul><ul><ul><li>Facilitates communication </li></ul></ul></ul><ul><ul><li>Disadvantages: </li></ul></ul><ul><ul><ul><li>Difficult to define product/market segments </li></ul></ul></ul><ul><ul><ul><li>Standard strategies can miss opportunities </li></ul></ul></ul><ul><ul><ul><li>Illusion of scientific rigor </li></ul></ul></ul>5-
  13. 13. In-Class Exercise 6 BCG Matrix <ul><li>Handout from www.marketingteacher.com </li></ul><ul><li>Students form into your BSG teams </li></ul><ul><li>Complete the BCG Matrices for your shoe industry </li></ul><ul><li>Add names to 1 sheet and hand in </li></ul>5-
  14. 14. Quiz 2 Preparation Practice Exercise <ul><li>(Handout) </li></ul><ul><li>Students work in pairs or threes to complete the Practice Exercise </li></ul>5-

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