this is about market values

1. Henry: Understanding Strategic
Management
Chapter 8: Corporate Level
Strategy

2. Corporate Level Strategy
What is Corporate Strategy?
Corporate level strategy is concerned with the
strategic decisions a business makes that
affect the entire organization. Financial
performance, mergers and acquisitions, human
resource management and the allocation of
resources.

3. Corporate Level Strategy
Growth Strategies
Strategy that is intended to win a large market share is termed as
business growth strategy.
It answers the following questions:
1.What is the target market of the business
2.Which product will you deliver to the segment of the market
3.What development channels will be adopted in order to find,
acquire and grow the customers.

4. Growth Strategies
In order to grow organizations can pursue four different strategies :
• Market penetration – increase market share in your existing markets using your
existing products: Campbell developed advertising campaign for its soups.
• Market development - entering new markets with your existing products:
Unilever introduced Sunsilk shampoo in US. Was sold in Europe, Latin
America and Asia.
• Product development – developing new products to sell in your existing
markets : Coca-Cola launched Diet Coke Sweetened with Splenda
• Diversification – developing new products to serve new markets : Gap introduced
Forth & Towne brand aimed at women over 35.

5. Growth Strategies

6. Increase sales through effective marketing strategies
within the current target market
1. To maintain or grow the market share of the current
product range
2. Become the dominant player in the growth markets
3. Drive out competitors
4. Increase the usage of a company's products by its
current customers
Market Penetration

7. – Expand sales in new markets through expanding
geographic representation
– An organization's current product can be changed
improved and marketed to the existing market.
– The product can also be targeted to another
customer segment. Either way, both strategies can
lead to additional earnings for the business.
Market Development

8. – Increase sales through new products/services
– An organization that already has a market for its
products might try and follow a strategy of
developing additional products, aimed at it's
current market.
– Even if the new products are need not be new to
the market, they remain new to the business.
Product Development

9. • Diversification Strategy is the development of new
products in the new market. Diversification
strategy is adopted by the company if the current
market is saturated due to which revenues and
profits are lower.
• It is of two types:-
– Synergistic
– Conglomerate
Diversification

10. • Virgin Media moved from music producing to travels
and mobile phones
• Walt Disney moved from producing animated movies
to theme parks and vacation properties
• Canon diversified from a camera-making company
into producing whole new range of office equipment.
Diversification strategy examples

11. Corporate Level Strategy
Related Diversification
Entry into a related industry in which there is still some link with the
organization’s value chain
Vertical integration
- when an organization goes upstream; that is, it moves
towards its inputs, or downstream; it moves closer to its
ultimate consumer
Horizontal integration
- takes place when an organization takes over a competitor or
offers complementary products at the same stage within the
value chain

12. Vertical integration &
Horizontal Integration
• Vertical integration is a strategy that allows a
company to streamline its operations by taking direct
ownership of various stages of its production process
rather than relying on external contractors or
suppliers.
• Horizontal integration involves the acquisition of a
competitor or a related business. A company may do
this to eliminate a rival, improve or diversify its core
business, expand into new markets, and increase its
overall sales.

13. Corporate Level Strategy
Unrelated Diversification
Where an organization moves into a totally unrelated industry; this
is sometimes called conglomerate diversification
Reasons for diversification:
• Where an organization’s existing markets are saturated or
declining
• Regulatory authorities view vertical and horizontal integration by
the organization as uncompetitive
• Management may believe that by not focusing on one market or
product range they can diversify their risk
• Example, GE

14. Corporate Level Strategy
Implementing Growth Strategies
• Mergers and Acquisitions
• Internal Development
• Joint ventures and Strategic Alliances

15. Corporate Level Strategy
Implementing Growth Strategies
Figure 8.2 Growth Strategies

16. Horizontal Merger
– Let’s say there are two companies that make smartphones. Both have
many customers and sell similar products. If these two separate
companies decide to join together and become one big company, that is
what we call a horizontal merger
– Example : Disney (Acquirer) + Hotstar (Target) = Disney Hotstar
Reasons for merging horizontally:
• Increase market share and reduce competition in the industry
• Further utilize economies of scale (thus reducing costs)
• Increase diversification
• Reshape the company’s competitive scope by reducing intense rivalry
• Realize economic scope
• Share complementary skills and resources

17. Vertical Merger
• A vertical merger is the merger of two or more companies that provide
different supply chain functions for a common good or service. Most
often, the merger is effected to increase synergies , gain more control
of the supply chain process, and ramp up business. A vertical merger
often results in reduced costs and increased productivity and efficiency.
• The purpose of a vertical merger between two companies is to heighten
synergies, gain more control of the supply chain process, and increase
business.
• Anti-trust violations are often cited when vertical mergers are planned
or occur because of the probability of reduced market competition.
• Vertical mergers may result in lower costs and increased productivity
and efficiency for the companies involved.
• Example: Footwear Company Merging with Leather Tannery

18. Conglomerate Mergers
• A conglomerate merger is a merger between firms that are involved in
totally unrelated business activities. These mergers typically occur
between firms within different industries or firms located in different
geographical locations.

19. Concentric Mergers
• A concentric merger is a merger in which two companies from the
same industry come together to offer an extended range of products or
services to customers. These companies often share similar
technology, marketing, and distribution channels, and look to the
concentric merger to create synergies

20. Corporate Level Strategy
Portfolio Analysis
• A portfolio is the different business units that an organization
possesses
• Portfolio analysis allows the organization to assess the
competitive position and identify the rate of return it is receiving
from its various business units
• By disaggregating the organization into its individual SBUs, the
organization can devise appropriate strategies for each
• The aim is to maximise the return on investment by allocating
resources between SBUs to achieve a balanced portfolio

21. Corporate Level Strategy
Boston Consulting Group Matrix
A business unit can fall within one of four strategic
categories:
• Stars
• Question Marks
• Cash Cows
• Dogs

22. Corporate Level Strategy
Boston Consulting
Group Matrix
Figure 8.3 The
BCG Matrix

24. BCG Matrix
1. Dogs: These are products with low growth or market share
Dog products: The usual marketing advice here is to aim to remove any dogs from
your product portfolio as they are a drain on resources.
2. Question marks or Problem Child: Products in high growth
markets with low market share
As the name suggests, it’s not known if they will become a star or drop into the dog
quadrant. These products often require significant investment to push them into the star
quadrant. The challenge is that a lot of investment may be required to get a return
3. Stars: Products in high-growth markets with high market
share
Can be the market leader though require ongoing investment to sustain. They generate
more ROI than other product categories.
4. Cash cows: Products in low growth markets with high market
share

25. BCG Matrix
Low Growth, High Share: Firms should milk these “cash
cows” for cash to reinvest.
High Growth, High Share: Firms must invest in
these “stars” as they have high future potential.
High Growth, Low Share: Firms should invest in or discard
these “question marks,” depending on their chances of
becoming stars.
Low Share, Low Growth: Firms should liquidate, divest, or
reposition these “pets.”

26. Nestle – BCG Matrix

27. Build Strategy
To grow the business.
Relatively low relative
market share / high
market growth rate
‘Question Mark’
opportunities need
investment in order to
grow.

28. Harvest Strategy
To develop short term
cashflow irrespective of the
long term damaging effect
to the product or business.
This strategy is appropriate
for any weak products
where disposal in the form
of a sale is unavailable or
not preferred due to high
exit barriers

29. Divest Strategy
To change the
capital of the
business and allow
resources to be
used elsewhere

30. Corporate Level Strategy
The General
Electric-McKinsey
Matrix
Figure 8.4 The GE-M
Matrix

31. Portfolio Analysis
Disadvantages:
– Difficult to define product/market
segments
– Standard strategies can miss opportunities
– Illusion of scientific rigor
– Value-laden terms

32. Portfolio Analysis
Advantages:
– Top management evaluates each of firm’s
businesses individually
– Use of externally-oriented data to
supplement management judgment
– Raises issue of cash flow availability
– Facilitates communication

33. Corporate Level Strategy
Corporate Parenting
Campbell, Goold and Alexander (1995) argue:
• Multi-business organizations (corporate parents)
create value by influencing or parenting the
businesses they own
• Sound corporate strategies create value through
parenting advantage
• Parenting advantage occurs when an organization
creates more value than any of its rivals could if they
owned the same businesses

34. Corporate Level Strategy
Corporate Parenting
• The concept of corporate parenting is useful in
helping an organization to decide which new
businesses it should acquire
• Unless the corporate parent is creating greater value
than its costs, the businesses would be better off as
independent companies
• Helps the corporate parent focus in deciding how
each business should be managed

35. Corporate Level Strategy
Goold, Campbell and Alexander (1994) argue
• Successful parents create parenting advantage
through their value creation insights
• Parenting advantage also involves creating a fit
between the parent’s distinctive characteristics,
and the opportunities that exist within the business
units
• In order to create value the parent’s characteristics
must be compatible with the critical success factors
needed for the business

36. Corporate Level Strategy
Which businesses should the corporate parent include
in its portfolio?
• Heartland
• Edge of Heartland
• Ballast
• Alien territory
• Value trap

37. Corporate Level Strategy
Figure 8.5 The
Parenting Fix Matrix

38. Corporate Level Strategy
Strategy Evaluation
Rumelt (1995)proposes four tests to evaluate a
strategy:
• Consistency
• Consonance
• Advantage
• Feasibility