2. Categories of Business Organizations
• Corporation
– Stock or non-stock
• Sole/ Single Proprietorship
• Partnership
• Cooperative
3. • Group of companies/ Conglomerate
– Growing number of independently organized
business organization
• Mother or parent company
– Serves as the core or the unifying factor in the
overall strategic direction of the entire business.
4. • Holding firm / holding company
– Influences other small business organizations
known as subsidiaries
• Subsidiaries / Affiliates
– Partly capitalized or wholly owned by the mother
company
• Diversified business group
– Involves a variety of business concerns with one
given out business opportunities for the other or
one is serving as major contractor or supplier of
member or affiliates of the business empire
5. The Nature of Corporate Level Strategy
• Corporate strategy
– independent or single business unit (SBU) forming
part of the family of business or group business
concerns needs to be bothered with its own
business level strategy
6. The Nature of Corporate Level Strategy
• Highly diversified business organizations
– Group of individuals business organizations with
individual charters or corporate status registered
in appropriate agencies of the government
7. • Corporate level strategy
– Serves as the guiding star of all the individual
business organizations belongs to the group of the
conglomerate
– broad or corporate wide strategy synchronizing
various business level strategies into a cohesive
and coordinated efforts to achieve the vision of
the entire business organization
3 main categories acc. Wheelen and Hunger
– Stability
– Growth
– Retrenchment
8. The 4 E’s to addressing Corporate Strategy by
Thompson and Cats-Baril
a. Extend
• Extending the business by going beyond its
current business model by adapting a new
business model or entering into new businesses
b. Expand
• This option takes the form of adding products or
services within the context of the companies’
existing business concern or present area of
operation
9. The 4 E’s to addressing Corporate Strategy
by Thompson and Cats-Baril
a. Exit
• This option takes the form of making some
sacrifice by dropping some product lines and
services or business units deemed uncompetitive
or unprofitable or less profitable to operate
b. Enhance
• This option takes the form of adding functionality
or improving a product or service that is
currently being offered
10. ENHANCEMENT EXTENSION
Add functionality or improve a Adopt new business model or
product or service that is currently E enter new businesses
offered X
T
E
N
ENHANCE D
EXPAND
E
X
I
T
EXIT EXPANSION
Drop a product or service Add products and services
line or exit a business within an existing business
Ways that a Business Strategy can evolve
11. Key Issues in Corporate Level Strategy
• The firm’s overall orientation towards growth,
stability, or retrenchment (directional strategy)
• The industries or markets in which the firm
competes through its products and business units
(portfolio strategy)
• The manner in which management coordinates
activities, transfers resources and cultivates
capabilities among product lines and business
units (parenting stategy)
12. Prosper
BPR and other Adopt Best
Cost Cutting Trigger Practices
and Operational Point
Parity
Initiatives
Survive
RIP
Fail
Yesterday Today Tomorrow
Current Choices Faced by Executives in
the Digital Economy
13. Strategic Choices at the Corporate Level
• Business closure
– An undesired act of folding up or shutting down
non-profitable business units to control or avoid
further losses
• Business disposal
– Calls for disposing or unloading some of the
members subsidiaries, affiliates or investments
14. Strategic Choices at the Corporate Level
• Business acquisition
– Option of business establishment meant to
expand their size and make their presence felt in
whatever area they want to do business
• Business reorganization
– This option may or may not lead to ownership
changes among members of the organization
15. Strategic Choices at the Corporate Level
• Business start-up
– Realizing the need create new business units to
cater to market opportunities
• The impact of doing nothing different
– This option is simply status quo which also comes
in the form of pause or no change strategy
16. The Corporate Expansion Option
As shown in the next figure, a single business
organization that is well managed is likely to
grow in size and in number eventually
becoming a conglomerate or highly diversified
company within many individual business
organizations forming part of the family.
17. Customers / End Users
I
V N
E D Forward integration
R I
T R
I E
C C
A T
L
Horizontal The Horizontal
diversification Company integration
C
I O
N M
T P
E E
G T
R Backward integration
I
A T
T O Suppliers
I R
O S Horizontal integration / diversification
N
Basic Model for Integration and Diversification
Options
18. Corporate strategy
Business
(Division level strategy)
Functional
c
strategy
Hierarchy of Strategy
19. Corporate
Business strategy 1
Business strategy 2
Business strategy 3
Business strategy 4
Corporate Strategy and Business Strategy
20. Vertical Integration Option
Evolves around the notion of how far or close
a business is from the source of raw materials
or the final consumer of the product
Involve engaging in business activities to the
level of sources of supply or forward in the
direction of final consumers
21. Vertical Integration Continuum
• Espoused by Harrigan postulates that vertical
integration strategy may be in full or in part
ranging from outsourcing to full integration
Full Taper Quasi Long-term
Integration Integration Integration contract
Continuum of Vertical Integration Option
22. Forward Vertical Integration
• An option where the firm engages in business
activities in the area of distribution and
retailing of the product or service directly to
the customers
23. Situations favoring forward integration
• present distributors are especially expensive
or unreliable or incapable of meeting the
firm’s distribution needs;
• availability of quality distributors is so limited
as to offer a competitive advantage to those
firms that integrate forward;
• advantages of stable production are
particularly high;
24. Situations favoring forward integration
• organization competes in an industry that is
growing and is expected to continue to grow
markedly;
• organization has both the capital and human
resources needed to manage the new
business of distributing its own products;
• present distributors or retailers have high
profit margins
25. Backward Vertical Integration
• A corporate option to engage in the business
concentrating the efforts at the stage of raw
materials production or close the source of
raw materials
26. Situations favoring backward integration
• present suppliers are especially expensive or
unreliable or incapable of meeting the firm’s
distribution needs;
• The number of suppliers is small and the
number of competitors is large;
• organization competes in an industry that is
growing rapidly;
27. Situations favoring backward integration
• Organization’s present channels of distribution
can be used to market the new products to
current customers;
• New products have counter cyclical sales
patterns compared to an organization’s
present products
28. Conglomerate Diversification
Conglomerate diversification (unrelated
diversification)
a diversification option that involves investing in or
buying into business organizations whose products
and/or services have nothing to do or not related to
the kind of products it is presently dealing with.
29. Situations favoring conglomerate diversification
• Organization’s basic industry is experiencing
declining annual sales and profits;
• Organization has the capital and managerial
talent needed to compete successfully;
• Organization has the opportunity to purchase
an unrelated business;
30. Situations favoring conglomerate diversification
• Financial synergy exists between the acquired
and acquiring firm;
• Existing market for an organization’s present
products are saturated; and
• Antitrust action could be charged against an
organization that historically has concentrated
on a single industry
31. Concentric Diversification
• Concentric diversification (related diversification)
A corporate diversification option that
involves engaging or dealing with products or
services that are somehow related to or
associated with what the firm is presently
handling.
32. Situations favoring concentric diversification
• Organization competes in a no-growth or a
slow-growth industry;
• Adding new, but related products significantly
would enhance the sales of current products;
• New, but related, products could be offered at
highly competitive prices;
33. Situations favoring concentric diversification
• New, but related, products have seasonal sales
levels that counterbalance an organization’s
existing peaks and valley;
• Organization’s products are currently in the
decline stage of the product life cycle; and
• Organization has strong management team
34. Strategic Fit
the relatedness in making decisions
concerning the appropriateness of the
strategic moves vis-à-vis the various operating
divisions or business units of the company
Degree of relationship or connectivity
35. Categories of strategic fit acc. To
Thompson and Strickland
• Product fit
• Operating fit
• Management fit
36. Directions of Corporate Level Strategies
According to Wheelen and Hunger:
• Growth strategy
• Stability strategy
• Retrenchment strategy
37. Growth Strategy Options
Designed to achieve growth in sales, assets,
profits or some combination
Categories:
• Merger
• Acquisition
• Strategic alliance
38. Stability strategies
This option is sometimes viewed as having lck
of strategy s the firm simply opts to stay put or
maintain the current array of businesses
Forms:
• Pause/proceed with caution
• No change strategy
• Profit strategy
39. Retrenchment strategies
Evolves around the concept of reduction in a
variety of aspects usually in terms of
size, capital, personnel complement and the
like.
Forms:
• Turnaround strategy
– Contraction
– Consolidation
• Sell-out/Divestment strategy
• Bankruptcy strategy
• Liquidation strategy
40. International and Other Entry Options
Usually done by multinational or foreign-
based organizations
designed to explore other markets beyond
their usual or original place of doing their
business
41. Strategies in entering the Int’l markets
• Exporting • Production sharing
• Licensing • Turnkey operations
• Franchising • Management contract
• Joint venture • Build-Operate-
• Acquisition Transfer or BOT
• Greenfield concept
development • Outsourcing
42. Strategic Alliance
Used for the purpose of achieving mutual
advantage and certain strategic or specific goals
Done through a process of exploration and
negotiation with targeted parties or business
concerns leading to signing up an alliance
document in the form of memorandum of
agreement, memorandum of understanding and
/or contracts stipulating mutual desire to attain
specific objective and expressing support for one
another.
43. Objectives in strategic alliance
• To collaborate on technology development or
new product development;
• To fill gaps in technical or manufacturing
expertise;
• To acquire new competencies
• To improve supply chain efficiency
• To gain economies of scalein production and
marketing; and
• To acquire or improve market access via joint
marketing agreements
44. Guidelines in forming strategic alliances
• Pick a good partner, one that shares a
common vision;
• Be sensitive to cultural differences;
• Recognize that the alliance must benefit both
sides
• Both parties have to deliver on their
commitments in the agreement;
45. Guidelines in forming strategic alliances
• Structure decision-making process so actions
can be taken swiftly when needed; and
• Parties must do a good job of managing the
learning process, adjusting the alliance
agreement over time to fit new circumstances
46. Success factors in alliances:
• Ability of an alliance to endure depends on
how well partners work together;
• Success of partners in responding and
adapting to changing conditions; and
• Willingness of partners to renegotiate the
bargain.
47. Failure factors in alliances:
• Diverging objectives and priorities of partners;
• Inability of partners to work well together;
• Emergence of more attractive technological
paths;
• Marketplace rivalry between one or more
allies; and
• Merger and acquisition strategies.
48. Benefits of mergers and acquisition
• More or better competitive capabilities;
• More attractive line-up of products/services;
• Wider geographic coverage;
• Greater financial resources to invest in R&D,
add capacity, or expand;
• Cost-saving opportunities;
• Filling in of resource or technological skills;
• Greater ability to launch next-wave
products/services
49. Pitfalls of merger and acquisition
• Resistance from rank-and-file employees;
• Hard-to-resolve conflicts in management
styles and corporate cultures;
• Tough problems in combining and integrating
the operations of the once-different
companies; and
• Greater-than-anticipated difficulties in
achieving expected cost-savings, sharing of
expertise, and achieving enhanced
competitive capabilities
50. Advantages of Outsourcing
• Improves firm’s ability to obtain high quality
and/or cheaper components or services;
• Improves firm’s ability to innovate by
interacting with “best-in-the-world” suppliers;
• Enhances firm’s flexibility
• Increases firm’s ability to assemble diverse
kinds of expertise speedily and efficiently;
• Allows firm to concentrate its resources on
performing those activities internally
51. Conditions to consider in outsourcing:
• Activity can be performed better or more
cheaply by outside specialists
• Activity is not crucial to achieve a sustainable
competitive advantage
• Risk exposure to changing technology and/or
changing buyer preferences is reduced
52. Conditions to consider in outsourcing:
• Operations are streamlined to
– Cut cycle time
– Speed decision-making
– Reduce coordination costs
• Firm can concentrate on doing those “core”
value chain activities that best suit its resource
strengths and capabilities
53. Situations favoring Joint Venture:
• When privately owned organization is forming
a joint venture with a publicly owned
organization;
• When a domestic organization is forming a
joint venture with a foreign company;
• The distinctive competencies of two or more
firms complement each other especially well;
54. Situations favoring Joint Venture:
• When some project is potentially very
profitable, but requires overwhelming
resources and risks;
• When two or more smaller firms have trouble
competing with a large firm; and
• When there exists a need to introduce a new
technology quickly.
55. Situations favoring Retrenchment:
• An organization has a clearly distinctive
competence but has failed to meet its
objectives and goals consistently over time;
• An organization is one of the weaker
competitors in a given industry;
• An organization is plagued by inefficiency, low
profitability, poor employee morale, and
pressure from stockholders improve
performance;
56. Situations favoring Retrenchment:
• An organization has failed to capitalized on
external opportunities, minimize external
threats, take advantage on internal strengths,
and overcome internal weakness over time;
• An organization has grown so large so quickly
that major internal reorganization is needed.
57. Situations favoring Divestiture:
• When an organization has pursued a
retrenchment strategy and it failed to
accomplish needed improvements;
• When a division needs more resources to be
competitive than the company ca provide;
• When a division is responsible for an
organizations overall poor performance; and
• When a division is a misfit with the rest of the
organization.
58. Situations favoring Liquidation:
• When an organization has pursued both
retrenchment strategy and a divestiture
strategy;
• When an organization’s only alternative is
bankruptcy;
• When the stockholders of a firm can minimize
their losses by selling the organization’s
assets.
