1. Chapter 15 Corporate strategy
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

2. Business and corporate strategy
Business-level strategy:
which strategy for this business?
position on the quadrant?
Corporate strategy:
which businesses should we be in?
how should growth be managed?
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

3. 5 types of corporate strategy
Specialisation: expansion with narrow range of businesses
Advantage: simplicity, focus
Vertical integration: integration of suppliers and/or distributors
Advantage: market power, control over resources
Economies of scope: exploiting resources and capabilities across businesses
Advantage: leveraging value-added across activities
Economies of search: leveraging distribution channels and customer relationships
Advantage: leveraging customer relationships
Unrelated diversification: no relationship between businesses
Advantage: risk management
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

4. Specialisation: examples
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

5. Vertical integration: example
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

6. Economies of scope: example
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

7. Economies of search: examples
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

8. Unrelated diversification: example
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

9. Mixing and matching
Most firms develop a corporate strategy that combines more than one type
There is usually one ‘dominant’ corporate strategy
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

10. Mixing and matching: example
Casinos
& betting
TV Broadcasting
Magazines
events &
cinemas
Web
TV & cinema
production
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

11. 15.3: WineRidge WineRidge’s corporate strategy:
Is it a “pure” strategy or a combination?
_________________________________________________________________________________________________________________________________________________________
What’s the dominant type?
What are the other types?
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

12. 15.3: WineRidge WineRidge’s corporate strategy:
Is it a “pure” strategy or a combination?
Combination of: specialisation (wine making in Australia + US JV), vertical integration (grape growing, wine making, wholesale distribution, internet retailing)
What’s the dominant type?
Specialisation (wine making)
Grape growing is 10% of needs, internet retailing is small, so vertical integration is not dominant.
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

13. Corporate strategy: portfolio
“Which businesses should we be in?”
Generate answers using portfolio analysis: evaluate the businesses one by one
Two tools used, depending on corporate strategy:
Unrelated diversification: BCG
Other corporate strategies: McKinsey
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

14. BCG Matrix Stars Question Ma Cash Cows Dogs Market Share High
Industry growth rate
High
(faster than the economy as a whole)
Low
(slower than the economy as a whole)
Market Share
Question marks
Cash cows
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

15. BCG Matrix Growth rate as estimate of attractiveness
Market share as proxy for profit potential
Assumptions:
businesses are independent one from another (no synergies, no shared resources or capabilities)
economies of scale
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

16. Industry attractiveness
McKinsey Matrix
Business strength
Average
Weak
Strong
Medium
Low
High
Winners
Industry attractiveness
Question marks
business
Losers
Profit producers
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

17. McKinsey Matrix Same as BCG, but: 3*3 design to look different
qualitative, case-based evaluations
Assumptions:
Use external analysis (Porter’s 5 forces, PEST) to evaluate attractiveness
Use resource and capabilities analysis to evaluate business strength (synergies, shared resources and capabilities are possible)
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

18. 15.9 Worked example: Woolworths
Supermarkets
Dick Smith/Tandy
Big W
Sector growth
High
Very High
Medium
Woolworths growth
+27% (>sector)
+40% (=sector)
+18% (<sector)
2004 sales
$22bn
$0.9bn
$2.7bn
2004 EBIT margin
4.0%
5.0%
4.3%
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

19. Industry Attractiveness
15.9 Worked solution
Business Strength
Strong Average Weak
High
Medium
Low
DS/T
Supermarkets
Industry Attractiveness
BigW
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

20. Matrices and lifecycle
Introduction
Growth
Maturity
Decline
Dog
Cash cow
Star
Question mark
Sales
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

21. Signature brands Overdiversification, poor portfolio management
6 Pulp juice bars, Koala Blue wines, Ozi Varmints kid’s clothing, Brian Rochford swimwear
Went bankrupt in 2006, lost $ millions
3 juice bars operating at a profit
all other businesses making a loss
3 bars sold as going concern. Rest will be liquidated
Overdiversification, poor portfolio management
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

22. 15.10 WineRidge
Position the businesses of WineRidge on the McKinsey matrix (grape growing, Australian wines, international operations, on-line retail distribution)
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

23. 15.10 WineRidge
Position the businesses of WineRidge on the McKinsey matrix (grape growing, Australian wines, international operations, on-line retail distribution)
international operations
on-line retail
Australian wines
grape growing
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

24. 15.10 WineRidge - justification
Grape growing: dominant player (largest grape grower) in an unattractive industry (oversupply)
Australian wines: industry attractiveness is medium (retailer power) and WineRidge is losing market share at home
International: attractive market in medium term (high growth) WineRidge is the largest exporter (16% growth)
Online retail: potentially attractive (high margins), but online achieves only small volumes at present (1%)
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak

25. 15.10 Recommendations
Grape growing: reduce to supply premium wines only
Australian wines: invest in marketing and distribution to regain share in home market
International: continue export growth, no further investment abroad
Online retail: no further investment until volume growth is significant
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee
Slides prepared by Robert Waldersee and Stephane Tywoniak