1. 1 Chapter 6 Strategy Formulation: Corporate Strategy

2. 2 Corporate Directional Strategies

3. 3 Corporate Strategy Growth Strategies: –Most widely pursued strategies –External mechanisms: Mergers –Transaction involving two or more firms in which stock is exchanged but only one firm survives. Acquisition –Purchase of a firm that is absorbed as an operating subsidiary of the acquiring firm. Strategic Alliance –Partnership of two or more firms to achieve strategically significant objectives that are mutually beneficial.

4. 4 Corporate Strategy 2 Basic Growth Strategies: –Concentration –Current product line in one industry –Diversification –Into other product lines in other industries

5. 5 Corporate Strategy Basic Concentration Strategies: –Vertical growth –Horizontal growth

6. 6 Corporate Strategy Concentration: Vertical growth –Vertical integration Full integration Taper integration Quasi-integration –Backward integration –Forward integration

7. 7 Corporate Strategy Concentration: Horizontal Growth –Horizontal integration

8. 8 Corporate Strategy Basic Diversification Strategies: –Concentric Diversification –Conglomerate Diversification

9. 9 Corporate Strategy Diversification: Concentric: –Growth into related industry –Search for synergies

10. 10 Corporate Strategy Diversification: Conglomerate: –Growth into unrelated industry –Concern with financial considerations

11. 11 Corporate Strategy International Entry Options Exporting Licensing Franchising Joint Ventures Acquisitions Green-Field Development Production Sharing Turnkey Operations BOT Concept Management Contracts

12. 12 Corporate Strategy Stability Strategies: –Pause/proceed with caution –No change –Profit strategies

13. 13 Corporate Strategy Retrenchment Strategies: –Turnaround –Captive Company Strategy –Selling out –Bankruptcy –Liquidation

14. 14 Corporate Strategy Portfolio Analysis –How much of our time and money should we spend on our best products to ensure that they continue to be successful? –How much of our time and money should we spend developing new costly products, most of which will never be successful?

15. 15 Corporate Strategy Portfolio Analysis BCG (Boston Consulting Group) Matrix –Product life cycle and funding decisions Question marks Stars Cash cows Dogs

16. 16 BCG Matrix

17. 17 GE Business Screen Long-term industry attractiveness Business strength/competitive position

18. 18 General Electric’s Business Screen A Winners B C Question Marks D F Average Businesses E Winners Losers G H Profit Producers StrongAverageWeak Low Medium High Business Strength/Competitive Position Industry Attractiveness

19. 19 Hofer-Schendel Portfolio Matrix

20. 20 International Portfolio Analysis 2 Factors: Country’s attractiveness Market size, rate of growth, regulation Competitive strength Market share, product fit, contribution margin, market support

21. 21 Portfolio Matrix for Plotting Products by Country Harvest/Divest Combine/License Invest/Grow Dominate/Divest Joint Venture Low High Low Competitive Strengths Country Attractiveness Selective Strategies

22. 22 Corporate Strategy 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

23. 23 Corporate Strategy Portfolio Analysis Disadvantages: –Difficult to define product/market segments –Standard strategies can miss opportunities –Illusion of scientific rigor –Value-laden terms

24. 24 Corporate Strategy Horizontal Strategy: –Corporate strategy that cuts across business unit boundaries to build synergy across business units to improve the competitive position of one or more business units.