1. © Prentice-Hall 2005 7-1 7 Strategic Management in Action Mary Coulter Corporate Strategies

2. © Prentice-Hall 2005 7-2 Learning Outline A brief overview of corporate strategy Define corporate strategy. Explain a single-business organization and multiple- business organization. Discuss how corporate strategy is related to the other organizational strategies. Organizational growth Define growth strategy. Describe the various growth strategies. Explain how growth strategies can be implemented.

3. © Prentice-Hall 2005 7-3 Learning Outline (contd.) Organizational stability Define stability strategy. Describe when stability is an appropriate strategic choice. Explain how a stability strategy is implemented. Organizational renewal Describe the two renewal strategies. Explain how renewal strategies can be implemented.

4. © Prentice-Hall 2005 7-4 Learning Outline (contd.) Evaluating and changing corporate strategy Describe the four approaches to corporate strategy evaluation. Discuss the three portfolio analysis techniques. Explain what’s involved with changing corporate strategy.

5. © Prentice-Hall 2005 7-5 What is Corporate Strategy? Those strategies concerned with the broad and long-term questions of what business(es) the organization is in and what it wants to do with those businesses

6. © Prentice-Hall 2005 7-6 Single and Multiple-Business Organizations Single-business organization Operates primarily in one industry Multiple-business organization Operates in more than one industry

7. © Prentice-Hall 2005 7-7 Growth Strategy Involves the attainment of specific growth objectives by increasing the level of an organization’s operations Typical growth objectives for businesses Increases in sales revenues Profits Other performance measures Growth objectives for not-for-profits Increasing clients served or patrons attracted Broadening the geographic area Increasing programs offered

8. © Prentice-Hall 2005 7-8 Figure 7.2 Possible Growth Strategies Organizational Growth Concentration Vertical Integration Backward Forward Horizontal Integration Diversification Related Unrelated International

9. © Prentice-Hall 2005 7-9 Concentration Strategy Organization concentrates on its primary line of business and looks for ways to meet its growth objectives through increasing its level of operation in this primary business

10. © Prentice-Hall 2005 7-10 Figure 7.3 Concentration Options Customers Current New CurrentNew Product-Market Exploitation Product Development Market Development Product/Market Diversification* Product(s) * not a concentration option

11. © Prentice-Hall 2005 7-11 Vertical Integration Strategy An organization’s attempt to gain control of  Its inputs (backwards)  Its outputs (forwards)  Or both

12. © Prentice-Hall 2005 7-12 Table 7.1 Major Benefits and Costs of Vertical Integration BenefitsCosts Reduced purchasing and selling costs Improved coordination among functions and capabilities Protected proprietary technology Reduced flexibility as organization is locked into product(s) and technology Difficulties in integrating various operations Financial costs of acquiring or starting up

13. © Prentice-Hall 2005 7-13 Horizontal Integration Strategy Combining operations with competitors Horizontal integration is appropriate when it Enables the company to meet its growth objectives Can be strategically managed Satisfies legal and regulatory guidelines

14. © Prentice-Hall 2005 7-14 Diversification Organization expands its operations by moving into a different industry Related (concentric) diversification Unrelated (conglomerate) diversification

15. © Prentice-Hall 2005 7-15 Figure 7.4 Types of Related Diversification Related Diversification Operational Skills-Capabilities Distribution Channels Customer Use Similar Technology Product Similarities

16. © Prentice-Hall 2005 7-16 International Strategy Organization can pursue international growth while pursuing other corporate growth strategies International growth issues Advantages and drawbacks General approach Ways to enter a foreign market

17. © Prentice-Hall 2005 7-17 Figure 7.5 Approaches to International Expansion Global Integration of Operations High Low Local Market Responsiveness Low High Multidomestic Approach Global Approach Transnational Approach

18. © Prentice-Hall 2005 7-18 Ways to Enter a Foreign Market  Exporting  Importing  Licensing  Franchising  Direct investment

19. © Prentice-Hall 2005 7-19 Implementing Growth Strategies Mergers-Acquisitions Mergers Acquisitions Takeover Internal development – starting a new business from scratch Strategic Partnering Joint venture Long-term contract Strategic alliance

20. © Prentice-Hall 2005 7-20 Organizational Stability Stability strategy – the organization maintains its current size and current level of business operations When is stability an appropriate strategic choice? Implementing the stability strategy

21. © Prentice-Hall 2005 7-21 Organizational Renewal Renewal strategies – used to reverse organizational decline and put the organization back on a more appropriate path to successfully achieving its strategic goals Organizational decline – main reason for decline is poor management

22. © Prentice-Hall 2005 7-22 Figure 7.6 Possible Causes of Corporate Decline Poor Management Uncontrollable Costs or Too High Costs New Competitors Unpredicted Shifts in Consumer Demand Slow or No Response to Significant External or Internal Changes Over expansion or Too Rapid Growth Inadequate Financial Controls

23. © Prentice-Hall 2005 7-23 Techniques for Evaluating Corporate Strategy  Corporate objectives or goals  Efficiency, effectiveness, and productivity measures  Benchmarking  Portfolio analysis

24. © Prentice-Hall 2005 7-24 Figure 7.7 Types of Corporate Goals Corporate Goals Maximized Stockholder Wealth Increased Market Share Strong Global Presence Increased Productivity Positive Reputation- Image Strong Customer Satisfaction High Product Quality Increased Revenues Increased Earnings

25. © Prentice-Hall 2005 7-25 Evaluating Corporate Strategies Efficiency Minimize use of resources in achieving objectives Effectiveness Ability to complete or reach goals Productivity Measures How many inputs it takes to produce outputs Benchmarking Search for best practices contributing to performance

26. © Prentice-Hall 2005 7-26 Figure 7.8 BCG Matrix Industry Growth Rate (in constant sales dollars) High (faster than the economy as a whole) Low (slower than the economy as a whole) Relative Market Share Position High (above 1.0)Low (below 1.0) 1.0 StarsQuestion Marks Cash CowsDogs

27. © Prentice-Hall 2005 7-27 Figure 7.9 McKinsey-GE Stoplight Matrix Industry (Product-Market) Attractiveness Business Strength-Competitive Position StrongAverageWeak (5)(3)(1) High(5) Medium(3) Low(1) Winners Profit Producers Average Business Question marks Losers

28. © Prentice-Hall 2005 7-28 Figure 7.10 Product-Market Evolution Matrix StrongAverageWeak The Business Unit’s Competitive Position Industry’s Stage in the Evolutionary Life Cycle Development Growth Decline Competitive Shakeout Maturity  Saturation A B C D E F G H

29. © Prentice-Hall 2005 7-29 When to Change Corporate Strategies? When evaluation shows Growth objectives aren’t being attained Organizational stability causes organization to fall behind Organizational renewal efforts aren’t working Possible strategies to change Functional Competitive Corporate direction

30. © Prentice-Hall 2005 7-30 Chapter Seven Questions