CHAPTER 7 Strategy

Formulation: Corporate
Strategy

STRATEGIC MANAGEMENT & BUSINESS POLICY

11TH EDITION
THOMAS L. WHEELEN J. DAVID HUNGER

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 Corporate Strategy

3 Key Issues –

–Firm’s directional strategy

(Growth, Stability, Retrenchment)

–Firm’s portfolio strategy

–Firm’s parenting strategy

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 Corporate Directional Strategies

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 Corporate Strategy

Directional Strategy –

–Orientation toward growth

•Expansion, contraction, status quo
•Concentration or diversification
•Internal development or acquisitions, mergers, or
alliances

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 Corporate Strategy

Directional Strategy –

–3 Grand Strategies

•Growth strategies

•Stability strategies

•Retrenchment strategies

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 Corporate Strategy

Growth Strategies --

–External mechanisms

•Mergers

•Acquisitions

•Strategic alliances

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 Corporate Strategy

Growth Strategies --

–2 Basic forms

•Concentration

•Diversification

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 Corporate Strategy

Basic Concentration Strategies --

–Vertical growth

–Horizontal growth

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 Corporate Strategy

Vertical Growth --

–Vertical integration
•Full integration
•Taper integration
•Quasi-integration
•Long-term contract

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 Corporate Strategy

Vertical Growth --

–Backward integration

–Forward integration

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 Corporate Strategy

Concentration --

–Horizontal Growth
•Horizontal integration

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 Corporate Strategy

Basic Diversification Strategies --

–Concentric Diversification

–Conglomerate Diversification

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 Corporate Strategy

Concentric Diversification --

–Growth into related industry

–Search for synergies

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 Corporate Strategy

Conglomerate diversification --

–Growth into unrelated industry

–Concern with financial considerations

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 Corporate Strategy

International Entry Options --

–Exporting
–Licensing
–Franchising
–Joint Ventures
–Acquisitions
–Green-Field Development

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 Corporate Strategy

International Entry Options --

–Production Sharing
–Turnkey Operation
–BOT Concept (Build, Operate, Transfer)
–Management Contracts

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 Corporate Strategy

Stability Strategies --

–Pause/proceed with caution

–No change

–Profit strategies

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 Corporate Strategy

Retrenchment Strategies --

–Turnaround
–Captive Company Strategy
–Selling out
–Bankruptcy
–Liquidation

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 Corporate Strategy

Portfolio Analysis --

–Resource commitment on best products to

ensure continued success

–Resource commitment on new costly products

high risk

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 BCG Matrix (Portfolio Analysis)

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 GE Business Screen (Portfolio Analysis)

C
Winners Winners
A Question
High B Marks

Winners
E Average
Businesses
Medium F
Losers

H
Losers
G
Low
Profit
Producers Losers

Strong Average Weak

Business Strength/Competitive Position

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 Corporate Strategy

Corporate Parenting Strategy --

–Strategic factors
–performance improvement
–Analyze fit

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