Michael Ceasar B.

Abarca
BS Business Economics II
Corporate-Level strategy

 A plan of action concerning which industries and

countries an organization should invest its
resources in to achieve its mission and goals.

*How should the growth and development of the company be

managed in order to increase its ability to create value for its
customers over the long run?

Formulating Corporate Level Strategies 2

The Principal Strategies that
managers use to help a
company grow, to keep it on
top of its industry, and to
help recognize in order to
stop its decline are:

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 Concentration on a single
business
 Diversification
 International expansion
 Vertical integration

Formulating Corporate Level Strategies 4

Concentration on a single
business
 Most organizations begin their growth and
development with a corporate-level strategy
aimed at concentrating resources in one
business or industry in order to develop a
strong competitive position within that
industry.
 Sometimes it an appropriate strategy.
 When performed effectively, they often decide
to enter new industries in which they can use
their resources to create more value.

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Diversification
 Strategy of expanding operations into a new
business or industry and producing new goods
and services.
 Two kinds:
-Related Diversification
-Unrelated Diversification

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Related Diversification
 Strategy of entering a new business or industry to
create a competitive advantage in one or more of an
organization’s existing divisions or businesses.
 Can add value to an organization’s product if managers
can find ways for its various divisions units to share
their valuables skills so that synergy is created.

Synergy- obtained when the value created by two

divisions cooperating is greater than the value that
would be created if the two divisions operated
separately.

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Related Diversification
 Seek to find new businesses where they can use
the existing skills and resources in their
department to create synergy.
 It may acquire a company in a new industry
because they believe that some of the skills and
resources of the acquired company might improve
the efficiency of one or more of their existing
divisions.
 Lowers costs if maximized.

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Unrelated Diversification

 Purchasing/entering a new industry that are not

related in any way to their current businesses.
 Managers can buy a poorly performing company,
transfer their management skills, turn around and
increase its performance…
 Lets managers engage in portfolio strategy…
 Today, unrelated diversification is rarely used
because too much diversification can cause
managers to lose control/flatter.

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International Expansion

 To compete internationally…
 “to what extent should the organization customize
features of its products and marketing campaign to
different national conditions?”

Global strategy- selling the same standardized

product and using the same basic approach in each
national market.
Multidomestic strategy- customizing products and
marketing strategies to specific national condition.

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Global strategy…

 Advantage:
Can save cost associated to different national
conditions.
 Disadvantages:
*Ignoring national differences may lead
themselves vulnerable to local competitors
that do differentiate their products to suit
local taste.
*raises production cost and puts high price to
customers.

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Multidomestic strategy…

 Advantage:
*customizing the product on a certain country
will attract more value.
 Disadvantages:
*increase production cost, thus price will be
higher.

This calls for trades-offs.

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Vertical Integration

 Corporate-level strategy through which an

organization becomes involved in producing its
own inputs (BACKWARD vertical integration) or
distributing and selling its own outputs
(FORWARD vertical integration).
 It allows them either to add value to their products
by making them special or unique or to lower the
costs of value creation.

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