strat chapter4

the choice of direction of the firm as a whole and the management of its business or product portfolio and concerns

corporate strategy

the firm’s overall orientation toward growth, stability, or retrenchment

industries or markets in which the firm competes through its products and business unites

the manner in which management coordinates activities and transfers resources and cultivates capabilities among product lines and business units

Growth Strategy

a transaction involving two or more corporations in which stock is exchanged but in which only one corporation survives

the purchase of a company that is completely absorbed by the subsidiary or division of the acquiring corporation

concentration

diversification

taking over the function previously provided by a supplier or by a distributor

the degree to which a firm operates vertically in multiple locations on an industry’s value chain from extracting raw materials to manufacturing to retailing

assuming a function previously provided by a supplier

assuming a function previously provided by a distributor

vertical integration is more efficient than contracting for goods and services in the marketplace when the transaction costs of buying on the open market become too great

a firm internally makes 100% of its key suppliers and completely controls its distributors

a firm internally produces less than half of its own requirements and buys the rest from outside suppliers

a company does not make any of its key supplies but purchases most of its requirements from outside suppliers that are under its partial control

agreements between 2 firms to provide agreed-upon goods and services to each other for a specific period of time

expansion of operations into other geographic locations and/or increasing the range of products and services offered to current markets

Horizontal growth is achieved through:

the degree to which a firm operates in multiple geographic locations at the same point on an industry’s value chain

International Entry Options for Horizontal Growth

growth into a related industry when a firm has a strong competitive position but attractiveness is low

when two businesses will generate more profits together than they could separately

growth into an unrelated industry

Management realizes that the current industry is unattractive

Firm lacks outstanding abilities or skills that it could easily transfer to related products or services in other industries

continuing activities without any significant change in direction

an opportunity to rest before continuing a growth or retrenchment strategy

continuance of current operations and policies

to do nothing new in a worsening situation but instead to act as though the company’s problems are only temporary

used when the firm has a weak competitive position in some or all of its product lines from poor performance

emphasizes the improvement of operational efficiency when the corporation’s problems are pervasive but not critical

effort to quickly “stop the bleeding” across the board but in size and costs

stabilization of the new leaner corporation

company gives up independence in exchange for security

management can still obtain a good price for its shareholders and the employees can keep their jobs by selling the company to another firm

sale of a division with low growth potential

company gives up management of the firm to the courts in return for some settlement of the corporation’s obligations

management terminates the firm

management views its product lines and business units as a series of investments from which it expects a profitable return

Popular portfolio analysis techniques include:

new products with the potential for success but require a lot of cash for development

market leaders at the peak of their product cycle and are able to generate enough cash to maintain their high market share and usually contribute to the company’s profits

products that bring in far more money than is needed to maintain their market share

products with low market share and do not have the potential to bring in much cash

BCG Matrix Limitation

GE Business Screen- Limitations

Portfolio Analysis Advantages:

Portfolio Analysis Limitations:

Managing a Strategic Alliance Portfolio

views a corporation in terms of resources and capabilities that can be used to build business unit value as well as generate synergies across business units

Generates corporate strategy by focusing on the core competencies of the parent corporation and the value created from the relationship between the parent and its businesses

cuts across business unit boundaries to build synergy across business units and to improve competitive position in one of more business units

large multi-business corporations compete against other large multi-business firms in a number of markets

Developing a Corporate Parenting Strategy