BUSINESS STRATEGY VII CORP LEVEL

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BUSINESS STRATEGY VII CORP LEVEL Powered By Docstoc
					CORPORATE LEVEL
  STRATEGIES
    Concentration, Integration &
           Diversification
From Business to Corporate Strategies
    CORPORATE STRATEGIES
 These are basically decisions regarding:
 (i) allocating resources among different
  businesses of the company, (ii)
  transferring resources from one set of
  businesses to another, (iii) managing an
  nurturing a portfolio of businesses
 There are several strategies available for
  any multi-business company
      EXPANSION STRATEGY
   This strategy is followed when a company aims
    at high growth by broadening the scope of one
    or more of its businesses in terms of customer
    groups, customer functions, alternative
    technologies, singly or jointly
   It is adopted when it becomes imperative
    because the environment demands increase in
    pace of activity, when the CEO takes pride in
    being growth-oriented, when it leads to larger
    market share at the expense of the rivals,
    reaping the experience curve
        STABILITY STRATEGY
   It aims at incremental growth by marginally
    changing one or more of its businesses in terms
    of customer groups, customer functions and/or
    alternative technologies
   Examples: a packaged tea company provides
    special services to institutional buer to
    encourage bulk buying, a copier machine
    company increases its after-sale service, a steel
    company modernises its plant for greater
    efficiency
    RETRENCHMENT STRATEGIES
   It is followed when a company wishes to contract
    its activities in terms of customer groups,
    customary functions and/or alternative
    technologies
   Examples: a pharma company concentrates on
    bulk drugs for exports and pulls out of retail to
    reduce/eliminate its sales force and increase
    efficiency a corporate hospital concentrates on
    specialty treatments which give more revenue, a
    trainig institution shifts to distance learning which
    gives more revenue, less establishment costs
    COMBINATION STRATEGY
 It happens when a company follows a mix
  of the above strategies either at the same
  time in to or more businesses or at
  different times in one business
 Eamples: a paints company augments its
  offering of decorative paints to widen
  variety for customers (stability), expand
  industrial paints (expansion), closes down
  painting contracts business (retrenchment)
       VARIOUS EXPANSION
          STRATEGIES
 Expansion through concentration
 Expansion through integration
 Expansion through cooperation
 Expansion through internationalisation
 Expansion through digitalisation
 Expansion through diversification
        VARIOUS STABILITY
           STRATEGIES
 No change strategy
 Pause or proceed with caution strategy
 Profit Strategy
    VARIOUS RETRENCHMENT
         STRATEGIES
 Turnaround Strategy
 Divestment Strategy
 Liquidation Strategy
     VARIOUS COMBINATION
          STRATEGIES
 Simultaneous combination
 Sequential combination
 A mix of simultaneous and sequential
  combination
    INTERNATIONALISATION

 Michael Porter Model
 Factor Conditions
 Demand Conditions
 Related & Supporting Industries
 Firm Strategy, Structure & Rivalry
 Government
 Serendipity
CONCENTRATION STRATEGIES
 When a company converges all its
  resources in one or more of its existing
  businesses in terms of customer groups,
  customer functions and/or alternative
  technologies to ensure expansion
 Stick to the knitting
 Use Ansoff Model of Market penetration,
  Market Development and Product
  Development
CONCENTRATION STRATEGIES
        (CONTD)
 Positives: minimal organisational changes,
  mastering one business and specialising,
  intense focusing leads to competitive
  advantage, known problems, easier
  decision making
 Negatives: heavily dependent on one
  business, product obsolescence, new
  technologies remain a threat, cash flow
  problems
    INTEGRATION STRATEGIES
   It means combining activities related to the
    present activity of the firm
   Chain of activities from procurement of raw
    materials to the value addition activities to
    produce the product to the marketing and sale of
    these finished products in the market
   A firm may decide to move up or down this chain
    to more comprehensively serve the customer
    groups
      TYPES OF INTERNATONAL
           STRATEGIES
   Factors pushing for international
    strategies: pressure to reduce/minimise
    unit costs by leveraging economies of
    scale and location economies, pressures
    for local responsiveness- responding to
    the requirements of individual countries-
    the second pressure resulting from having
    to go international to minimise unit costs
    INTEGRATION STRATEGIES
           (CONTD)
 It is an expansion a strategy as it
  broadens the scope of the business
  definition of the firm
 It is also a diversification strategy as the
  firm starts doing something different
 It is prompted by the transaction cost
  economics regarding “make or buy”
    HORIZONTAL INTEGRATION
 In concentration strategy when the firm
  does not move beyond its boundaries.
 When an organisation takes over an
  organisation in the same product area or
  its marketing it is called horizontal
  integration- it is also called merger or
  acquisition
 Existing business definition remains the
  same but the firm becomes bigger
          OUTSOURCING
 The opposite of horizontal integration
 It is a vertical disintegration strategy
 Positives: reduced capital & operation
  costs, freeing up assets for more
  productive use, allows concentrating on
  core competencies, utilising higher tech
  and expertise available with the outsource,
  coping with business ups and downs
    OUTSOURCING (CONTD)
 Risks of Outsourcing: focus on short term
  benefits, dependency on outside suppliers,
  loss of information to outsiders, complexity
  of managing supply chain
 Some more Risks: Technological
  obsolescence, lack of strategic flexibility
         DIVERSIFICATION
 When a company takes up an activity
  unrelated to its existing business definition
  in terms of customer groups, customer
  functions and alternative technologies it is
  called diversification strategy
 Concentric Diversification
 Conglomerate Diversification
CONCENTRIC DIVERSIFICATION
   Marketing Related: when the distribution channel
    provides opportunities for the company to produce and
    sell “similar” products with unrelated technologies like a
    sewing machine producer starts producing kitchenware,
    household appliances to be sold through the same
    channels
   Technology Related: a new product or service is
    provided with the help of related technology,like a
    leasing firm selling on hire purchase starts consumer
    financing for sellin to individual customers
   A combination of the above two: example of synthetic
    tank manufacturers
          CONGLOMERATE
          DIVERSIFICATION
 Offering a product or service with totally
  new technology in a new market
 Aditya Birla Group
 ITC Group
 RPG Group
 TTK Group
           REASONS FOR
          DIVERSIFICATION
 Concentric: to realise synergies of
  finances, marketing, operational, people,
  informational, managerial
 Conglomerate: Spreading business risks,
  investing in profitable businesses and
  divesting the loss making ones, by turning
  around loss making businesses develop
  competency in turning around, migrating
  from businesses under threat of some kind
 RISKS OF DIVERSIFICATION
 It requires different and diverse
  competencies and skills of a high order
 Dissipation of focus and commitment
 It does not bring the projected rewards
 Complexity of managing a portfolio of
  diverse businesses

				
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