Corporate level strategies

CATEGORIES OF BUSINESS ORGANIZATIONS
SINGLE PROPRIETORSHIP
PARTNERSHIP
CORPORATION
COOPERATIVE

Group of Companies
Parent Company
Subsidiaries

NATURE OF CORPORATE LEVEL
STRATEGY
• CORPORATE LEVEL STRATEGY
• CORPORATE STRATEGY

4 E’s to Addressing Corporate Strategy
1.Extend
2.Expand
3.Exit
4.Enhance

Figure 16. Ways that a Business Strategy can Evolve
EXPANDE
X
I
T
ENHANCE
EXTEND
ENHANCEMENT
Add functionality or
improve a product or
service that is currently
offered.
EXTENSION
Adopt new business model
or enter new business.
EXPANSION
Add products and
services within an
existing business.
EXIT
Drop a product or
service line or exit a
business.

Key Issues is Corporate Level Strategy
a)Directional Strategy
b)Portfolio Strategy
c)Parenting Strategy

Strategic Choices at Corporate Level
a.Business Closure
b.Business Disposal
c.Business Acquisition
d.Business Reorganization
e.Business Start up
f. The impact of doing nothing different

Figure 18. Basic Model for Integration and Diversification Options
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The
Company
Horizontal
integration
Forward integration
Backward integration
Horizontal
diversification
Horizontal integration/diversification
Customers/End Users
Suppliers

Vertical integration
- is the degree to which a firm owns its
upstream suppliers and its downstream buyers.
- the term VI describes a style of management control
Three (3) varieties:
 backward (upstream) vertical integration
 forward (downstream) vertical integration
 balanced (both upstream and downstream) vertical integration

a.Full Integration
b.Taper Integration
c.Quasi- Integration
d.Long-term Contracts

Horizontal integration
- is a strategy where a company acquires, mergers or takes
over another company in the same industry value chain.
 Merger is the joining of two similar sizes, independent
companies to make one joint entity.
 Acquisition is the purchase of another company.
 Hostile takeover is the acquisition of the company,
which does not want to be acquired.

Horizontal Diversification
Generally perceived as a strategy that evolves
around the idea of seeking ownership or
increased control over the direct and indirect
competitors of the business.

Direct and Indirect competitors
Direct competitors can be classified as:
 Offering the same products and/or services as you are offering to
your clients and/or customers.
 Having the same targeted field of clients, customers and/or
demographics.
 Using the same tactics in advertising or bringing news/informations
of products/services to your targeted demographics.
Indirect competitors can be classified as “wanting to have a share
of the pie”

Figure 19. Hierarchy of Strategy
Functional
strategy
Corporate strategy
Business
(Division level strategy)

 Corporate strategy —this strategy seeks to determine what
businesses a company should be in or wants to be in. Corporate
strategy determines the direction that the organization is going and
the roles that each business unit in the organization will plan in
pursuing that direction.
 Business strategy —this strategy seeks to determine how an
organization should compete in each of its businesses.
 Functional strategy —this strategy seeks to determine how to
support the business strategy.

• Conglomerate Diversification
• Unrelated Diversification

In an effort to extend growth beyond its turf, large companies dream of
expanding their image beyond profit objectives . Fame and corporate image
beyond the boundaries of the industry or sector they are known for are among
the motivations that drive corporate giants to go into conglomerate
diversification.

 Is a corporate diversification option that involves engaging or
dealing with products or services that are somehow related to or
associated with what the firm is presently handling.

 When an organization competes in a no-growth or a
slow-growth industry;
 When adding new, but related products significantly
would enhance the sales of current products;
 When new, but related, products could be offered at
highly competitive prices;
 When new, but related, products have seasonal sales
levels that counterbalance an organization’s existing
peaks and valley;
 When an organization’s products are currently in the
decline stage of the product life cycle; and
 When an organization has a strong management
team.

 Product Fit
Is achieved when distribution channels, sales
forces, promotion techniques, or customers can be
handled at the same time for more than one product or
service.
 Operating Fit
Involves economies being realized in certain areas
like purchasing, warehousing, production and operations,
research and development, or personnel from more than
one product or services.
 Management Fit
Occurs when managers are given responsibility
over areas of accumulated exposure from one line of
business to another.

 Growth Strategy expands the company’s
activities;
 Stability Strategies make no chance to the
company’s current activities; and
 Retrenchment Strategies reduce the company’s
level of activities

 Merger- Involves a transaction involving two or more
corporations in which a stock is exchanged or swapped among
independent business organizations from which only one
company services
 Acquisition- Is an option that involves the purchase of a
company then completely absorbed as in operating subsidiary or
division of the acquiring corporation.
 Strategic alliance- is another option involving a partnership
among two or more corporations or business units to achieved
strategically significant objectives that are mutually beneficial.

 Pause/proceed with caution.
This is in effect, a sort of time out. It is an opportunity to
rest before continuing a growth or retrenchment strategy.
 No change strategy.
It involves a decision to do nothing new.
 Profit strategy.
It involves a decision to do nothing new in a worsening
situation and instead, to act as though the company’s problems are
only temporary.

 Turnaround strategy.
This strategy emphasizes on the improvement of operational efficiency and is
probably most appropriate when a corporation’s problems are pervasive but not
yet critical.
-Contraction
-Consolidation
 Sell-out/Divestment strategy.
This strategy is resorted to when a company has a weak competitive position
in its industry.
 Bankruptcy strategy.
Involves giving up management of the firm to the courts in return for some
settlement of the corporation’s obligations.
 Liquidation strategy.
Is the termination of the firm’s business operation.

• Shipping goods to other country.
Exporting
• Grants rights tp another firm in thr host cou0ntry to
prudce or sell prodcut or services.
Licensing
• Grants rights to another company to open a
business.
Franchising

• Companies Combine the resources & Expertise needed to
develop new Products or Technologies.
Joint Venture
• Acquiring or Purchasing another company.
Acquisition
• Building its own manufacturing plant and distribution system.
Greenfield Development
Production Sharing

• Construction of Operating facilities in exchange for fee.
Turnkey Operations
• A corporation may use its personnel to assist a firm in a
host country for a specified fee & period of time.
Management Contract
Build-Operate-Transfer / BOT Concept
Outsourcing

Corporate level strategies

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Corporate level strategies