04: Corporate Strategy

Question 1

Strategy:

Answer 1

Resource allocation decisions,
at least medium term,
aiming at a sustainable competitive advantage,
linking env w org;

(Planning) Process is more important than plan.

Question 2

Porter’s generic strategies

Answer 2

Competitive advantage
Strat target. Percei. uniquen. Cost position
Industry-wide Differentiation. Cost leadership
1 mkt sector. ———- Focus ———

To some extent, can be combined, but difficult!

Question 3

Cost leadership pros n cons

Analysis by 5 forces + nothing lasts forever

Answer 3

SLIDE 12
Scale advantage (means)
Bargaining power w suppliers
But:
Tech can be imitated (even if it takes time)

Question 4

Differentiation pros n cons

Analysis by 5 forces + nothing lasts forever

Answer 4

SLIDE 13
Vertical integration (typical means)
Monopoly
But
Risk of segmenting too much
Risk of brand dilution (by differentiating too much)

Question 5

Focus strat.

Answer 5

Theoretically could be cost leader or differentiators

Question 6

Logic of corporate strategy (properties)

Answer 6

Very visible decision.

• pick NEW INDUSTRIES
  n decide MEANS OF ENTRY
• boost COMBINED PERFORMANCE of diff industries
• LEVERAGE CROSS BIZ VALUE CHAIN RELATIONSHIPS n STRATEGIC FIT (eg in negative: do not enter your clients’ biz)

Question 7

Synergies vs strategic fit

Answer 7

Synergies are operational, strategic fit implies also

synergies

Question 8

Diversification taxonomy

Answer 8

• unrelated
• related
• • horizontal
• • vertical
• – backward
• – forward

Question 9

Horizontal integration

logic pros n cons

Answer 9

Share resources, in- / tangible.
Can squeeze suppliers!
Warning: overdo it n you damage relationships.

Question 10

Vertical integration

Logic, pros n cons

Answer 10

Control.
Good for dominant player in high growth industries!
Bad: you get loaded w fixed costs

Question 11

Unrelated diversification

Logic, pros n cons

Answer 11

Diversify risk. Eg inv. fund

Does well in growing markets, does worse otherwise.

Question 12

Mergers vs acquisitions

Answer 12

Mergers have high potential synergies, but most fail coz of difficult integration process; end up in acquisitions.

Question 13

Corp strat summary:

4Qs

Answer 13

1- Choice: diversify or divest?
2- logic tying curr n target biz together?
3- means to enter new market?
4- how is value added?