Ch. 6 Learning Review Questions Flashcards
What is corporate strategy?
The choice of direction for the firm, what businesses to be in and what to do with those businesses.
There are 3 ways of corporate strategy:
- directional strategy
- portfolio analysis
- parenting strategy
Contrast single-business and multiple-business organizations.
Single businesses are in one industry (e.g. beverages), while multiple-businesses are in multiple industries (e.g. beverages and food)
How is corporate strategy related to the other organizational strategies?
The competitive (business) and functional strategies serve as the means to fulfil the corporate strategy.
The corporate strategy can’t be implemented efficiently and effectively without the resources, capabilities and competencies being developed/used in the other strategies.
Describe each of the three corporate strategic directions.
- Moving forward (Growth)
- grow
- expand activities/operations - Keeping it as is (Stability)
- choosing stability by not growing, but also not falling behind - Reversing a decline (Renewal)
- there are problems with the business
- a decline in performances necessitates a renewal strategy
Define growth strategy.
A growth strategy is one that expands the current products and markets or its activities and operations through current or new businesses.
Describe the various corporate growth strategies
- International
Growth by taking opportunities in global markets
2. Concentration Growing by focusing on expanding core businesses - product/market exploitation - product development - market development
- Vertical integration
Growth by gaining control of inputs and/or output
- forward
- backward - Horizontal integration
Growth by combining operations & resources with competitors - Diversification
Growth by expanding into other industries
- related (concentric)
- unrelated (conglomerate)
Discuss how the corporate growth strategies can be implemented.
- merger-acquisitions
- internal development
- strategic partnering
What is a stability strategy?
This is when an organization remains at the current level of operations and isn’t moving forward, but also not slipping backwards.
Why might an organization choose a stability strategy?
When an industry is in a period of upheaval, with external forces drastically changing, making the future uncertain. It can also be that resources, capabilities and core competencies are stretched to their limits and growing might risk losing the competitive advantage.
Describe how a stability strategy is implemented.
There is not much implementation, however, strategic managers can take the time of stability to assess operational strengths and weaknesses and prepare itself for pursuing growth.
Discuss the causes of corporate decline.
The primary cause is poor management.
- inadequate financial controls
- uncontrollable or high costs
- new competitors
- unpredicted shifts in consumer demand
- slow or no response to internal/external changes
- over-expansion or too rapid growth
Describe the two organizational renewal strategies.
- Retrenchment
This is when an organization is addressing their weaknesses that are leading to corporate decline. - Turnaround
When the organisation’s survival is in jeopardy and needs to be revived and revitalized.
What two strategic actions are used in implementing the renewal strategies?
- Cutting costs
2. Restructuring
Describe organizational restructuring actions.
- downsizing: removing personnel
- divestment: selling off different business units
- spinoff: distributing stock
Why are most organizational renewal strategies used in combination?
Because a combination might be necessary to enhance the organization’s competitive advantage in the long-run.
