Chap 10 Flashcards
Strategic business units (SBU)
Can be called divisions
-To decentralise initiative to smaller units within the corporation
so SBUs can pursue their own distinct strategy.
* To allow large corporations to vary their business strategies
according to the different needs of external markets.
* To encourage accountability – each SBU can be held responsible
for its own costs, revenues and profits.
Corporate strategy
Corporate strategy
* the choice of direction of the firm as a whole and the management of its
business or product portfolio and concerns
- Directional strategy
- the firm’s overall orientation toward growth, stability, or retrenchment
- Portfolio analysis
- industries or markets in which the firm competes through its products and
business unites - Parenting strategy
- the manner in which management coordinates activities, transfers
resources, and cultivates capabilities among product lines and business
units
Diversification (2 types)
-Related diversification involves diversifying into products or
services with relationships to the existing business.
- Conglomerate (unrelated) diversification involves diversifying
into products or services with no relationships to the existing
businesses.
Market penetration (4 strategy related)
➢strategic capabilities; builds on established
➢scope is unchanged; means the organisation’s
➢ increased power; leads to greater market share and with buyers and
suppliers;
➢ economies of scale; and provides greater and experience curve benefits.
Corporate Directional Strategi
Directional strategies (5)
Growth
stability
Retrenchment
Merger
Acquisition
Concentration strategies (4)
- Vertical growth
achieved by taking over a function previously provided by a supplier or
distributor - Backward integration
assuming a function previously provided by a supplier - Forward integration
assuming a function previously provided by a distributor
Concentration strategies (not vertical) (different types almost owning) (6)
- Full integration
a firm internally makes 100% of its key suppliers and completely controls its distributors - Taper integration
a firm internally produces less than half of its own requirements and buys the rest from outside
suppliers - Quasi-integration
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 - Long-term contracts
agreements between two firms to provide agreed-upon goods and services to each other for a specific
time - Horizontal growth
expansion of operations into other geographic locations and/or increasing the range of products and
services offered to current markets - Horizontal integration
the degree to which a firm operates in multiple geographic locations at the same point in an industry’s
value chain
Diversification strategies (2)
- Concentric (related) diversification
growth into a related industry when a firm has a strong competitive
position, but industry attractiveness is low - Conglomerate (unrelated) diversification
-diversifying into an industry unrelated to its current one
-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
Retrenchment strategies (4)
-Turnaround
-Contraction
-Sell-out
-Bankruptcy
BCG growth-share Matrix
Question marks : new products with the potential for success but need a lot of cash for
development
Stars : market leaders that are typically at or nearing the peak of their product life
cycle and can generate enough cash to maintain their high share of the market
and usually contribute to the company’s profits
Cash cows : products that bring in far more money than is needed to maintain their market
share
DOgs : products with low market share and do not have the potential to bring in much
cash
Corporate parenting
Big business helps smaller one. Value created and synergy
