Corporate Strategy and Diversification

Question 1

Corporate Strategy

Answer 1

Corporate strategy is about what business area to be
active in and this will determine which business units to buy, the direction an organization might pursue and how resources may be allocated efficiently across
multiple business activities

Question 2

Market penetration

Answer 2

Market penetration implies increasing share of current
markets with the current product range”

Question 3

Market penetration types

Answer 3

1. Consolidation - Strategy by which an organisation
   focuses defensively on their current markets with current products
2. Retrenchment - Strategy of withdrawal from marginal
   activities in order to concentrate on the most valuable segments and products within their existing business

Question 4

Related diversification

Answer 4

Expanding into products or services with relationships
to the existing business”

Question 5

New Products/Services: Definition

Answer 5

Organizations following a New Products/Services
strategy delivers modified or new products (or services) to existing markets”

Question 6

New Products/Services: Characteristics

Answer 6

1.Expensive & high risk!
2. Involves project management risks
3.Requires new resources & strategic capabilities
4.Involves varying degrees of related diversification

Question 7

Market development: Definition

Answer 7

Market development consists of offering existing products to
new markets”

Question 8

Market development: Characteristics

Answer 8

1.New users -customer research & customer profile
development
2.Critical success factors of the new market need to be met
3.Focuses on new geographies
4.New strategic capabilities have to be developed

Question 9

Unrelated Diversification aka Conglomerate Diversification

Answer 9

Diversifying into new products or services in markets
unrelated to existing businesses”

Question 10

Conglomerate (unrelated) diversification: Definition

Answer 10

Conglomerate (unrelated) diversification takes the organization beyond both its existing markets and
its existing products, radically increasing the organization’s
scope

Question 11

Conglomerate (unrelated) diversification: Characteristics

Answer 11

1.Added value from being part
of a larger group* ↑ reputation * ↓ financial costs
2. Can create trust issues with stakeholders (no
obvious ways to generate added value)
3.Bureaucratic costs are increased (more HQ managers)
4.Can lead to conglomerate discount

Question 12

Diversification drivers

Answer 12

1. EXPLOIDING ECONOMIES OF SCALE
   2.STRETCHING CORPORATE COMPETENCES
   3.INCREASED MARKET POWER

Question 13

Outsourcing

Answer 13

The process by which activities previously carried
out internally are subcontracted to external
suppliers

Question 14

Corporate Parent: Value adding activities

Answer 14

1. Envisioning
2. Facilitating synergies
3. Coaching
4. Providing centra services and resources
5. Intervening

Question 15

Corporate Parent: Value destroying activities

Answer 15

1. Adding management costs
2. Adding bureaucratic complexity
3. Obscuring Financial performance

Question 16

The BCG (Growth/share matrix) - the cow dog thingy

Answer 16

helps corporate parents manage their portfolios of
businesses.