Intro to corporate Strat

Question 1

Corporate strategy -

Strategic Business Unit (SBU) -

Answer 1

an organizational strategy that
determines what businesses a company is in or wants to
be in, and what it wants to do with those businesses.

the single independent
businesses of an organization that formulate their own
competitive strategies.

Question 2

TYPES OF CORPORATE STRATEGIES
1.

2.

3.

Answer 2

I. Growth - expansion into new products
and/or markets served.
2. Stability - maintenance of the status quo.
3. Renewal - examination of organizational
weaknesses that are leading to performance
declines.

Question 3

Growth strategy

Answer 3

a corporate strategy that’s used when an
organization wants to expand the number of markets served or
products offered, through either its current business(es) or new
business(es). Because of its growth strategy, an organization may
increase revenues, number of employees, or market share.

Question 4

TYPES OF GROWTH STRATEGIES

► Concentration -

► Vertical integration- 2

► Horizontal integration-

► Diversification- 2

Answer 4

focuses on its primary line of business (e.g. cell
phones) and increases the number of products offered or markets
served in this primary business.

• Backward vertical integration - the organization becomes its own supplier
  (e.g. Walmart getting into the business of producing soft drinks).
• Forward vertical integration - the organization becomes its own distributor
  (e.g. A produce company, for example, might hold a farm, a produce
  distribution business and a green grocery).
• a company grows by combining with
  competitors (e.g. mergers & acquisitions: BofA & MBNA, NationsBank, … ).
• Related diversification - when a company combines with other companies
  in different, but related industries (e.g. Google & YouTube).
• Unrelated diversification - when a company combines with firms in
  different and unrelated industries (Tata Group: Chemicals, Comms, IT).

Question 5

TYPES OF CORPORATE DIVERSIFICATION

3. 4.

Answer 5

I. Single business
► Low level of diversification ( e.g. Google,
Coca Cola)
2. Dominant business
► Additional business activity pursued ( e,.g,
Pepsi - with Frito-Lay & Quaker Foods; Nestle, … )
3. Related diversification
► Businesses share competencies (e.g. Nike,
Exxon Mobile, Amazon, Disney, … )
4. Unrelated diversification ( conglomerate)
► No businesses share competencies ( e.g.
GE, the Tata Group)

Question 6

LEVERAGE CORE COMPETENCIES FOR
DIVERSIFICATION

Answer 6

Question 7

CORPORATE DIVERSIFICATION AND FIRM
PERFORMANCE

Graph

1 2 3 4

Answer 7

Question 8

Stability strategy -

what

examples

results

Answer 8

a corporate strategy in which
an organization continues to do what it is currently
doing.

Examples of this strategy include continuing to serve the
same clients by offering the same product or service,
maintaining market share, and sustaining the organization’s
current business operations.

✓ The organization doesn’t grow, but doesn’t fall behind, either.

Question 9

RENEWALSTRATEGY

what

Retrenchment strategy-

Turnaround strategy -

Managers do two things for both renewal strategies:

However, in a turnaround strategy,
these measures are

Answer 9

a corporate strategy designed to
address declining performance.

a short-run renewal strategy
used for minor performance problems.This strategy helps an
organization stabilize operations, revitalize organizational
resources and capabilities, and prepare to compete once again.

when an organization’s problems
are more serious, more drastic action is needed.

cut costs and restructure organizational operations.

more extensive than in a retrenchment strategy.

Question 10

BCG matrix -

Stars-

Cash Cows -

Dogs-

?-

Answer 10

a strategy tool that guides resource allocation
decisions on the basis of market share and growth rate of SBUs.
The organization’s various businesses are evaluated and plotted
using a 2 x 2 matrix to identify which ones offer high potential and
which were a drain on organizational resources .

► Businesses in rapidly growing markets with large market shares. (Action:
Hold and invest in it; it may become a future cash cow)

► Businesses with a high market share in low-growth markets or
industries. They generate more cash than they consume. (Action: Milk it
= Hold it but not necessarily invest in it).

► Low market share and low growth businesses (Action: divest it).

► Businesses whose high growth rate gives them considerable appeal but
whose low market share makes their profit potential uncertain. (Action:
Invest if it has potential, otherwise, sell; it may become either a dog or a
cash cow as the industry matures).