S15: Corporate-level Strategy

Question 1

What does a corporate-level strategy do?

Answer 1

It specifies actions a firm takes to gain competitive advantage by selecting and managing different businesses competing in different product markets

Question 2

Expectations of corporate-level strategies (3)

Answer 2

• grows revenues and profits
• focuses on diversification
• expected to yield above-average returns by creating value

Question 3

What are 2 issues corporate-level strategies are concerned with?

Answer 3

• where should the firm compete
• how should HQ manage those businesses

Question 4

What is horizontal integration?

Answer 4

Expansion into multiple businesses that share inputs (ex: you diversify your portfolio w new businesses)

Question 5

What is vertical integration?

Answer 5

Expansion into businesses that make inputs or use the outputs of other units within the corporation

Question 6

Value-creating Strategies & Diversification (4) (operational & corporate relatedness)

Answer 6

High op. & Low corp.: related constrained diversification
High op. & High corp.: both op. & corp. relatedness
Low op. & Low corp.: unrelated diversification
Low op. & High corp.: related linked diversification

Question 7

Risks of having both operational & corporate relatedness? (2)

Answer 7

• expensive to undertake (if the costs are not offset by the benefits created, creates diseconomies instead of economies of scope)
• investors discount assets (can be hard to identify value if the asset is shared)