12. corporate strategies- s, t, etc

8/12/2019 12. Corporate Strategies- S, T, ETC..

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A strategy where the organization maintains its

current size and current level of businessoperations

The stability strategy is a do nothing strategy

Its main strategic decisions focus onincremental improvement of functionalperformance

When the company is doing reasonably well,but no scope for significant growth, thestrategy to be adopted is stability.

Industries such as alcoholic, tobacco productsprefer this strategy

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When is stability an appropriate strategy?

Organization has just completed a

frenzied period of growth & needs tohave some down time in order for its

resources & capabilities to build up

strength again

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Large firm in large industry at

maturity stage of industry life

cycle

Implementation of Stability Strategy

Not expanding organizations level

of operation

Should be a short-run strategy

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A strategy that is used to reverseorganizational decline& put the firmback on a more appropriate path tosuccessfully achieve its strategic goals

Main cause of corporate decline ispoormanagement

Poor management manifests itself in:

Over-expansion or too rapid growthInadequate financial controls

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Uncontrollable costs or too highcosts

Inability to anticipate & deal with

new competitorsInability to anticipateunpredictable shifts in consumer

demandSlow or no response to significantexternal or internal changes

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Indicators of corporate performancedecline

Excess number of personnel

Unnecessary & cumbersome

administrative procedures

Fear of conflict or taking risk

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Tolerating work incompetence at

any level or area

Lack of clear vision, mission, or

goals

Ineffective or poor communication

within various units and between

various units

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Two main types:

(1) Retrenchment; and

(2) TurnaroundRetrenchment Strategy

Common short-run strategy designed to

address organizational weaknesses anddeficiencies that are leading to

performance declines

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What does retrenchment involve?

Stabilizing operations

Replenish & revitalizeorganizational resources &

capabilities

Be prepared to compete again

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Turnaround Strategies

A renewal strategy designed for situations

where the firms performance problems are

more serious but not yet criticalObjective of turnaround strategies

Improve operational efficiency

Improve revenue and profitability of moneyloosing businesses

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Turnaround most appropriate when

Reasons for poor performance are

short-term

Divestment doesn't make long-

term sense

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Two basic phases of a turnaround

strategy

Contraction effort to quickly

stop the bleeding

Consolidation stabilizing the new

leaner organization

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Cost cutting

Costs are cut to revitalize the firmsperformance (retrenchment) or save the

firm (turnaround)Cost cutting can be approached from:

Across-the-board all areas of theorganization

Selective cuts selected areas of theorganization

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RESTRUCTURING

Divestment: Selling off business to

someone else where it will continue as agoing concern

Spin-Off: Setting up business unit as a

separate business through thedistribution of shares

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Liquidation:Shutting down thebusiness completely

Reengineering: Fundamentalrethinking & redesign of theorganizations business processes

Downsizing: Laying-off employees

Bankruptcy: Dissolving or reorganizingthe business under the protection of

bankruptcy legislation

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Without evaluation, strategic managerswould not know whether the implementedstrategies are working

Corporate Objectives or Goals for strategyevalution are:

Maximizing shareholder wealth

Increased market share

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Strong global presence

Increased productivity

Positive reputation/image

Strong customer satisfaction

High product quality

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EfficiencyOrganizations ability to minimizethe use of resources in achievingfirm objectives

Effectiveness

Organizations ability to completeor reach goals

ProductivityMeasure of the quantity of inputsneeded to produce specified

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Measure as the ratio of overalloutput to inputs used to producethe output

BenchmarkingSearch for best practices fromleading firms that are believed to

contribute to superior performance

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Changes are needed if evaluation shows

Growth objectives are not beingattained

Organizational stability causes firm

to fall behindCorporate renewal efforts are notworking

Possible Strategies to changeFunctional

Competitive

Corporate direction 22

12. corporate strategies- s, t, etc

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