Corporate StrategiesChapter 7

Melissa DunlopJose MedinaMona ShaferAlma PenaRaul GuerreroLaura Randall

Explain What Corporate Strategy is

The corporate strategy for Under Armour is

Integration Position

A strategy with choices of what business(es) to be in and what to do with those businesses.

Single- and Multiple-Business Organization

Single-business organization is primary in one industry. Ex. Under Armour

Multiple-business organization is in more than one industry

Why is the distinction important? Because it influences an organization’s

overall strategic direction, what corporate strategy is used, and how that strategy is implemented and managed

Corporate, Competitive, and Functional Strategy

Is important to whether the organization does what its in business to do and whether it achieves its strategic goals

Without resources, capabilities, and competences being developed and used in the competitive and functional strategy; the corporate strategy can’t be implemented

The competitive and functional strategies that are implemented must support the overall strategic direction and corporate strategy

What Are the Corporate Strategic Directions

1. Moving an Organization forward Means an organization’s strategic manager’s

hope to expand the organization's activities or operations- that is to grow. Growth

2. Keeping an Organization as is Means it’s not growing, but also isn’t falling

behind. Stability strategy

3. Revering an Organization’s decline Describes situations in which an organization

has problems and may be seeing declines in one or more performance areas. Renewal

Organizational

Growth

Strategies

Types of Growth Strategies

Concentration::focuses on main line of business and tries to meet its goals by growth in its core business Adding products or opening new locations; Under Armour

choosing to start selling footwear Product-market exploitation::increase the sales in current

products in its current market; creating incentives for customers Product development::producing new products for a company’s

current market by adding new features or options to the product Market development::selling current product in a new market

possibly in different geographic regions; Under Armour making deal with Tottenham FC in EPL

Advantage of concentration growth is that a company can become very good at it

Types of Growth Strategies

International::looking at global markets for new opportunities

Vertical Integration: growth through control of a company’s inputs(backward) or outputs(forward) Backward VI::a company becomes its own supplier of the resources that it

needs Forward VI::company becomes its own distributer ; Wal-mart with Great

value or outlet stores such as Apple

Horizontal Integration::the combining of operations with its competitors Able to expand market share and strengthen market position For horizontal integration to work it has to be found legal by the FTC in that

it will not decrease overall competition and not make the consumer worst off

Diversification::movement into a different industry Related::movement into a different industry but similar to the company’s

current business, trying to find a strategic fit Unrelated::moving a completely different industry that has nothing to do

with the company’s current strategy or resources; done when there is a lack of growth in an industry

Implementing The Growth Strategies

Mergers-Acquisitions

Internal Development

Strategic Partnering

Mergers-Acquisitions

Merger A legal transaction in which two or more

organizations combine operations through an exchange of stock and create a third entity

Between organizations of similar size are usually friendly

Acquisition Outright purchase of an organization by

another Between organizations of different sizes and

can be friendly or hostile

Mergers- Acquisitions

Used when: Maturity stage of industry life cycle High barriers to entry New industry not closely related to

existing one Unwilling to accept time frame and

development costs of starting new business

Unwilling to accept risks of starting new business

Internal Development

Grows by creating and developing new business activities itself

Have the necessary resources, distinctive capabilities, and core competencies

Under Armour

Internal Development

Used when: Embryonic or growth stage of industry life

cycle Low barriers to entry New industry closely related to existing one Willing to accept time frame and

development costs of starting new business Willing to accept risk of starting new

business

Strategic Partnering

Two or more organizations establish a legitimate relationship by combining their resources, distinctive capabilities, and core competencies for some business purpose

Examples Organization-suppliers/distributors Organization-competitor Organization-related industry

organization

Strategic Partnering

Joint Venture Two or more separate organizations

form a separate independent organization for strategic purposes

Both own equal shares Used when partners do not want to or

cannot legally join together permanently

Ex: Clorox Company and Procter & Gamble

Strategic Partnering

Long-Term Contract Legal contract between organizations

covering a specific business purpose Used between organizations and

suppliers Both partners understand the

importance of developing resources, capabilities, and core competencies for a competitive advantage

Under Armour and Dick’s Sporting Goods

Strategic Partnering

Strategic Alliance Two or more organizations share resources,

capabilities, or competencies to pursue some business purpose

No separate entity formed Used to:

Encourage product innovation Bring stability to cyclical businesses Expand product line offerings Cement relationships with suppliers,

distributors, or competitors Ex: PepsiCo and Lipton

Organizational Stability Strategy

Organizational Stability An organization might want to stay as it

is although there are times when its resources, distinctive capabilities, and core competencies are stretched to their limits

Growing might risk the organization’s competitive advantage.

Stability Strategy: is one in which an organization maintains its current size and current activities.

When is Stability an Appropriate Strategic Choice?

When an industry is in a period of rapid upheaval with several key industry and general external forces drastically changing.

If an industry is facing slow or no growth opportunities. Keep organizations working at current levels before any strategic

movements into new industries.

If an organization has been growing rapidly and needs some “down” time in order to build up its resources and capabilities again. i.e. Staples Inc.

Large Firms in an industry that is in the maturity stage of the industry life cycle.

Small business owners may follow a stability strategy indefinitely. Feel their business is successful Accomplished personal goal

Under Armour is growing at a fast rate but is not looking to stability yet.

Implementing Stability Strategy

Involves no growing but also not allowing the organization to decline No new products No new programs No adding production capacity

Gives an opportunity for the organization to “take a breather” and prepare itself for pursuing growth.

Stability As a Short-Run Strategy

If an organization become too complacent it is susceptible to losing its competitive position.

If significant organizational weaknesses exist or performance is declining, then it may be necessary to look at a different strategy such as organizational renewal.

Organizational Renewal Strategies

Renewal Strategies- Used when an organization’s situation is declining and strategic managers want to reverse the decline and put the organization back on a more appropriate path to achieving its goals

Two Kinds Retrenchment Turnaround

What Leads to Performance Declines?

Strategic decisions taken by managers may create conditions that may keep the organization from developing or exploiting a sustainable competitive advantage

Primary cause of performance decline is Poor Management

If strategic managers are inept, incompetent, or incapable of strategically managing all aspects of the organization, then organizational performance is likely to suffer

What Leads to Performance Declines?

Poor Management

Inadequate Financial Controls

Uncontrollable Costs or Too High

Costs

New Competito

rs

Unpredicted Shifts in

Consumer Demand

Slow or No Response to Significant External or

Internal Changes

Overexpansion or Too

Rapid Growth

Chapter 3 in Strategic Management and MKT 3350- Porter’s Five Forces Model

What Leads to Performance Declines?

Signs of Declining Performance Excess Number of Personnel Unnecessary and cumbersome administrative

procedures Fear of conflict or taking risks Tolerating work incompetence at any level or in

any area of the organization Lack of clear visions, mission, or goals Ineffective or poor communication within

various units and between various units

Renewal Strategies

Retrenchment Strategy- is a short-run strategy designed to address organizational weaknesses that are leading to performance declines Doesn’t necessarily have negative financial

returns Instead, organization hasn’t been able to meet

its strategic goals

Turnaround Strategy- is a renewal strategy that’s designed for situations in which the organization’s performance problems are more serious

Examples: Sears, Delta Airlines, Kmart, Chrysler, General Motors, Ford Motor, Motorola, Mitsubishi, Intuit, Apple, and others

Implementing Renewal Strategies

COST CUTTING

Cost cutting alone has little to do with developing a sustainable competitive advantage.

Instead, the need to cut costs is approached as a way to bring the organization’s performance results back in line with expectations.

How to cut costs? Redundancies Inefficiencies Waste in work activities

Ex. UPS-Light bulbs

ACCT 5305- “Chainsaw” Al Dunlop

Implementing Renewal Strategies

RESTRUCTURING

Divestment- selling a business to another organization where it will continue as an ongoing business Sell to investors, companies, or anyone Under Armour and new cotton products

Spin-off- setting up a business as a separate, independent business by distributing its shares of stock

Liquidation- shutting down a business completely Business will no longer continue as business Often strategic action of last resort

Implementing Renewal Strategies

Downsizing- individuals are laid off from their jobs Dangerous Can increase shareholder wealth when done for

strategic purposes

Bankruptcy- is the failure of a business in which it’s dissolved or reorganized under the protection of bankruptcy legislation Reorganize-Chapter 11 bankruptcy Liquidate their assets-Chapter 7 bankruptcy

Companies can use a combination of any of these strategic actions. What is important though, is that the organization’s competitive advantages are enhanced and strengthen by these actions

How is Corporate Strategy Evaluated?

Evaluation is a crucial part of the strategic management process Corporate Goals Efficiency, Effectiveness, and Production Benchmarking Portfolio Analysis

Corporate Goals

Goals become the standard the standards against which actual performance is measured

Goals are Quantitative Qualitative

Efficiency, Effectiveness, and Productivity Measures

Overall output of goods and services/by the inputs used in generating the output

Represent corporation's ability to use limited resources strategically in achieving high levels of corporate performance

Benchmarking

Search for best practices inside or outside the organization

The Benchmark is the Standard

Portfolio Analysis

Two-dimensional matrices that summarize internal and external factors through various business units BCG Matrix McKinsey-GE Stoplight Matrix Product Market Evolution Matrix

Four Takeaways

Corporate strategy is a strategy that’s concerned with the choices of what business(es) to be in and what to do with those businesses.

A growth strategy is one that expands the products offered or markets served by an organization or expands its activities or operations either through current business(es) or through new business(es).

A stability strategy is one in which an organization maintains its current size and activities.

Renewal Strategies are used when an organization’s situation is declining and strategic managers want to reverse the decline and put the organization back on a better path to achieving its goals.

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