directions of corporate level strategies

8/18/2019 Directions of Corporate Level Strategies

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DIRECTIONS OF

CORPORATE LEVELSTRATEGIES

1. Growth Strategy2. Stability Strategies

3. RetrenchmentStrategies


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1. GROWTH STRATEGY – usu. Done by largecorporations aiming at the growth potentials in

terms of size or magnitudes sales! assets! pro"ts!etc.#

a. merger – in$ol$es two or morecorporations in which a stoc% is e&changed or

swapped among independent businessorganizations from which only one companysur$i$es. 'ccurs between corp. which are (friendly)in nature.

b. acquisition – in$ol$es the purchase of acompany then completely absorbed as an operatingsubsidiary or di$ision of the ac*uiring corporation.+i%e merger! this may occur bet. ,irms of di-erentsizes but can be either (friendly) or (hostile.)

c. strategic aiance – partnership among


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2. Stability Strategies – continue current acti$itieswithout any signi"cant change in direction sometimes

$iewed as lac%ing of strategy as the "rm simplymaintain the current array of businesses

Reasons a. enables the corp. to focus manageriale-orts on the e&isting business with the goal ofenhancing their competiti$e posture

b. senior managers may percei$e that thecost of adding new businesses may be more than thepotential bene"ts.

a. Pause ! "rocee# $it% caution – time out#an opportunity to rest before continuing a growth orretrenchment strategy

4 ma%e only incremental impro$ementsuntil a particular en$ironment situation changes

b. no c%ange strateg& ' to do nothing new – achoice to continue current operations and policies for


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International an Other Entry O!tionsa.E,"orting – e&plore foreign mar%ets which ship goods produced toother countriesb.Licensing – co$ered by a document called licensing agreement the

licensing "rm grant right to another "rm in the host country to produceor sell a product or ser$icec.Franc%ising – co$ered by a franchising agreement wherein thefranchiser grants rights to another company to open a business!usually a retail store! using the franchiser5s name and operatingsystem.#.-oint Venture – in$ol$es formation and registration of a newbusiness organization based on in$estment agreed upon

4 combine resources and e&pertise needed to de$elopnew products or technologiese. Acquisition – foreign# purchasing another company

operating in that area.Green(e# #e*eo"ment – refers to building its ownmanufacturing plant and distribution system done in lieu ofac*uiring the entire company with all its inherent liabilities andproblems which can a-ect the "rm5s entry into the domesticmar%et

g.Pro#uction s%aring – allows combining resources to pursue abusiness by sharing whate$er proceeds as may be agreed upon


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i. /anagement contract – it o-ers a scheme! through whicha corporation may use some of its personnel to assist a "rm

in a host country or company for a speci"ed fee and periodof time 0. 1ui#)O"erate)Transer or 1OT conce"t – usu. adopted

in go$ernment infrastructure proects a concept that isusually a $ariation of the turn%ey contract. 8nstead of turningthe facility o$er to the host country when completed! thecompany operates the facility for a "&ed period of timeduring which it earns bac% its in$estment! plus a pro"t. 7henit turns the facility o$er to the go$ernment at little or no costto the host country

+. Outsourcing – essentially refers to de4integration or

unbundling of certain business acti$ities narrowing thescope of the "rm5s operations! focusing on performingcertain (core) $alue chain acti$ities and relying on outsidersto perform the remaining $alue chain acti$ities


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Strategic Alliance4 9an be done through a process of e&ploration and negotiationwith targeted parties or business concerns leading to signingup an alliance document in the form of memorandum of

agreement! memorandum of understanding and:or contractsstipulating mutual desire to attain obecti$e and e&pressingsupport for one another.Ob0ecti*es21.7o collaborate on technology de$elopment or new product

de$elopment2.7o "ll gaps in technical or manufacturing e&pertise3.7o ac*uire new competencies;.7o impro$e supply chain e6ciencyoint $enture ?aluechain

consortia +icensing agreement@artnership


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1ene(ts an# Pitas o /ergers an#Acquisitions

"ene#ts$1./ore or better competiti$e capabilities2./ore attracti$e line4up of products:ser$ices3.Aider geographic co$erage;.Greater "nancial resources to in$est in RBD! add capacity ore&pand


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Outsourcing2 A#*antages an# Con#itions to Consi#er A&antages$1.8mpro$es "rm5s ability to obtain high *uality and : or cheaper

components or ser$ices2.8mpro$es "rm5s ability to inno$ate by interacting with (best4in4the4world) suppliers3.nhances "rm5s Fe&ibility should customer needs and mar%etconditions suddenly shift;.8ncreases "rm5s ability to assemble di$erse %inds of e&pertise

speedily and e6ciently and


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Situations Fa*oring -oint Venture1.Ahen a pri$ately owned organization is forming a

oint $enture with a publicly owned organization

2.Ahen a domestic organization is forming a oint$enture with a foreign company a oint $enture canpro$ide a domestic company with the opportunityfor obtaining local management in a foreign

country! thereby reducing ris%s such ase&propriation and harassment by host countryo6cials3.Ahen the distincti$e competencies of two ormore "rms complement each other especially well;.Ahen some proect is potentially $ery pro"table!but re*uires o$erwhelming resources and ris%s


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Situations Fa*oring Retrenc%ment1.Ahen an organization has a clearly distincti$e

competence! but has failed to meet its obecti$esand goals consistently o$er time2.Ahen an organization is one of the wea%ercompetitors in a gi$en industry3.Ahen an organization is plagued by ine6ciency!

low pro"tability! poor employee morale! andpressure from stoc%holders impro$e performance;.Ahen an organization has failed to capitalize one&ternal opportunities! minimize e&ternal threats!

ta%e ad$antage on internal strengths! and o$ercomeinternal wea%nesses o$er time that is! when theorganization5s strategic managers ha$e failed andpossibly will be replaced by more competentindi$iduals# and


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Situations Fa*oring Di*estiture1.Ahen an organization has pursued a retrenchmentstrategy and it failed to accomplish neededimpro$ements2.Ahen a di$ision needs more resources to becompetiti$e than the company can pro$ide3.Ahen a di$ision is responsible for an

organization5s o$erall poor performance and;.Ahen a di$ision is a mis"t with the rest of theorganization this can result from radically di-erentmar%ets! customers! managers! employees! $alues

or needs.


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Situations ,a$oring +i*uidation1.Ahen an organization has pursued both a retrenchment strategyand a di$estiture strategy! and neither has been successful

2.


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@erformance

@roducts Synergy and"t

customersStructure

9ompetiti$e@arentingad$antage

Sta%eholders@rocess

n$ironments/ar%ets


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"'siness le&el strategy – the operational plan of action of asingle and independent business that uses the company5sresources and competencies to gain a competiti$e ad$antage o$er

its ri$als in the mar%et or industry 9orporate

9orporate 4le$el Strategy /anage

Iusiness4le$el Iusiness Strategies

/anagers

,unctional ,unctional Strategiesmanagers

operating 'perating Strategies managers

Le*es o Strateg&)ma+ing in a Di*ersi(e# Com"an&


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8n de$eloping a business le$el strategy and inorder to stay competiti$e or outdo the "rm5s

competitors! substantial e-orts should be madeto de$elop strategies ta%ing note of the followingareas of concern

1. speci"c responses to changing conditions2. scope of geographic co$erage of the

business strategy3. e&plore collaborati$e alliance or

partnerships as necessary

;. the "nancial strategy to support the o$erallbusiness strategy


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Com"etiti*e Strengt%s o 1usinessLe*e Strateg&

a.+ess ambiguity about (who we are)b.Resources can be focused on buildingcompetencies and capabilities that can ma%e the

"rm better at what it doesc.Eigher probability inno$ati$e ideas will emerged.7op e&ecuti$es can maintain hands4on contactwith core businesse.8mportant competencies more li%ely to emergef.0bility to parlay e&perience and reputation intosustainable competiti$e ad$antage andg.@rominent leadership position.


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('nctional res!onsibilities – refer to thosetas%s! function or acti$ities that a gi$en operating

unit e.g. department! di$ision! group! etc.# isduty4bound to do by the $ery nature of itsfunctional category.

e&. /ar%eting department is generally

tas%ed to handle mar%eting! sales! promotion!ad$ertising! etc.

('nctional strategy – is the approach ta%en by afunctional area or unit to achie$e its obecti$es

and duties by way of ma&imizing the use of itsresources and in light of strategic direction as wellas pre$ailing mar%et competitions.

4 it broadly addresses how the particularmandate or duty of a concerned department or

unit will be done and carried out or how it will


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directions of corporate level strategies

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