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10 Cards in this Set
- Front
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Corporate Strategy addresses three key issues |
1. Directional strategy: growth, stability, or retrenchment 2. Portfolio analysis: The industries or markets in which the firm competes through its products and business units 3. Parenting Strategy: The manner in which management coordinates activities and transfers resources and cultivates capabilities among product lines and business units. |
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Corporate strategy is about |
Choosing the direction of the org. and management of the business portfolio |
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Directional Strategy: three questions |
1. Should we expand, cut back, or continue our operatons unchanged? 2. Should we concentrate our activities within our current industry, or should we diversify into other industries? 3. If we want to grow and expand nationally and/or globally, should we do so through internal development or through extrenal acquisitions, mergers, or strategic alliances? |
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Directional Strategy Orientations |
1. Growth Strategies expand the company's activities 2. Stability strategies make no change to the company's current activities. 3. Retrenchment strategies: reduce the company's level of activities. |
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Growth Strategies |
Most widely prused corporate directional strategies are those designed to grow sales, assets, profits, or a combo of these. Cost reduction is important in fast growth industries. E.g., Oracle has been acquiring businesses for the past seven years. 85 businesses. they needed to double or triple in size by buying smaller and weaker rivals in order to compete with Microsop and SAP. Larger companies tend to survive longer than smaller companies due to the greater availability of financial resources, org. routines, and external ties. A corp can grow internally by expanding its operations both globally and domestically, or it can grown externally through mergers, acquisitions, and strategic alliances. The line between mergers and acquisitions has been blurred. |
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Merger |
a transaction involving two or more corporations inwhich both companies exchange stock in order to create one new corp. Most mergers are friendly. |
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Acquisition |
A 100% purchase of another company. |
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Concentration |
If the current product line has potential, concentrate on that. Vertical growth - take over a function previously done by a vendor. The company grows by making its own supplies or or by distributing its own products. Henry Ford plant - Iron ore entered one end, a car exited out the other end.
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Vertical integration |
The degree to which a firm operates vertically in multiple location on an industry's value chain from extracting raw materials to manufacturing to retailing. Assuming a function previosly provided by a supplier is called backward integration (going backward on the value chain) Forward integration - fedex and kinkos (kinkos had the store front for package drop off) Appropriate for a business unit with a strong competitive position in a highly attractive industry. |
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Transaction cost economics |
proposes that vertical integration is more efficient than contracting for goods and services in the marketplace when the costs of byuing goods on the open market become to great. vertical integration and outsourcing are situation specific. |
