CHAPTER 6 STRATEGY FORMULATION: CORPORATE STRATEGY Corporate Strategy Corporate strategy deals with three key issues facing the corporation as a whole: 1. Directional strategy- the firm’s overall orientation toward growth, stability, or retrenchment 2. Portfolio strategy- 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, transfer resources, and cultivates capabilities among product lines and business units Corporate strategy is primarily about the choice of direction of the firm as a whole. In other words, this includes decisions regarding the flow of financial and other resources to and …show more content…
Under the full integration, a firm internally makes 100% of its key suppliers and completely controls its distributors. With taper integration, a firm internally produces less than half of its own requirements and buys the rest from outside suppliers. With quasi-integration, a company does not make any of its key supplies but purchases most of its requirements from outside suppliers that are under its partial control. Long-term contracts are agreements between two separate firms to provide agreed-upon goods and services to each other for a specified period of time. Horizontal Growth This can be achieved by expanding the firm’s products into other geographic locations and/or by increasing the range of products and services offered to current markets. Horizontal growth results in horizontal integration-the degree to which a firm operates in multiple geographic locations at the same point in an industry’s value chain. Horizontal integration for a firm can range from full to partial ownership to long-term contracts. Diversification Strategies The two basic diversification strategies are concentric and conglomerate. Concentric (Related) Diversification Growth through concentric diversification into a related industry may be very appropriate corporate strategy when a firm has a strong competitive position but industry attractiveness is low. Conglomerate (Unrelated) Diversification When
Vertical integration is a concept in which a company develops or acquires production units for outputs which are
Vertical integration is when one firm joins with another at a different stage of the same production process. Forward Vertical is when the other firm is at a later stage and Backward Vertical is when the other firm is at an earlier stage. Vertical integration as a whole allows for a firm to control key stages of the production process; guarantees access to a market; and gains control of supplies. Companies such as Zara and American Apparel are vertically integrated, especially at key stages of
Vertical integration- a company controlled all parts of production from raw mats to the finished goods
Horizontal integration involves buying out other companies and taking over one single step of an industrial process. It establishes a monopoly because, with horizontal integration, everyone must go the company that has monopolized that step.
Vertical integration is a business growth strategy for economics of scale. It is typified by one firm engaged in different parts of production example; growing raw materials, manufacturing, transporting, marketing, and/or retailing to expand business in existing market for the firm. It can function in two directions both forward integration and backward integration.
This first strategy calls for the creation of more sales without changing the original product, which can achieved through the four P’s of marketing. The next strategy, market development, allows the supplier to find new markets for their current products by using demographic markets to see where the greatest revenue will be based on the target group you are selling to (seniors, teens, etc.). Product development is the next strategy which focuses on new products the modification of current products. This strategy is rather important as without evolving products to meet the ever changing needs of current and potential companies can see a loss in sales and would limit their ability to be competitive in the market. The final strategy is diversification. This strategy calls for companies to attain current or new businesses allowing them to “diversify” their offerings and break into new markets.
According to Slack et al. The corporate strategy or business strategy is the guide lines for the whole corporation’s businesses in relation to its markets, customers, and the competitors (2007). In the same context, the same authors discussed the link between the corporate strategy and
A competitive strategy, or business-level strategy, is the way a business used to successfully enter and penetrate into a market (Eastwood et al, 2006), and also, to succeed in this chosen market against its competitors (Johnson et al, 2014). A company needs to develop and apply appropriate strategy to help the company to generate distinctive competences (David, 2007). Compared with the strategies implemented in other levels of operation, competitive strategy is more focused on the competition against other competitors and strategic choices to better attain market share (Harrison and St. John, 2009). According to
A strategy is a plan that is targeted over the long run. Business level strategies refers to strategic alternatives that an organization chooses from as it conducts business in a particular industry or market (Griffin,2002). A corporate level strategy means that a company manages its operations simultaneously across many industries and markets. Netflix operates across both a business and corporate level strategy. The main areas across which Netflix operate on in their corporate level are business portfolio and partnerships.
Corporate Strategy has been defined by numerous authors. Grant (1995) claims corporate strategy deals with the way a corporation manages a number of different businesses. Lynch, R, in both his third and fourth edition books on corporate strategy refers to Penrose (1959) definition of corporate strategy as “the pattern of major objectives, purposes or goals and essential polices or plans for achieving those goals, stated in such a way as to define what business the company is in or to be in and the kind of company it is or to be”
Marketing strategy is a method of focusing an organization's energies and resources on a course of action which can lead to increased sales and dominance of a targeted market niche. A marketing strategy combines product development, promotion, distribution, pricing, relationship management and other elements; identifies the firm's marketing goals, and explains how they will be achieved, ideally within a stated timeframe. Marketing strategy determines the choice of target market segments, positioning, marketing mix, and allocation of resources. It is most effective when it is an integral component of overall firm strategy, defining how the organization will successfully engage customers, prospects, and competitors in
Product diversification is a feasible way to obtain growth through new products. The company can use existing product knowledge to develop the brand into new lines to increase exposure and use similar technology to increase synergies. Leveraging off an existing well-known brand to a market that is familiar with the brand will also increase the possibility of success while maintaining lower marketing costs in
Some of the opportunities from global perspectives would be vertical growth, such as constant improvement, close financial monitoring, reducing costs, differentiating, or horizontal growth as territorial expansion, occupying new potential niches.
Chapter Five describes the five basic competitive strategy options – which of the five to employ is a company’s first and foremost choice in crafting overall strategy and beginning its quest for competitive advantage.
A company 's strategy consists of the competitive moves and business approaches that managers are employing to grow the business, attract and please customers, compete successfully, conduct operations, and achieve the targeted levels of organizational performance.