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STRATEGIC MANAGEMENT & BUSINESS POLICY11TH EDITION

THOMAS L. WHEELEN J. DAVID HUNGER

CHAPTER 7 Strategy Formulation: Corporate Strategy

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Corporate Strategy

3 Key Issues –

–Firm’s directional strategy(Growth, Stability, Retrenchment)

–Firm’s portfolio strategy

–Firm’s parenting strategy

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Corporate Directional Strategies

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Corporate Strategy

Directional Strategy –

–Orientation toward growth•Expansion, contraction, status quo•Concentration or diversification•Internal development or acquisitions, mergers, or alliances

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Corporate Strategy

Directional Strategy –

–3 Grand Strategies

•Growth strategies

•Stability strategies

•Retrenchment strategies

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Corporate Strategy

Growth Strategies --

–External mechanisms

•Mergers

•Acquisitions

•Strategic alliances

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Corporate Strategy

Growth Strategies --

–2 Basic forms

•Concentration

•Diversification

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Corporate Strategy

Basic Concentration Strategies --

–Vertical growth

–Horizontal growth

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Corporate Strategy

Vertical Growth --

–Vertical integration•Full integration•Taper integration•Quasi-integration•Long-term contract

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Corporate Strategy

Vertical Growth --

–Backward integration

–Forward integration

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Corporate Strategy

Concentration --

–Horizontal Growth•Horizontal integration

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Corporate Strategy

Basic Diversification Strategies --

–Concentric Diversification

–Conglomerate Diversification

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Corporate Strategy

Concentric Diversification --

–Growth into related industry–Search for synergies

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Corporate Strategy

Conglomerate diversification --

–Growth into unrelated industry–Concern with financial considerations

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Corporate Strategy

International Entry Options --

–Exporting–Licensing–Franchising–Joint Ventures–Acquisitions–Green-Field Development

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Corporate Strategy

International Entry Options --

–Production Sharing–Turnkey Operation–BOT Concept (Build, Operate, Transfer)–Management Contracts

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Corporate Strategy

Stability Strategies --

–Pause/proceed with caution

–No change

–Profit strategies

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Corporate Strategy

Retrenchment Strategies --

–Turnaround–Captive Company Strategy–Selling out–Bankruptcy–Liquidation

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Corporate Strategy

Portfolio Analysis --

–Resource commitment on best products to ensure continued success

–Resource commitment on new costly products high risk

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BCG Matrix (Portfolio Analysis)

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GE Business Screen (Portfolio Analysis)

AWinners Winners

B

C

Question Marks

D

F

Average Businesses

EWinners

Losers

GLosers H

LosersProfit

Producers

Strong Average Weak

Low

Medium

High

Business Strength/Competitive Position

Indu

stry

Att

ract

ive

ness

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Corporate Strategy

Corporate Parenting Strategy --

–Strategic factors–performance improvement–Analyze fit