Module IV - Corporate Level Strategy (Part A)
Module IV - Corporate Level Strategy (Part A)
Module IV - Corporate Level Strategy (Part A)
CORPORATE LEVEL
STRATEGY (PART A)
DR.MOLLY CHATURVEDI
CORPORATE STRATEGIES
Corporate-level strategies (or simply, corporate strategies) are basically
about decisions related to:
• Allocating resources among the different businesses of a firm;
• Transferring resources from one set of businesses to others;
• Managing and nurturing a portfolio of businesses; and
• Creating value across businesses in the portfolio.
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DISADVANTAGES
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TYPES OF EXPANSION STARTEGY
PRODUCT DEVELOPMENT
It involves selling new products to same markets: it may introduce newer
products in existing markets by concentration on product development. For
example- the development of Fanta Icy Lemon. Coca-Cola developed this new
product to sell to its existing markets to increase sales. Apple products follows
the strategy of Product development . In the service industry, promoting India
as Ayurveda based medical treatment destination or promoting green lush
plantation of Kerala ,serenic beaches of Karnataka in the tourism to its
existing set of customers.
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DIVERSIFICATION STRATEGIES
In relative terms, a diversification strategy is generally the highest risk endeavor; after all, both product
development and market development are required. While it is the highest risk strategy, it can reap
huge rewards – either by achieving altogether new revenue opportunities or by reducing a firm’s
reliance on a single product/market fit (for whatever reason).
There are generally two types of diversification strategies that a management team might consider:
1. Related Diversification – Where there are potential synergies that can be realized between the
existing business and the new product/market.An example is a producer of leather shoes that decides
to produce leather car seats.
2. Unrelated Diversification – Where it’s unlikely that any real synergies will be realized between the
existing business and the new product/market.Let’s work on the leather shoe producer example again.
Consider if management wanted to reduce its overall reliance on the (highly cyclical) consumer
discretionary high-end shoe business, they might invest heavily in a consumer packaged goods
product in order to diversify.
.
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ANSOFF’S MATRIX FOR DIVERSIFICATION
STRATEGIES
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DISADVANTAGES
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INTEGRATION STRATEGIES
VERTICAL
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TYPES OF PARTIAL VERTICAL INTEGRATION
STRATEGIES
Taper integration strategies require firms to make a part of their own
requirements and to buy the rest from outside suppliers or when firms
sell some of their products through company outlets and others through
independent retailers. Ex-Tim Hortons owning some of its retail outlets
but also using franchising, Coca-Cola and Pepsi both having integrated
bottling subsidiaries while also relying on independent bottlers for
production and distribution in some markets
Quasi integration strategies firms purchase most of their requirements
from other firms in which they have an ownership stake or when firms
sell most of their products through their own stores. Ex-. a large
pharmaceutical firm that acquires part interest in a drugstore chain in
order to guarantee that its drugs have access to the distribution
channel(DRL in Medplus).
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BENEFITS AND LIMITATIONS- HORIZONTAL
INTEGRATION
Benefits: Horizontal integration leads to economies of scale,
economies of scope, increased market power, increased product
differentiation, replicating a successful business model and
reduction in industry rivalry .
Limitations: Horizontal integration increases size but it may attract
the provisions of monopolies, restrictive trade practices act or anti-
trust laws.
Economies of scope may not arise in most cases
VERTICAL INTEGRATION- ADVANTAGES