SOM497 Business Policy

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SOM497 Business Policy Strategy
CHAPTER 7 Strategy Formulation Corporate
Strategy
STRATEGIC MANAGEMENT BUSINESS POLICY 10TH
EDITION THOMAS L. WHEELEN J. DAVID HUNGER
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Corporate Strategy

• All product/business units to gain synergy
• Deals with issues facing corporation as a whole
• Corporate strategy examined via
• Part 1 Directional Strategy
• Part 2 Portfolio Analysis
• Part 3 Corp. Parenting

Example Dining concepts for Brinker International
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Part 1 Corporate Directional Strategy

• Decide its orientation toward growth
• Expansion, Contraction, or Status quo
• Concentration or Diversification
• Internal development or Acquisitions, Mergers, or
  Alliances
• 3 Grand Strategies

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Corporate Directional Strategy How do firms
grow?

• Internal mechanisms
• External mechanisms

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Growth Strategies

• 2 Basic forms
• Concentration
• Diversification

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Concentration Strategies

• Vertical growth ?
• Backward integration
• Forward integration
• Full integration
• Why would firms do this?

• Horizontal growth ?
• Horizontal Integration
• Via mergers, acquisitions, takeovers
• Why would firms do this?

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Diversification Strategies

• Concentric Diversification
• Related
• Focus?
• Industry type?
• Example Dell
• Computers
• Flat panel TV
• Mp3 players
• Online music downloading store

• Conglomerate Diversification
• Unrelated
• Focus?
• Industry type?
• Example General Electric
• Locomotives
• Light bulbs
• Power plants
• Refrigerators
• Financial (credit cards)

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International Entry Options

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

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Retrenchment Strategies

• Turnaround
• Selling out
• Bankruptcy
• Liquidation

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Part 2 Portfolio Analysis

• Asks
• Which products/ business units should we spend
  time and money on?
• Which should we not?
• Which will give us the most profitable return?
• Purpose?

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Portfolio Approach BCG Matrix

• Based on combo of market growth and market share
  relative to the largest competitor
• Used to portray corporations portfolio of
  investments
• E.g. PepsiCo
• Ice Tea ?
• Energy Drinks ?
• Diet Pepsi
• Quaker Milk Chiller

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Part 3 Corporate Parenting

• Asks What businesses should this company own and
  why?
• Focuses on
• core competency of parent firm
• Creating a good fit in the relationship of parent
  and its businesses to create value
• Purpose?

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Next Class Update in Syllabus

• Switching cases
• Next class Case 5 (Starbucks International
  Operations)
• On March 27th we will focus on the Cola Wars
  (Coca-Cola vs. Pepsi)