Professional Documents
Culture Documents
STRATEGIES
Prof.Dr.Dr.Dr.H.C. Constantin
Bratianu
Corporate-level strategies
SB 1
America
SB 2
Headquarters
Europe
SB 3
Business-level strategies
Ansoff Matrix
Products / Services
Existing
Existing
New
Market
penetration
Product &
Service
Development
Market
development
Conglomerate
diversification
Markets
New
MARKET PENETRATION
Market penetration means increasing shares of the
current market with the current product range.
This strategy builds on the existing strategic capabilities
and does not require the company to go in new and
unknown territory.
Retaliation from competitors A natural reaction from
competitors defending their market share. A strategy
could be to purchase some of the competitors and to
extend your market. Mittal an Indian Steel company
purchased in 2000 several steal companies from the
former socialist countries and became the largest steel
producer in the world.
Legal constraints A barrier against monopoly. In UK
the market share cannot be larger than 25%.
High
Performance
Low
Specialized
Related limited
diversification
Unrelated diversification
INTEGRATION / DIVERSIFICATION
Integration is a form of diversification.
Horizontal integration purchasing or developing related
business.
Vertical integration purchasing or developing businesses which
are unrelated but can be aligned to the dominant scope of the
company. Vertical integration can be:
Backward integration refers to development into activities
concerned with the inputs into the companys current business
(i.e. they are further back in the value network).
Forward integration refers to development into activities
concerned with the outputs of a companys current business (i.e.
they are further forward in the value network).
Integration is the opposite strategy of outsourcing. When to
integrate and when to outsource is a strategic question. There is
no general answer for success.
Car retail
Truck
manufacture
Horizontal
integration
Car
manufacture
Components
manufacture
Forward
integration
Bus
manufacture
Backward
integration
Value-adding activities
Any corporate parent must demonstrate that it creates
more business value than costs.
Envisioning. The corporate parent can provide a clear
overall vision or strategic intent for its business units.
Coaching and facilitating. The corporate parent can
help business unit managers develop strategic
capabilities, by coaching them to improve their skills
and confidence.
Providing central services and resources. Capital and
knowledge can be such resources. Thus, capital
investment and sharing knowledge expertise add value.
Intervening. The corporate parent can intervene within
its business units in order to ensure appropriate
performance.
Value-destroying activities
Adding managing costs. Generally, the staff and
facilities of the corporate centre are expensive. The
corporate centre has the best-paid managers and the
most luxurious offices. However, it is the actual
business that have to generate the revenue to pay them.
Adding bureaucratic complexity. Any new managerial
layer increases the bureaucracy of the company and the
time for decision making and solving problems.
Obscuring financial performance. One danger in a large
diversified company is that the underperformance of
weak businesses can be obscured. Weak business
might be cross-subsidized by other strong businesses.
That could lead to lack of incentive and innovation from
the weak business.
Parent
SBU 1
SBU 2
SBU 3
Parent
SBU 1
SBU 2
SBU 3
Parent
SBU 1
SBU 2
SBU 3
Low
High
Stars
Question
marks
Market
growth
Cash cows
Low
Dogs
Strategic alliances
In M&A the fundamental problem is a change in ownership. In a
strategic alliance there is only a partial change or no change in
ownership.
Joint venture. Two organizations that remain independent but they
set up jointly a new organization . For example, General Motors
and Toyota have operated together the NUMMI joint venture since
1984, producing cars from both companies in the same plant in
California.
Consortium. It involves several companies setting up a common
venture together. For example, IBM, Hewlett-Packard, Toshiba and
Samsung are partners in the Sematech research consortium,
working together on the latest semiconductor technologies.
Franchising. One organization (the franchisor) gives another
organization (the franchisee) the right to sell the franchisors
products or services in a particular location in return for a fee or
royalty. Examples: McDonalds, KFC, Starbucks.