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Functional Strategy
Corporate Strategy
An action taken to gain a competitive advantage through the selection and management of a mix of businesses competing in several industries or product markets
Related Diversification
Is strategy development beyond current products and markets , but within the capabilities or value network of the organization
Stability Strategy
Decides to serve the same markets Pursue same objectives with incremental improvement of functional performance Concentrates resources in a narrow product market for developing competitive advantage
Approaches to Stability
Holding Strategy Stable Growth Harvesting Strategy Profit or End Game Strategy
Expansion Strategies
When the firm has lofty growth objectives When new opportunities are emerging Firm is the leader Firm has surplus resources Diversification fulfils growth objectives
Expansion ( contd )
Expansion through intensification Ansoffs product market expansion grid Expansion through Integration
Market Penetration
Motivating Existing Customers to buy more frequently Increase efforts to attract its competitions customers Targeting new customers price concessions , better customer service
Diversification
Mergers & Acquisitions : Outright purchase of a company by another eg Tech Mahindra buys Satyam Strategic Alliance & Joint Venture : Agreements between companies to form collaborative partnership eg Maruti-Suzuki Internal Development : Organic growth into other LOBs eg Reliance, ITC
Integration
Vertical Integration either forward or backward into adjacent activities in the value network. Eg buying a car component company by a car manufacturer is BI whereas buying of a repair centre is FI. Horizontal Integration is development to activities which are complementary to present activities.
Unrelated Diversification
Is the development of products or services beyond the current capabilities or value network Pays off by exploiting dominant logic
Forms of Diversification
Vertical : Diversification across value chain Horizontal : Diversification into complementary businesses Geographic : Firms expand into other geographic areas
International Expansion
Exporting Licensing Joint Venture Direct Investment
Exporting
Marketing of domestically produced goods in a foreign country Advantage minimizes risk , ensures speed of entry m maximizes scale using existing resources Disadvantage trade barriers and tariff add to cost , limits access to local market information , seen as outsider
Licensing
Licensing permits a company in the target country to use the property of the licensor eg trademarks , patents , and production techniques Advantage high ROI, able to circumvent trade barriers Disadvantage lack of control over use of assets, license period is limited
Joint Ventures
Partners strategic goal converge but competitive goal diverge Partners size, resources , market power are small compared to the industry leaders Advantage viewed as insider, potential for learning , overcomes cultural distance Disadvantage Dilution of control, Knowledge spillovers, higher risk
Direct Investment
It is the ownership of facilities in the target country Greater knowledge of local market Viewed as insider Higher risk than other modes Require more resources and commitment
International Strategy
Multi domestic strategy- Value adding activities are located in national individual markets served by the organization
Global Strategy Standardized products exploiting economies of scale . Transnational : Seeks the best of both multidomestic and global strategy