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Strategy Formulation:

Corporate Strategy

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Corporate Strategy

Three Key Issues:

• Firm’s directional strategy


• 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
• Expand, cut back, status quo?
• Concentrate within current industry,
diversify into other industries?
• Growth and expansion through internal
development or acquisitions, mergers, or
strategic alliances?

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Corporate Strategy

Directional Strategy:
– Three Grand Strategies:
• Growth strategies
• Stability strategies
• Retrenchment strategies

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Corporate Strategy
Growth Strategies:
– Most widely pursued strategies
– External mechanisms:
• Mergers
– Transaction involving two or more firms in which
stock is exchanged but only one firm survives.
• Acquisition
– Purchase of a firm that is absorbed as an operating
subsidiary of the acquiring firm.
• Strategic Alliance
– Partnership of two or more firms to achieve
strategically significant objectives that are mutually
beneficial.

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Corporate Strategy

2 Basic Growth Strategies:

– Concentration
– Current product line in one industry

– Diversification
– Into other product lines in other industries

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Corporate Strategy

Basic Concentration Strategies:

– Vertical growth

– Horizontal growth

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Corporate Strategy
Concentration:

Vertical growth

– Vertical integration
• Full integration
• Taper integration
• Quasi-integration

– 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

Diversification:

Concentric:

– Growth into related industry


– Search for synergies

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Corporate Strategy

Diversification:

Conglomerate:

– Growth into unrelated industry


– Concern with financial considerations

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Corporate Strategy

Exporting
Licensing
Franchising
International Joint Ventures
Entry Acquisitions
Options Green-Field Development
Production Sharing
Turnkey Operations
BOT Concept
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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