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Lecture

Swayam corporate strategy

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9 views3 pages

Lecture

Swayam corporate strategy

Uploaded by

nynarayanny
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Advanced Corporate Strategy

ST104x

Course overview

Let me start off by making the important distinction between business strategy and corporate
strategy.

Business strategy deals with the strategy of a single business unit – how should the firm
position itself in a product market and how should it build its competitive advantage, whether
in the form of a cost advantage or a differentiation advantage.

In contrast, corporate strategy deals with a firm that is present in multiple businesses or seeks
to be present in multiple businesses and asks questions such as which businesses should the
firm compete in.

In the first module of this course, we will offer a broad introduction to the topic of corporate
strategy. Very broadly speaking, corporate strategy deals with diversification - types of
diversification, modes of diversification and how to manage a diversified firm.

There are three types of diversification:


1) product or horizontal diversification,
2) vertical integration and
3) geographic diversification.

In product diversification, which we will discuss in Module 2 of this course, a firm enters new
product markets. Note that product diversification is often just referred to as
diversification. For example, consider Google or to be more precised its parent from Alphabet.
Now Alphabet is present in multiple business such as internet search engines, travellers’ cars
and so on. So, this decision by Alphabet to be in multiple business is an example of
product diversification.

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Advanced Corporate Strategy

ST104x

In vertical integration, which we will discuss in Module 3 of this course, a firm can move
upstream and be backward integrated or it can move downstream and be forward integrated.
Or it can outsource an activity such as manufacturing instead of doing that activity by itself
and reduce its level of vertical integration. Let us consider the Google example again. If Google
decides to make its own servers instead of buying them from outside then that would be an
example of a backward integration.

In geographic diversification, which we will discuss in Module 4 of this course, a firm enters
new geographical markets. For example, Google can decide to sell its travellers cars not just
in united states but in other countries outside, for example in Europe, in Asia and so on.

As we discuss each of this different types of diversification, we will discuss the motives for
that particular type of diversification. We will then discuss how that type of diversification
affects firm performance by focusing on how diversification can create value and how
diversification can destroy value.

There are good reasons to believe that the performance consequences of diversification differ
between developed and emerging economies. So, we will conclude every module with a
discussion of how diversification affects firm performance in emerging economies.

After discussing these three types of diversification in Modules 2 to 4, we will discuss the
modes of diversification in Module 5. The different modes of diversification include alliances
and joint ventures, acquisitions and internationalization. We again will compare the benefits
and costs of each mode and discuss how to choose the appropriate mode of diversification.

In the rest of this introductory module, we will first discuss the important concept of
corporate advantage. While business strategy is concerned with how a firm can achieve
competitive advantage, corporate strategy is concerned with achieving corporate advantage.

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Advanced Corporate Strategy

ST104x

Collis and Montgomery define corporate advantage as "the way a company creates value
through the configuration and coordination of its multi-business activities".

• We will then discuss the benefits of diversification – how synergy creates value.
• We will also discuss the costs of diversification – how value is destroyed.
• Next, we will discuss how to manage a portfolio of businesses,
• and conclude by discussing the role of a corporate office in managing a multi-business
firm.
• We next move on to discussing corporate advantage.

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