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Business Policy Chapter 7 Slides

The document discusses strategic corporate level decisions including diversification, market penetration, consolidation, product development and market development. It also discusses related and unrelated diversification strategies and when each may be most effective. The document provides examples and exhibits on various strategic corporate level frameworks and concepts.

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AsadChishti
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202 views32 pages

Business Policy Chapter 7 Slides

The document discusses strategic corporate level decisions including diversification, market penetration, consolidation, product development and market development. It also discusses related and unrelated diversification strategies and when each may be most effective. The document provides examples and exhibits on various strategic corporate level frameworks and concepts.

Uploaded by

AsadChishti
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Strategic Choices

7: Strategic Decisions and


Corporate-Level Strategy
Learning Outcomes (1)

Identify alternative directions for strategy,


including market penetration or
consolidation, product development,
market development, and diversification
Recognise when diversification is an
effective strategy for growth
Distinguish between different
diversification strategies (related and
unrelated) and identify conditions under
which they work best

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-2


Learning Outcomes (2)

Analyse the ways in which a corporate


parent can add or destroy value for its
portfolio of business units
Analyse portfolios of business units and
judge which to invest in and which to
divest

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-3


What is a Corporate Parent?

The corporate parent refers to the


levels of management above that of
the business units, and therefore
without direct interaction with buyers
and competitors.

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-4


Exhibit 7.1 Strategic Directions
and Corporate-Level Strategy
Value creation

Corporate Portfolio
parenting management

Penetration
Diversification Consolidation
Development

Scope decisions

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-5


Exhibit 7.2 Strategic Directions
(Ansoff Matrix)

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-6


Strategic Directions for
Axel Springer

Which strategic directions should Axel


Springer pursue?
Considering the Ansoff matrix, what other
options are possible?

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-7


What is Market Penetration?

Market penetration refers to a


strategy by which an organisation
takes increased share of its existing
markets with its existing
product range.

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-8


Constraints of
Market Penetration

Retaliation
Legal
from
constraints
competitors

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-9


What is Consolidation?

Consolidation refers to a strategy


by which an organisation focuses
defensively on their current markets
with current products.

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-10


Forms of Consolidation

Defending Downsizing
market share or divestment

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-11


What is Product Development?

Product development refers to a


strategy by which an organisation
delivers modified or new products
to existing markets.

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-12


Risks of Product Development

Project
New strategic
management
capabilities
risk

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-13


What is Market Development?

Market development refers to a


strategy by which an organisation
offers existing products to
new markets.

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-14


Forms of Market Development

New New New


segments users geographies

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-15


What is Diversification?

Diversification refers to a
strategy by which an organisation
pursues new product offerings and
new markets.

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-16


Reasons for Pursuing
Diversification (1)

Efficiency gains

Stretching corporate parenting capabilities

Increasing market power

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-17


Reasons for Pursuing
Diversification (2)

Responding to market decline

Spreading risk

Expectations of powerful stakeholders

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-18


Zodiac and Diversification

What were the bases of the synergies


underlying Zodiac’s diversifications?
What are the advantages and potential
dangers associated with this basis?

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-19


Exhibit 7.3 Related
Diversification Options

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-20


Exhibit 7.4 Diversification
and Performance

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-21


Value-Adding Activities

Coaching and
Envisioning
facilitating

Providing central
services and Intervening
resources

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-22


Value-Destroying Activities

Adding management costs

Adding bureaucratic complexity

Obscuring financial performance

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-23


Exhibit 7.5 Portfolio and Synergy
Managers and Parental Developers

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-24


Problems Achieving Synergy

Excessive costs

Overcoming self-interest

Illusory synergies

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-25


Challenges for Parental Developers

Identifying parent capabilities


Parental focus
The ‘crown jewel’ problem
Sufficient ‘feel’

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-26


Portfolio Matrices

Growth/Share (BCG) Matrix

Directional Policy (GE-McKinsey) Matrix

Parenting Matrix

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-27


Exhibit 7.7 The Growth Share
(BCG) Matrix

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-28


Exhibit 7.8 The Directional
Policy (GE-McKinsey) Matrix

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-29


Exhibit 7.9 Strategy Guidelines
Based on Directional Policy Matrix

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-30


Exhibit 7.10 The Parenting Matrix

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-31


Case Example: The Virgin Group

Are there any relationships of a strategic


nature between businesses within the
Virgin portfolio?
What were the main issues facing the
Virgin Group at the end of the case?

Exploring Corporate Strategy 8e, © Pearson Education 2008 7-32

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