Chapter Summary – Strategic Management
Chapter 5 – Corporate Level Strategy
Introduction
After conducting the analysis of industry, competition, macro
environment and corporate missions which are the keys to robust
strategy formulation, the next step is to review the organisation’s current
strategy and direction. Corporate level strategic management consists of
activities that define the overall characters and mission of the
organisation, the products and service segments it will pursue or exit.
Importance of Corporate Profile
The corporate profile is defined by the top management which helps in
identification of the types of business the company will be doing. The
company may choose to operate in any of the following three types of
the business to operate intoSingle industry
Multiple related industries
Multiple unrelated industries
Most of the organisations start with single industry as a strategy and
over a period of time expands to related and unrelated industry to
eventually become a conglomerate.
Corporate Level Strategies
Corporate adopt various strategies at different stage in the lifecycle of
the business, which includes
Growth Strategy
Stability Strategy
Retrenchment strategy
Turnaround strategy
Divestment strategy and
Liquidation strategy
Growth Strategies
Organic Growth – The organic growth is achieved by increased
capacity, turnover, manpower and it enables the company to
leverage its expertise and preserve its corporate culture and the
image as it grows
Chapter Summary – Strategic Management
Inorganic Growth – Inorganic growth is achieved theory merger,
acquisitions, joint ventures and alliances. The inorganic growth
consists of various sub-strategies which may includeo Horizontal integration / expansion – The company
acquires a company that is in the same line of business
o Horizontal integration – Diversification – the objective in
diversification is to create synergy by transferring capabilities
and credentials of the target company with the core business
o Conglomerate diversification – The company acquires a
business in an unrelated industry to reduce cyclical
fluctuations in its revenues or cash flows
o Vertical integration – Organisational expansion by
acquiring a company in the procurement or distribution
channel. Vertical integration can be of two types –
 Forward integration – company acquires distribution
channel or buyers
 Backward integration – Company acquires its
suppliers
o Mergers and Acquisitions – Merger is a strategy where
firm combines with another firm to form a new entity often.
Whereas, in acquisition, one company acquires another
company by paying consideration in form of cash or stock
o Strategic Alliances and Partnerships – Collaboration is the
new mantra for getting into new and innovative products or
services and focus is not to build capabilities in-house but to
leverage capabilities of partner.
Stability Strategy
In stability strategy the company maintains its current fields of business
operations and focus is on enhancing the existing business units, by
fostering productivity and innovation. The strategy is resorted in tough
times and in situation where organisation has constraints over
resources.
Corporate Restructuring Strategy
If the performance of a company is on constant decline phase, it is the
time when organisation take a back seat and take a hard look at the
business with an objective to re-orient the business, revise the
Chapter Summary – Strategic Management
financials, seek leaner operations, reduce costs and enhance the
margins
Turnaround Strategy
A company may need to be turnaround on account of issues like bad
business performance, corporate governance, allegations of top
management wrongdoings, scandals, corruption charges and challenges
with management integrity. Layoffs are outcome of this strategy.
Divestment Strategy
When the industry is on the decline phase and business unit drains
resources, the divestment strategy is pursued. This strategy may aim at
spin-off of the business or induction of partner for rejuvenation of the
business.
Use of BCG Matrix as a tool for strategy formulation
Organisations use BCG Matrix which classifies business units under the
following key categories and recommends business strategiesCash Cow- Company has high market share in a slow growing
industry. Limited investment is required
Dogs- Units with low market share in a mature, slow growing
industry. These Units are mostly operating at break even
Question Marks-Business Unit operating in a high market growth,
but having low market share. Primarily, start ups fall under this
category
Stars – Units with high market share in a fast growing industry.
Stars require high level of funding to fight competition, create
market visibility and maintain growth rate
A well balanced organisation ideally should have mostly stars and cash
cows, some question marks and few dogs
Corporate involvement in SBU
Most corporate define the vision and stipulate policy guidelines to control
the business unit level operations strategically. Corporate involvement
become necessary to take right decisions at the right time related to the
strategic matters, company performance, decisions related to investment
and divestment, in the interest of creating value for the stake holders.
Chapter Summary – Strategic Management
The organisation’s decision making process can be centralised or
decentralised depending on the management attitude and culture.