CHAPTER 7 Strategy
Formulation: Corporate
Strategy
STRATEGIC MANAGEMENT & BUSINESS POLICY
11TH EDITION
THOMAS L. WHEELEN
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J. DAVID HUNGER
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Corporate Strategy
3 Key Issues –
–Firm’s directional strategy
(Growth, Stability, Retrenchment)
–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
•Expansion, contraction, status quo
•Concentration or diversification
•Internal development or acquisitions, mergers, or
alliances
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Corporate Strategy
Directional Strategy –
–3 Grand Strategies
•Growth strategies
•Stability strategies
•Retrenchment strategies
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Corporate Strategy
Growth Strategies -–External mechanisms
•Mergers
•Acquisitions
•Strategic alliances
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Corporate Strategy
Growth Strategies -–2 Basic forms
•Concentration
•Diversification
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Corporate Strategy
Basic Concentration Strategies -–Vertical growth
–Horizontal growth
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Corporate Strategy
Vertical Growth -–Vertical integration
•Full integration
•Taper integration
•Quasi-integration
•Long-term contract
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Corporate Strategy
Vertical Growth -–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
Concentric Diversification -–Growth into related industry
–Search for synergies
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Corporate Strategy
Conglomerate diversification -–Growth into unrelated industry
–Concern with financial considerations
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Corporate Strategy
International Entry Options -–Exporting
–Licensing
–Franchising
–Joint Ventures
–Acquisitions
–Green-Field Development
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Corporate Strategy
International Entry Options -–Production Sharing
–Turnkey Operation
–BOT Concept (Build, Operate, Transfer)
–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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Corporate Strategy
Portfolio Analysis -–Resource commitment on best products to
ensure continued success
–Resource commitment on new costly products
high risk
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BCG Matrix (Portfolio Analysis)
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GE Business Screen (Portfolio Analysis)
C
Winners
A
High
Winners
B
Question
Marks
D
Winners
E
Medium
Average
Businesses
F
Losers
Losers
G
Low
Profit
Producers
Strong
H
Losers
Average
Weak
Business Strength/Competitive Position
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Corporate Strategy
Corporate Parenting Strategy -–Strategic factors
–performance improvement
–Analyze fit
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