Chapter 6 -Corporate-Level Strategies

merger

merger A corporate-level growth strategy in which a firm combines with another firm through an exchange of stock.

BCG growth-share matrix - dv 1967

A corporate portfolio framework developed by the Boston Consulting Group that categorizes a firm's business units by the market share that they hold and the growth rate of their respective markets.

Internal growth

A corporate-level growth strategy in which a firm expands by internally increasing its size and sales, rather than by acquiring other companies. Accomplished when a firm increases revenues, production capacity, and its workforce; it can occur by growing an existing business or creating new ones.

External growth

A corporate-level growth strategy whereby a firm acquires other companies.

divestment

A corporate-level retrenchment strategy in which a firm sells one or more of its business units. - If one or more of the firm's business units may function more effectively as part of another firm

liquidation

A corporate-level retrenchment strategy in which a firm terminates one or more of its business units by the sale of their assets.

turnaround

A corporate-level retrenchment strategy intended to transform the firm into a leaner and more effective business by reducing costs and rethinking the firm's product lines and target markets.

growth strategy

A corporate-level strategy designed to increase profits, sales, and/or market share.

retrenchment strategy

A corporate-level strategy designed to reduce the size of the firm. one or a combination of three forms: turnaround, divestment, or liquidation.

stability strategy

A corporate-level strategy intended to maintain a firm's present size and current lines of business.

backward integration

A firm's acquisition of its suppliers.

forward integration

A firm's acquisition of one or more of its buyers.

acquisition

A form of a merger whereby one firm purchases another, often with a combination of cash and stock.

Horizontal (Related) Integration

A form of acquisition in which a firm expands by acquiring other companies in its same line of business.

Horizontal Related Diversification

A form of diversification in which a firm acquires a business outside its present scope of operation but with similar or related core competencies.

Conglomerate (Unrelated) Diversification

A form of diversification in which a firm acquires a business to reduce cyclical fluctuations in cash flows or revenues.

Vertical integration

A form of integration in which a firm expands by acquiring a company in the distribution channel.

International franchising

A form of licensing in which a local franchisee pays a franchiser in another country for the right to use the franchiser's brand names, promotions, materials, and procedures.

international licensing

An arrangement whereby a foreign licensee purchases the rights to produce a company's products and/or use its technology in the licensee's country for a negotiated fee structure.

corporate profile

Identification of the industry(ies) in which a firm operates. identifies one or more businesses and industries in which the firm is and/or should be operating.

core competencies

The firm's key capabilities and collective learning skills that are fundamental to its strategy, performance, and long-term profitability.

corporate-level strategy

The strategy that top management formulates for the overall company. the strategy top management formulates for the overall corporation. In general, corporate-level strategy concerns precede the competitive and tactical issues related to business and functional strategies.

Summary

Two key sets of strategic decisions must be made at the corporate level. First, top executives must identify the corporate profile and determine whether the firm will operate in a single business, in more than one related businesses, or in more than one unrelated businesses. There are benefits and shortcomings associated with each profile option. Second, strategic managers must select a corporate strategy from among three basic choices: growth, stability, or retrenchment. A number of additional alternatives associated with growth and retrenchment strategies must also be addressed. A firm may choose a form of corporate restructuring to support strategic attempts to revive its competitiveness and performance. Portfolio frameworks such as the BCG matrix can assist corporate executives in managing the relationships among the firm's business units. In doing so, executives must determine the extent to which the firm will involve itself in business operations. Global concerns represent a key consideration at the corporate strategy level. There are three broad options ranging from conservative to aggressive, each with advantages and disadvantages, depending on the level of international involvement desired.

synergy

When the combination of two firms results in higher efficiency and effectiveness than would otherwise be achieved by the two firms separately.

Strategic alliances

often called partnerships—A corporate-level growth strategy in which two or more firms agree to share the costs, risks, and benefits associated with pursuing new business opportunities. Strategic alliances are often referred to as partnerships.Such arrangements include joint ventures, franchise/license agreements, joint operations, joint long-term supplier agreements, marketing agreements, and consortiums.

comprehensive organizational strategy has three dimensions:

the corporate or firm level, the business unit or competitive level, and the functional or tactical level. These dimensions are interrelated, and the terms associated with each are often used interchangeably in contemporary discourse, but it is important to understand the distinctions among the three and use common terms to describe each one.