strategic management

1. MOHAMMED SHEBEER.V.P

2. CHAPTER 6
CORPORATE LEVEL
STRATEGIES

3. INTRODUCTION
The essence of corporate strategy is the
determination of the overall direction that will
enable the organisation to achieve its strategic goal
trough its operation
“Corporate level strategy” is specifies actions
taken by the firm to gain a competitive advantage
by selecting and managing a group of different
business competing in several industries or
product market

4. CLASSIFICATION OF STRATEGIES
On the basis of
Scope
•Grand /generic
strategy
•Programme
strategy
On the basis of
Level
• corporate level
•Business level
•Functional level
On the basis of
Direction
•Stability
•Expansion
•Diversification
•retrenchment

5. 5
Three Levels of Strategy in Organizations
Corporate-Level Strategy:
What business are we in?
Corporation
Business-Level Strategy:
How do we compete?
Textiles Unit Chemicals Unit Auto Parts Unit
Functional-Level Strategy:
How do we support the business-level strategy?
Finance R&D Manufacturing Marketing

6. Classification of Strategies
 Once a company completes its mission
formulation, environment scan & internal
appraisal, it has to think about the choice of
strategy alternatives to achieve its objectives.
 Strategy can be classified as Grand / Generic /
Master / Root strategies which deal with overall
strategic action, or programmed strategies that
deal with implementation on corporate strategy.
 Our focus will be on Grand strategies.

7. Classification of Strategies
 Grand / Master / Root strategies can be of the
following four types :
 Stability Strategy
 Growth Strategy
 Retrenchment Strategy
 Combination Strategy
 We examine each of them separately.

8. Keeping the organisation
where it is
Moving the organisation
aheadAllowing the organisation fall
back
STABILITY GROWTHRETRENCHMENT

9. Stability Strategy
 Also referred to as the Defensive Approach.
 Basic principle is “Maintain the present course”.
 It can be implemented when the co. is comfortably
satisfied with its current performance and there is
no significant environment threat i.e. it offers
scope for safe business.
 Some top level managements are reluctant to
change, take risks and hence adopt Stability
strategy.

10. Stability Strategy
 If a co. has passed through turbulent environment. It
tends to adopt Stability Strategy.
 If the cost of changing strategy is very high, a co. will
adopt Stability Strategy.
 Though small amount of adjustments can be made to
the present strategies, it is very insignificant and small.

11. Stability Strategy
 Types of Stability Strategy :
 Incremental Growth Strategy : Past objectives adjusted for
inflation. It is easy and does not disturb routine of the
organization.
 Profit Strategy : Gives extra support to a particular product
in the decline stage.
 Sustainable Growth Strategy : Gives extra resources to a
product to remain at a current position.
 Stability as a pause strategy : For cos. who’s previous
strategies are full of growth adopt Stability strategy to take
some time to breath and get ready for further growth.

12. NO CHANGE STRATEGY
Several small and medium sized firms operating in a familiar market
more often niche market that is limited in scope and offering products or
services trough a time tested technology rely on the no change strategy.
PROFIT STRATEGY
In a situation where the profitability is drifting lower, firms
undertake measures to reduce investments, cut costs, raise prices, increase
productivity, or adopt some such measures to tide over what are supposed to
be temporary difficulties.
PAUSE/PROCEED WITH CAUTION STRATEGY
Wish to rest while before moving ahead . FMCG sector
(HUL,BATA..etc)

13. Growth Strategies
 A strategy in which an organization increases its
level of objectives upward in significant
increments, much higher than an exploration of its
past achievement level. It indicates on objective to
raise the market share or sales objectives
significantly.
 It should be differentiated from Normal Growth
which can be achieved by Learning Curve.
 No strategy can however grow more that 1/3rd of
the Market Share. Why?

14. Growth Strategies
When & Why do cos. adopt Growth Strategies :
 If an org. has stabilized after various growth strategies.
Growth – Stability – Growth…
 If the envt. offers and permits growth. (FERA / FEMA etc )
 Org. has excess funds ( Plough back profits )
 Present products are in the decline stage – High costs and
low revenues.
 Growth may offer economies of scale.
 Will & skill of management permits growth.
 Increase prestige, goodwill, reorganization etc.

15. Internal Growth Routes
> Expansion. The process of expansion :
1. Determine options for capacity expansion
2. Access future cost & demand of inputs.
3. Access probable technological change
4. Predict capacity addition by competitors
5. Access demand & supply in industry
6. Determine expected cash flow from expansion.
7. Test the analysis for consistency.

16. Expansion
strategy
Diversification
Cooperation
Internationalization
Concentration
Integration

17. Internal Growth Routes
Vertical Integration :
 Backward Integration : Takes place when a
company looks for various options through which
it can own an important source of raw material.
 Forward integration : Takes place when a
company looks for various options through which
it can own a distribution network for its products.
Horizontal integration : Entering similar products
or product lines.

18. Vertical and Horizontal Integrations

19. Internal Growth Routes
 Diversification : Entry of an organization into a
business which is new to an organization either
market wise or technology wise or both.
diversification may involve
 internal or external
Related or unrelated
Horizontal or vertical
Active or passive
Either singly or jointly
 customer function
 customer groups
Alternative technology

20. Types of diversification :
1. Concentric Diversification : Some similar factors can be
used by diversification. E.g. : A tea company starts producing
other food products to take advantage of its distribution
network etc.
 Marketing related (R-pdt UR-tech)
(sewing machine-kitchenware &home appliance-sold to
housewives-chain of retail store)
 Technology related(R-tech UR-product)
a leasing firm offering-HP service to institutional customers-
customer finance for the purchase of durables to individual
customers
 Marketing and technology related( R-pdt R-tech)
rain coat manufacture makes other rubber based items( shoes ,
gloves.etc) –sold trough same retail outlets)

21. Types of diversification
2. Conglomerate diversification : Company enters
entirely different product – market segments.
For example
ITC (Cigarette ,hotel , FMCG Goods)
ESSAR GROUP( Shipping , Marine Construction , oil Support
Services, and Iron and Steel)
POLAR GROUP(Fans ,marbles and Granite)

22. External Growth Routes-
COOPERATION
one company can benefit at the cost of others-
(win-lose situation)
Mergers
Take Over
Joint Venture
Strategic Alliance
Why :
 Quick entry into business
 Faster growth rate
 Diversification advantage
 Reduction in competition(limited market share)
 Tax advantage
 Synergetic effect.

23. Mergers
 Horizontal Merger : Both cos. have similar products /
product lines. FOOTWEAR  FOOTWEAR
 Vertical Merger : One co. is a supplier of the other.
FOOTWEARLEATHER TANNERY
 Concentric Merger : Two cos. are either related
technology wise or market wise.
FOOTWEARSOCKS
 Conglomerate Merger : Two cos. have entirely different
products and markets
FOOTWEAR  PHARMACEUTICAL FIRM

24. External Growth Routes
Acquisition / Takeover Strategy :
 Takes place when one company takes control over
the other;
 Can be a Mutual takeover or a Hostile takeover.
Joint Ventures :
 Combined effort of two cos. to form a new co.
 3 types of objectives for JV cos. :
Objectives of the 1st co, 2nd co & of the new company.
 Arbitration most important.

25. Strategic Alliance
 The firms combine or unite to perform a set of business
operations, but function independently and pursue the
individualised goals.
 Generally, the strategic alliance is formed to capitalise on
the expertise in technology or manpower of either of the
firm.
 They are 4 types
 Pro competitive
 Non competitive
 Competitive
 Pre competitive
ICICI Bank and Vodafone India announces
strategic alliance to launch ‘m-pesa’
Mumbai: ICICI Bank and Vodafone India through
its 100% subsidiary, Mobile Commerce Solutions
Ltd.(MSCL) have finalized plans to launch mobile
payment services this year, under the brand name
‘m-pesa”.

26. Pre
competitive
Competitive
Pro
competitive
Non
competitive
Low High
High
Conflict
Interaction

27. Expansion through concentration
 First level form of expansion grand strategy that
involves the investment of resources in the product
line, catering to the needs of identified market with
the help of proven and tested technology.
 Simply, the strategy followed when an organisation
coincides its resources into one or more of its
businesses in the contexts of CN,CF.AT either singly or
jointly.

28. Concentrated Growth
 Concentrated growth is the strategy of the firm that
directs its resources to the profitable growth of a
dominant product, in a dominant market, with a
dominant technology
 Concentrated growth strategies lead to enhanced
performance
 Specific conditions favor concentrated growth
 The risks and rewards vary

29. The org. May follow any of the ways to
practice expansion trough concentration.
Market
Development
Product
Development

30. Expansion through Internationalisation
 Aims to expand beyond the national market
 When an org. has explored all the potential to expand
domestically and look for the expansion opportunities
beyond the national boundaries.
 Going to global is not an easy task, the org. Has to
comply with the stringent benchmark of price, quality
and timely delivery of goods and services, that may
vary from country to country

31. Global
strategy
Transnational
strategy
International
strategy
Multi-
domestic
strategy
Low High
High
Costpressure
Local responsiveness

32. Retrenchment Strategies
 Comes from the HR when a co. cuts its size of
employees due to recession / reorganization.
 Retrenchment strategy follows the saying “Slow
down and take a breath, we have to do better”.
 In this strategy a co. decides to improve its
performance in reaching its objectives by focusing
on functional improvement, reduction in costs,
reduction in number of functions it performs by
becoming a captive co, reduction in the number of
products and markets it serves and also liquidation
of business.

33. Types of Retrenchment Strategies
Retrenchment
strategy
Turn around
Divestment
Liquidation

34. Types of Retrenchment Strategies
Turnaround Strategy : when org feels that the decision
made earlier is wrong and needs to be undone before it
damages the profitability of the co. Dell Computer
 Revenue generating : Only promote those products
having high demand.
 Cost cutting : Encourage VRS, lower promotion costs
etc.
 Asset Reduction : Sell off assets that are
underperforming.
 Combination : Of all of the above three.

35. Types of Retrenchment Strategies
Divestment Strategies : downsizing the scope of
business .
Tata communications-data center business-reduce
debt burden
 Organization decides to get out of a certain business &
sells off SB units / divisions.
Probable reasons :
 Inadequate growth rate or market potential
 Technology change
 Management unable to control business

36. Types of Retrenchment Strategies
Liquidation Strategy :
 Sell off business. Winding up
 It is the most crucial and the last resort
Probable reasons :
 Very uncertain future.
 Accumulated losses.
 Some co. offers high price.
 Less resources to continue.
 Diversify into other businesses.

37. Combination strategy
A baby diaper manufacturing co augments its offering
of diapers for the babies to have a wide range of its
products (Stability) and at the same time, it also
manufactures the diapers for old age people, thereby
covering the other market segment (Expansion). In
order to focus more on the diapers division, the co
plans to shut down its baby wipes division and allocate
its resources to the most profitable division
(Retrenchment).
S+E+R=C

38. Business-Level Strategy

39. 39
Business-Level Strategy
Business-level strategy: an integrated and coordinated
set of commitments and actions the firm uses to gain a
competitive advantage by exploiting core competencies
in specific product markets
Strategic managers keep three issues in mind while
developing business level strategy;
1. What are the customer’s needs?
2. Who are our customers?
3. How can we satisfy these customers’ needs?

40. 40
Core Competencies and Strategy
The resources and capabilities that have been
determined to be a source of competitive
advantage for a firm over its rivals
An integrated and coordinated set of actions
taken to exploit core competencies and gain a
competitive advantage
Actions taken to provide value to customers and
gain a competitive advantage by exploiting core
competencies in specific, individual product
markets
Business-level
strategy
Strategy
Core
competencies

41. Types of business level strate
1. Porter’s generic model
2. Miles and snow’s adaptation model
3. Product Life Cycle (PLC) model

42. Porter’s Generic Model
Cost Leadership
Strategy
Differentiation
Strategy
Focus Strategy
Low Cost
Product or services
uniqueness
Broad
(Industry Wide)
Narrow
(Market Segment)
ADVANTAGE
TARGET/SCOPE

44. Miles and Snow Adaptation Model
 Prospector
An organisation that follows a prospector strategy is a highly
innovative firm that is constantly seeking out new markets
and new opportunities and is oriented toward growth and
risk taking. Johnson & Johnson
 Defender
rather than seeking new growth opportunities and
innovation, an organisation that follow defender strategy
concentrates on protecting its current markets , maintaining
stable growth and serving its current customers Rolls- Royce
, Rolex

45. Miles and Snow Adaptation Model
 Analyzer
An org that follows an analyzer strategy both maintains
market share and seeks to be innovative, although usually
not as innovative as an org that uses a prospector strategy.
Most large cos fall into the third category, because they want
both to protect the base of their operation and to create new
market opportunities. IBM, Proctor & Gamble
 Reactor
No clear strategy , react to changes in the environment, drift
with event. International Harvester (IH) in the 1960-1970

46. PLC Model
Introduction Growth Maturity Decline
Time
Total
Sales

47. THANK YOU
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