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Corporate level strategy

This document discusses corporate strategy and diversification strategy. It defines corporate strategy as determining what businesses an organization will compete in and how to allocate resources. The document outlines different levels of strategy and describes four approaches to corporate strategy: exit, expand, enhance, and extend. It then focuses on diversification strategy, discussing its purpose of entering new markets and forms such as horizontal, vertical, concentric, and conglomerate diversification. The advantages and disadvantages of diversification are also summarized.

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Strategy By: Nazir Fahim & Team
What is Strategy? ď‚—Strategy is the direction and scope of an organization in a changing business environment through the configuration of its resources and competence with a view to meeting stakeholder expectation.
Characteristics of Strategy ď‚—Long term in nature ď‚—Strategy contains elements of uncertainty ď‚—It is directed towards the goals of the organization ď‚—Dynamic in nature ď‚—Strategy are normally complex ď‚—Strategy affects the whole organization
Different levels of strategy ď‚—Corporate level strategy ď‚—Business level strategy ď‚—Functional level strategy
Corporate level strategy ď‚—Corporate level Strategy: we can simply say that corporate level strategies are concerned with questions about what business to compete in. Corporate Strategy involves the careful analysis of the selection of businesses the company can successful compete in. Corporate level strategies affect the entire organization and are considered delicate in the strategic planning process.
Characteristics of Corporate Strategy ď‚—Corporate level strategies are formulated by the top management. ď‚—Decisions are complex and affects the entire organization. ď‚—It is concerned with the efficient allocation and utilization of scarce resources for the benefit of the organization. ď‚—Corporate level strategies are mapped out around the goal and objectives of an organization.
4 E’s to address corporate strategy E X I T EXPAND ENHANCE EX TE N D EXTENSION Adopt new business model or enter new business ENHANCEMENT Add functionality or improve a product or service that is currently offered EXIT Drop a product or service line or exit a business EXPANSION Add products and services within an existing business
Types of corporate Strategy:  Diversification Strategy Entering into a new market or industry in which the business doesn’t currently operate. Stability Strategy The company stops expenditures in expansion. Growth Strategy An organization substantially broadens the scope of one or more of its business in terms of their respective customer group, customer functions and alternative technologies to improve its overall performance.
Diversification Strategy ď‚—Diversification strategies are used to expand firms' operations by adding markets, products, services, or stages of production to the existing business. ď‚—The purpose of diversification is to allow the company to enter lines of business that are different from current operations.
The role of Diversification ď‚—The role of diversification is summarized into two ways. 1. To expand the scope of the industries and markets in which the firms compete. 2. How managers buy, create and sell different business to match skills and strengths with the opportunities available to the firm.
Forms of Diversification ď‚—Horizontal ď‚—Horizontal diversification occurs when a firm enters a new business (either related or unrelated) at the same stage of production as its current operations. ď‚—e.g. Avon's (A UK based Cosmetics Direct selling co) move to market jewelry through its door-to-door sales force involved marketing new products through existing channels of distribution.
Vertical Diversification When a firm diversifies closer to the sources of raw materials in the stages of production, it is following a vertical diversification strategy.  E.g. Avon's primary line of business has been the selling of cosmetics door-to-door. Avon pursued a form of vertical diversification by entering into the production of some of its cosmetics.
Concentric Diversification ď‚—Concentric diversification occurs when a firm adds related products or markets. The goal of such diversification is to achieve strategic fit. Strategic fit allows an organization to achieve synergy. ď‚—E.g. A TV Company pursues a diversification strategy of producing DVD PLAYER.
Conglomerate Diversification ď‚—Conglomerate diversification occurs when a firm diversifies into areas that are unrelated to its current line of business. Synergy may result through the application of management expertise or financial resources, but the primary purpose of conglomerate diversification is improved profitability of the acquiring firm. ď‚—E.g. Tata steel, Tata salt
Advantages of Diversification ď‚—Reduction in risk ď‚—Profit maximization ď‚—Economic growth ď‚—Expansion of business ď‚—Better access to capital market ď‚—Increased flexibility
Disadvantages of Diversification ď‚—Easier to hide poorly performing business. ď‚—Performance measures usually concentrate on financial returns. ď‚—The future success is hard to predict ď‚—Increases the burden of management. ď‚—Complexity in control of business
Corporate level strategy