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Prentice Hall, Inc. © 2008 7-1
STRATEGIC MANAGEMENT & BUSINESS POLICY11TH EDITION
THOMAS L. WHEELEN J. DAVID HUNGER
CHAPTER 7 Strategy Formulation: Corporate Strategy
Prentice Hall, Inc. © 2008 7-2
Corporate Strategy
3 Key Issues –
–Firm’s directional strategy(Growth, Stability, Retrenchment)
–Firm’s portfolio strategy
–Firm’s parenting strategy
Prentice Hall, Inc. © 2008 7-4
Corporate Strategy
Directional Strategy –
–Orientation toward growth•Expansion, contraction, status quo•Concentration or diversification•Internal development or acquisitions, mergers, or alliances
Prentice Hall, Inc. © 2008 7-5
Corporate Strategy
Directional Strategy –
–3 Grand Strategies
•Growth strategies
•Stability strategies
•Retrenchment strategies
Prentice Hall, Inc. © 2008 7-6
Corporate Strategy
Growth Strategies --
–External mechanisms
•Mergers
•Acquisitions
•Strategic alliances
Prentice Hall, Inc. © 2008 7-7
Corporate Strategy
Growth Strategies --
–2 Basic forms
•Concentration
•Diversification
Prentice Hall, Inc. © 2008 7-8
Corporate Strategy
Basic Concentration Strategies --
–Vertical growth
–Horizontal growth
Prentice Hall, Inc. © 2008 7-9
Corporate Strategy
Vertical Growth --
–Vertical integration•Full integration•Taper integration•Quasi-integration•Long-term contract
Prentice Hall, Inc. © 2008 7-10
Corporate Strategy
Vertical Growth --
–Backward integration
–Forward integration
Prentice Hall, Inc. © 2008 7-11
Corporate Strategy
Concentration --
–Horizontal Growth•Horizontal integration
Prentice Hall, Inc. © 2008 7-12
Corporate Strategy
Basic Diversification Strategies --
–Concentric Diversification
–Conglomerate Diversification
Prentice Hall, Inc. © 2008 7-13
Corporate Strategy
Concentric Diversification --
–Growth into related industry–Search for synergies
Prentice Hall, Inc. © 2008 7-14
Corporate Strategy
Conglomerate diversification --
–Growth into unrelated industry–Concern with financial considerations
Prentice Hall, Inc. © 2008 7-15
Corporate Strategy
International Entry Options --
–Exporting–Licensing–Franchising–Joint Ventures–Acquisitions–Green-Field Development
Prentice Hall, Inc. © 2008 7-16
Corporate Strategy
International Entry Options --
–Production Sharing–Turnkey Operation–BOT Concept (Build, Operate, Transfer)–Management Contracts
Prentice Hall, Inc. © 2008 7-17
Corporate Strategy
Stability Strategies --
–Pause/proceed with caution
–No change
–Profit strategies
Prentice Hall, Inc. © 2008 7-18
Corporate Strategy
Retrenchment Strategies --
–Turnaround–Captive Company Strategy–Selling out–Bankruptcy–Liquidation
Prentice Hall, Inc. © 2008 7-19
Corporate Strategy
Portfolio Analysis --
–Resource commitment on best products to ensure continued success
–Resource commitment on new costly products high risk
Prentice Hall, Inc. © 2008 7-21
GE Business Screen (Portfolio Analysis)
AWinners Winners
B
C
Question Marks
D
F
Average Businesses
EWinners
Losers
GLosers H
LosersProfit
Producers
Strong Average Weak
Low
Medium
High
Business Strength/Competitive Position
Indu
stry
Att
ract
ive
ness