Corporate Strategy Final Exam Questions and Answers
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Course
Corporate Strategy
Institution
Corporate Strategy
Corporate strategy sets long-term direction for the total enterprise
Examples of strategic documentation - Corporate plan, only one
- Business plans, one for each business unit
- Functional plans, one for each major functions
- Budgets
Key questions of Corporate-level strategy - To which d...
Corporate Strategy Final Exam
Questions and Answers
Corporate strategy ✅sets long-term direction for the total enterprise
Examples of strategic documentation ✅- Corporate plan, only one
- Business plans, one for each business unit
- Functional plans, one for each major functions
- Budgets
Key questions of Corporate-level strategy ✅- To which degree the businesses in the
portfolio are worth more under the management of the companby than they would be
under other ownership?
- What businesses should the firm be in?
- How should the corporate office manage the group of businesses
Stages from single-business to diversification ✅1. Most firms began as small single-
business enterprises serving a local or regional market
2. Geographical expansion
3. Vertical integration
4. As growth slows, strategic options include taking market share from ricals and
focusing on diversification
At what stage in the industry life cycle is diversification absolute necessary for the
industry ✅In the laote maturing and the decline stage of the industry life cyle, the
industry need to find new diversification strategies otherwise the industry will die
When to diversify ✅- When a company runs out of growth opportunities in the core
business and not before
- When diversification results in creation of value
When does diversification start to make sense ✅- Strong competitive position, rapid
markert growth, NOT a good time to diversify
- Weak competitive position, rapid market growth, NOT a good time to diversify
- Strong competitive position, slow market growth, diversification is TOP priority
- Weak competitive position, slow market growth, diversification merits consideration
Three tests for whether diversification is a good idea ✅- Attractiveness test: The
industry must be attractive
- Cost of entry test: Cost has to be reasonable
- Better off test: Diversification results in a competitive advantage and creation of value
, Ansoff's Growth Matrix ✅Theory stating a companies most applicable growth strategy
based on 2 dimensions: Newness of market and Newness of product; making up 4
quadrants: market penetration, market development, product development,
diversification
Firm growth options ✅- Diversification into new product markets through acquisition or
internal growth
- Geographical expansion (global/international strategy)
- Vertical integration (backward or forward)
Portfolio planning frameworks ✅- Boston consulting group's Growth-share Matrix
- GE/McKinsey's Portfolio Matrix
- A. D. Little Portfolio Matrix
(They are developed to help senior managers: Allocate resources between buisness
units, Balance the porfolio (cash flow, life cycle, or risk,Formulate buisness strategy)
Boston Growth-Share matrix ✅Matrix for evaluating products and industries and
market share
McKinsey Portfolio matrix ✅a tool for allocating resources among products or strategic
business units on the basis of relative market share and market growth rate
Parameters of industry attractiveness ✅- Market size
- Industry growth rate
- Industry profitability
- Cyclycality
- Inflation recovery
- Importance of overseas markets
- Competitive forces
Parameters of competitive position ✅- Market share
- Profitability
- Cost position
- Quality / differentiation
- Technology
- Manufacturing
- Distribution & Marketing
The A. D. Litlle Portfolio matrix ✅Portfolio matrix based on the strage of
product/industry life cycle and the competitive position evaluating which action to take
for each portfolio item
Benefits of portfolio planning tools ✅- Simplicity: Analysis can be prepared quickly &
provides a high level view of all of a firm's businesses
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