Study guide
BMNG7312 LU 1 Chapter 8: Business level strategy
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- Varsity College
Study guide and summary of each learning objective for BMNG7312.
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By: angeliqueduplessis • 5 year ago
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Chapter 10: Corporate levelstrategy
Learning outcomes:
Differentiate between corporate and business level strategies;
Discuss the nature of corporate strategy and what it entails;
Analyse the individual growth, turnaround or decline, and corporate combination strategies.
Discuss corporate strategies in use within an organisation;
Recommend appropriate corporate level strategies for an organisation;
Discuss the role of the corporate parent and the management of a multi business organisation.
10.2 What corporate strategy entails
Porter argued that corporate strategies are those strategies that make the corporate add up
to more than the sum of its parts, cautioning however, that corporate strategies often
dissipate rather than create shareholder value. Value is added when the organisation as a
whole is valued in excess of its component units. Organisations who want to grow their
market share may choose to do so through creating more value with their existing operations
or by buying additional capacity to add more value (either through the forming of strategic
alliances, or the acquisition / establishment of other businesses).
Corporate strategy addresses two basic questions:
1. What and how many businesses and industries should we operate in?
2. How can we build synergy and competitive advantage among business units? In
other words, how should the corporate headquarters (parent) manage the portfolio of
businesses?
Corporate level strategy Business level strategy
considerations considerations
What and how many What is our source of
businesses and What is the mission or purpose competitive advantage
industries should we of our organisation and what and how can we use it
operate in? are the best strategies to to compete
achieve this? successfully?
Where do we see
ourselves in the future Who are our
customers?
Whether an organisation operates as a multi-business organisation or not, it has the option
to pursue any or a combination of several corporate strategies. Corporate strategies can be
divided into growth strategies (organic growth and growth through diversification) and
defensive strategies (retrenchment or recover, divestiture, and liquidation)
Cooperative strategies (joint ventures, strategic alliances, consortia) are a component of
growth strategies.
The choice of strategy depends on the strategic fit between the organisations internal
strengths, capabilities, and resources, and the external opportunities.
, 10.3 An overview of corporate strategy options
Multi-business organisations’ decisions about their corporate strategies flow from their
corporate goals: either to grow the business or to defend the business when it finds itself in a
vulnerable position. Whether opting for grow or defend goals, organisations have various
corporate strategies and actions to choose from.
1. The first option is to grow the business organically through market penetration or
consolidation.
2. The second option is to grow the business by either entering new markets (market
development) or by expanding its product range (product development).
3. The third option is to diversify the business.
4. Finally, organisations can also opt to grow the business through integration
strategies.
Within growth strategies, organisations can choose from a range of corporate actions to
achieve their corporate growth goals. These corporate actions include the cooperative or
corporate combination strategic actions that are especially appropriate for organisations that
operate globally or in technology driven industries. When the organisation finds itself in a
vulnerable position due to new competitors, an increase in competitive rivalry or an internal
organisational weakness, multi-business organisations will opt for defend strategies.
10.3.1 Growth strategies (intro)
Growth strategies are viable when opportunities exist and the organisation is in a position to
exploit them and growth strategies can be divided into organic growth such as market
penetration, and market development, product development and innovation. Growth
strategies can also be divided into external growth strategies such as diversification and
integration. Diversification strategies are further divided into concentric or related
diversification or conglomerate or unrelated diversification.
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