corporate level strartegy

8/2/2019 Corporate Level Strartegy

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Corporate Level Strategy

Presented By

Sreekumar M B


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CORPORATE

Group of companies incorporated under onehead. It is concerned with the choice of business,product and services.

Corporate-level strategies address the entirestrategic scope of the enterprise. This is the "big

picture" view of the organization and includesdeciding in which product or service markets tocompete and in which geographic regions to operate.


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Corporates in India


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Corporate Strategy?

It pertains the organization as whole and thecombination of business units and product lines thatmake up the corporate entity.

? It addresses the overall strategy that an organizationwill follow.

? For multi-business firms, the resource allocationprocess and distribution is typically established atthe corporate level.


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Key Questions - Strategy

What business the firm should be in, in terms ofrange of products and its suppliers?

What should be the optional geographic spread ofactivities for the firm?

What range of vertically linked activities should thefirm encompass?


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Grand Strategy

Portfolio Strategy

Types of Business

Process of CorporateStrategy


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Advantages of CorporateStrategy

; Bridge the gaps

Identify the strategic planning gaps and bridgethem through appropriate strategies.

; Exploit the opportunities

Identify the areas and counter the threatsposed by competitive forces.

; Develop core competencies


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Grand Strategy It is the general plan of major action by which a

firm intends to achieve its long term goals .

It provides basic direction for the strategic actionsof a firm.

Most firms begin their operations as single-business units. Some firms continue to thrive due totheir specialized operations and exclusive focus on a

limited business arena.


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Examples of GrandStrategy


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Strategic Alternatives


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Growth / ExpansionStrategy

" Organizations generally seek growth in sales,market share or some other measures as a primaryobjective.

" When growth becomes a passion of and

organizations try to seek sizeable growth, it takesthe shape of an expansion strategy.


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Growth / Expansion

A.

Intensification

Market Penetration Market Development Product Development

Diversification

B. Diversification

Horizontal Concentric Conglomerate

Vertical Forward

Backward


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Ansoffs Product MarketExpansion Grid

Market PenetrationProduct

Development

MarketDevelopment

Diversification

Current Products

Current Markets

New Markets

New Products


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Diversification Strategies

Diversification is said to be minimize risksassociated with confining the business to one orvery few products.

The company can enter new lines of business topreempt potential competitors or to gain superiority

over competitors entering the market at an earlystage.


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Types of Diversification


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It occurs when an organization diversifies into a

related, but distinct business. In this context, the newbusiness can be related to existing business throughbusiness, products, technology.

Concentric Diversification


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Diversification in India

Johnson & Johnson Gillette

Dental ProductsOral contraceptivesWound care productsPrescription DrugsHospital ProductsDiapers

Razors & BladesToiletriesElectrical shavers, CurlersToothbrushes, alarm clocks,coffee makers,Stationery Products

And Writing instruments


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Conglomerate Diversification

It take place when an organization diversifiesinto areas that are unrelated to its current business.The decision is to diversify into unrelated areas is

generally undertaken by firms in volatile industriesthat are subject to rapid technological change.


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ITCs Diversification Strategy

ITC was established by UK-based tobacco majorBAT. It initially set up the Peninsular TobaccoCompany (Peninsular).

In 1910, it set-up a fully fledged sales organizationnamed the imperial.

In 1971, they diversified into marine productsexport division.


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Continued In 1977, ITC also set up Bhadrachalam

paperboards.

In 1981, ITC diversified into cement business inIndia.

In 1986, ITC established Hotel Divisions, It alsoentered in the financial services by setting up ITCClassic Finance.


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Stability Strategy A Stability strategy involves maintaining the

status quo or growing in a methodical, but slow,manner.

The firm follows a safety-oriented, status-quo-type strategy without efficiency any major

changes in its present operations.

The resources are put on existing operations toachieve, moderate, incremental rowth.


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Reasons for stabilitystrategy

' Why rock the boat ?

' Why not stop for a while?

' Why to swallow risk?

' Where are the resources?

T f St bilit


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Types of StabilityStrategies

Stability

Incremental Growth Profit Sustainable Growth Pause Strategy


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& Incremental Growth

The firm following this strategy concentrates onone product line at a time, growing steadily.

& Profit/Harvesting Strategy

This is followed when the primary goal of thefirm or any of its strategic business units is to generatecash so as to ensure steady growth of business.

Continued


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& Sustainable Growth Strategy

This strategy is followed when the firmperceives that the external environment is not

favorable due to certain critical resource constraints.

& Stability as a pause strategy

After organization have undergone a turbulentperiod of rapid growth, mangers often pause for awhile to integrate strategic business units, etc, pause

for a while and prepare themselves for another big

Continued


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Retrenchment Strategy

Retrenchment strategy is a corporate level,defensive strategy followed by a firm when itits performance is disappointing or when its

survival is at stake for a variety of reasons.

Economic recessions, production

inefficiencies, and innovative breakthrough bycompetitors are only three causes.

T f R t h t


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Types of RetrenchmentStrategy

Retrenchment Strategy

Divestment Turnaround Liquidation Bankruptcy


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Divestment Strategy

It involves the sale of those units or parts of abusiness that no longer contribute to or fit thefirms distinctive competence.

The firm simply gets out of certain businessand sells off units or divisions for various

reasons.


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Reasons for Divestment

? Strong Focus

? Unlock Critical Funds

?

Invest in emerging technologies? A maker of policy

? From red to black

? Unviable projects


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Turnaround Strategies

A turnaround is designed to reverse a negativetrend and bring the organization back tonormal health and profitability.

The basic purpose of a turnaround is totransform the corporation into leaner and more

efficient firm.


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Nissans TurnaroundStory

? In 1933, Jidosha Seizo Co. Ltd., wasestablished in yokohama.

? In 1934, the company was changed name intoNissan Motor Co. Ltd.

? In 1945, diversified to development of textilemachinery.

? In 1958, Nissan started exporting passengercars to the US.

C ti d


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? Nissan started showing the signs of declinefrom the early 1990s.

? The top management at Nissan failed to noticeof changing trends.

? Nissan took steps during 1992-1998 to turn thecompany around .

Continued


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CARLOS GHOSN

Lack of clear profit orientation

Insufficient focus on customers

Lack of cross functional lines of work

Lack of a sense of urgency


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Nissan Revival Plan (NRP)

Reducing operating costs by I trillion yen.

Reducing number of suppliers

Reducing net debt from 1.3 trillion to 700billion by FY 2002.

Introduction of around 22 new products by

2002. Reducing the assembly plants from seven to

four in japan.


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Combination Strategies

Large, diversified organizations generallyuse a mixture of stability, expansion orretrenchment strategies either simultaneously (at

the same time in various business) orsequentially (at different times in the samebusiness.

Types of Combination


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Types of CombinationStrategies

Combination

Joint Ventures

Strategic Alliances Consortia


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Corporate Restructuring

? It involves destroying old paradigms, oldtechnology, old paradigms, old technology, oldways of doing things and starting all over

afresh.

? It demands a strong cultural willingness to

make a clear beginning taking a realisticlook at ones company and deciding to reshapethe whole place to remain continuously

competitive.


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Process of Restructuring

Canon India Restructuring


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Canon India : Restructuringto Survive

" Canon India was established in 1997.

"

Canon focusing on selling mid-range and high end copiers.

" In 1988, the company introduced Canon Cameras.

" Canon India faced problems in both the office

automation and camera sectors

Contin ed


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" The restructuring initiatives was focused on revamping thecompanys product, brand building, promotion, sales anddistribution, and customer service strategies.

" In early 2001, Canon India replaced its national distributionmodel with a regional distribution model.

" In January 2002, the company began a new retail initiative,Canon Retail Solutions to promote its products.

" In early 2002, Canon India announced its intension to open

Continued


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Restructuring Philips Philips poor performance could not be blamed on

weak markets alone.

Competition from aggressive Asian companieslike Sony was intensifying especially in Europe.

Philips corporate culture set rigid boundaries onemployee responsibilities and discouragedemployees from stepping outside theseboundaries.


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Restructuring in Philips

Kliesterlee introduced Towards OnePhilips(TOP), and through it, he is aimed tomake philips work as a single, unified

company.

As part of its TOP initiative, Philips also began

developing a range of new technologies usingits traditional strength in technology research.

M & A i i i


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Mergers & Acquisitions

A merger occurs when two or more organisationcombine to become one through an exchange ofstock or cash or both. Mergers can take place in twodifferent ways:-

Acquisition It is the purchase of firm by a firm that isconsiderably larger. Te firm that acquires is called theacquiring firm and the other, merging firm.

Consolidation If both firms dissolve their identity to

create a new firm, it is called consolidation.

ony o um a


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ony o um aPictures

Sony envisioned the convergence of electronics and

entertainment devices in the early 1990s.

Hence it felt that it made good business sense to merge the

companys electronics division.

Sonys decision to acquire Columbia was also driven by the

companys previous experience of losing to Matsushita inthe VCR business in the 1970s.

Apart from this, Mortias dream of owning a hollywood filmstudio was also one of the ma or factor.


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Post Acquisition Blues

Corporate Governance

Mismanagement

Cultural Mismatch

Some analysts also felt that the vast differencebetween the Japanese and American cultures wasalso responsible for the failure of Sony to manageColumbia efficiently.


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Joint Ventures

Joint Ventures are a special case ofconsolidation where two or more companiesform a temporary partnership for a special

purpose.

Once the purpose is achieved the joint venture

is terminated, with all profits distributed to itsmembers.

St t i Alli


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Strategic Alliances

They are usually partnerships that exist for a definiteperiod during which partners contribute their skillsand expertise to a cooperative project.

Equity Strategic Alliance are more effective attransferring know-how between firms because theyare close to hierarchical control.

Non Equity Strategic Alliance - are formed

through contractual agreements given to a company


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The TVS Suzuki Breakup

In September 2001, Sundaram Clayton (of the TVSgroup of companies) and japanese automobile majorSuzuki Motor Corporation (SMC), partners in the

joint ventures TVS Suzuki,

Indias second largest motorcycle company,

announced their decision to break-up.

Their differences over the issues of managementcontrol and ownershi had become well known.


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THANK

YOU!!!

corporate level strartegy

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