CORPORATE STRATEGIC CHOICES

Strategic Analysis:Where do we want to be?

Presentation Outline

Vertical Integration. Corporate Decisions Relating To Scope. Corporate Diversification. Corporate Strategy. Parenting Styles & Rationales. Corporate Decisions Relating To Portfolio.

Vertical Integration

• Backward and Forward Integration• Reduced Transactional Costs• Zara = Fast Fashion (Competitive Advantage)• Zara vs. H&M vs. Gap

Zara: Exception To The Rule

Vertical integration is in extinction in the consumer economy but Zara is a spectacular exception to the rule (Richard Hyman).

Self-reinforcing Strategy (Two weeks shelf life) Cultural Phenomenon of Instant Fashion.

Zara: The Art of Supply Chain Management

Corporate Diversification

• Strategy of Diversification• Product Development• Market Penetration• Market Development• Diversification (Related & Unrelated)

Key concepts in Corporate Diversification

Virgin Seeking New Products & New Market The Ansoff Matrix

BCG Matrix & The Virgin Group

RAILWAYFLIGTHS

ENTERTAINMENT

FINANCE

SHOPPING

MEDIA & TELECOMUNICATION

SOCIAL & ENVIRONMENT

VIRGIN COLA

Corporate Strategy

Corporate SynergyGeographical Scope (International Markets)The Corporate Parent and Value Creation to

Different SBU’s

Value Adding/Destroying Activities of Corporate Parents

Case study on the parenting styles of the following diversified companies:oVirgin GroupoBerkshire HathawayoZara Inc.oTesco

The Parenting Matrix Goold et al, 1994

Elements of Corporate Strategy

Johnson, Whittington and Scholes, 2011

Parenting styles may impact how wide the corporate scope is, while the scope in itself may reflect limitations of the parenting styles.

Portfolio matrices is used to identify attractive areas to diversify into as scope increases. This helps to highlight underperforming units and thus may lead to scope reduction

By emphasising the lack of fit between subunits and parent, portfolio matrix may lead to change in parenting style thereby impacting upon the decisions made.

Corporate Parenting Styles

What is Good Corporate Strategy?Richard Rumelt – Harvard Business School.