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AV SM Unit 3 2023

The document discusses various corporate and business level strategies including strategy formulation, SWOT analysis, competitive strategies, mergers and acquisitions, joint ventures, corporate parenting styles, functional strategies, outsourcing, offshoring, concentration strategies, integration strategies, diversification strategies, internationalization, and Porter's model of competitive advantage of nations.

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16 views21 pages

AV SM Unit 3 2023

The document discusses various corporate and business level strategies including strategy formulation, SWOT analysis, competitive strategies, mergers and acquisitions, joint ventures, corporate parenting styles, functional strategies, outsourcing, offshoring, concentration strategies, integration strategies, diversification strategies, internationalization, and Porter's model of competitive advantage of nations.

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© © All Rights Reserved
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Unit 3

By
Dr. Anand Vyas
Strategy Formulation
Strategy can be formulated at
three levels, namely, the
corporate level, the business
level, and the functional
level. At the corporate level,
strategy is formulated for
your organization as a whole.
Corporate strategy deals with
decisions related to various
business areas in which the
firm operates and competes.
SWOT Analysis
Business Strategies
• A comprehensive business strategy creates a structure for companies
to carry out their organisational goals. It helps them remain relevant
in the market and identify growth opportunities.
• Major components of a business strategy
• Core values
• Business objective
• SWOT analysis
• Measurement
• Operational tactics
Types of Competitive Strategies by Porter
Competitive Strategy: Cost Leadership, Differentiation & Focus
• Cost Leadership
• Here, the objective of the firm is to become the lowest cost producer in
the industry and is achieved by producing in large scale which enables
the firm to attain economies of scale. High capacity utilization, good
bargaining power, high technology implementation are some of factors
necessary to achieve cost leadership. e.g Mi phones
• Differentiation Leadership
• Under this strategy, firm maintains unique features of its products in the
market thus creating a differentiating factor. With this differentiation
leadership, firms target to achieve market leadership. And firms charge a
premium price for the products (due to high value added features).
Superior brand and quality, major distribution channels, consistent
promotional support etc. are the attributes of such products.E.g. BMW,
Apple
• Cost focus
• Under this strategy, firm concentrates on specific market segments
and keeps its products low priced in those segments. Such strategy
helps firm to satisfy sufficient consumers and gain popularity. E.g.
Sonata watches
• Differentiation focus
• Under this strategy, firm aims to differentiate itself from one or two
competitors, again in specific segments only. This type of
differentiation is made to meet demands of border customers who
refrain from purchasing competitors’ products only due to missing
of small features. It is a clear niche marketing strategy. E.g. Titan
watches
Cooperative: Mergers & acquisition Strategies
1. Determining business plan drivers.
2. Identifying acquisition financing constraints.
3. Developing a list of acquisition candidates.
4. Building preliminary valuation models.
5. Rating/ranking acquisition candidates.
6. Reviewing and gaining approval for the strategy.
Joint Venture
• Joint Venture (JV) is a cooperative enterprise entered into by two or more
business entities for the purpose of a specific project or other business
activity. The reason for a joint venture is usually some specific project.
• To combine resources. A bigger entity may have more clout in an
industry or more resources to ensure the success of a venture.
• To combine expertise. In technical businesses, one company might have
expertise in one part of a venture while the second company might have
expertise in another part. For example, Company A might be good at
creating software, while Company B has experience creating the
hardware that’s needed for a venture.
• To save money. Two companies might consider a joint venture to save
money on advertising, maybe at a trade show or in a trade publication.
Corporate Strategy: Concept, Components, Importance

• Corporate Strategy takes a portfolio approach to strategic decision


making by looking across all of a firm’s businesses to determine how
to create the most value.
1. Allocation of resources
2. Organizational design
3. Portfolio management
4. Strategic tradeoffs
Strategies: Stability, Expansion, Retrenchment
and Combination strategies
• Growth is essential for an organization. Organizations go through an
inevitable progression from growth through maturity, revival, and
eventually decline. The broad corporate strategy alternatives,
sometimes referred to as grand strategies,
are: stability/consolidation, expansion/growth, divestment/
retrenchment and combination strategies. During the organizational
life cycle, managements choose between growth, stability, or
retrenchment strategies to overcome deteriorating trends in
performance.
•
Corporate Parenting
• There are basically three styles of corporate parenting as follows;
• Financial control. Under this style the role of the corporate parent is to
monitor and evaluate the financial performance of investment portfolio of
the respective business units. The corporate managers act as agents on
behalf of shareholders and financial markets to identify and acquire viable
assets and businesses. The business unit managers are given the autonomy
to carry out business activities and make decisions at their level. However,
the corporate parent sets performance standards for control purposes.
• Strategic planning. Under this style the role of the corporate parent is to
enhance synergies across the business units. This may be achieved
through: envisioning to build a common purpose, facilitating cooperation
across businesses and providing central services and resources.
• Strategic control. Under this style the corporate parent leverages its
resources and competences to build value for its businesses. For example,
a corporate could have a valuable brand or a specialist skill. The corporate
parent uses its parenting capabilities to seize opportunities for growth.
Functional Strategies
• Functional Strategy’ is the strategy or organisational plan adopted by
each functional area, viz. marketing, production, finance, human
resources and so on, in line with the overall business or corporate
strategy, to achieve organisational level objectives. The functional
strategy of a company is customized to a specific industry or strategic
business unit (SBU) and is used to back up other corporate and
business strategies. Each department develops certain objectives,
which is to be enforced by employees, and aids in the achievement of
final organisational goals.
Outsourcing
• Outsourcing is the process of contracting a business function or any
specific business activity to specialized agencies. Mostly, the non-core
areas such as sanitation, security, household, pantry, etc are
outsourced by the company. The company makes a formal agreement
with the agency.
• Advantage and Disadvantage
Offshoring
• Offshoring refers to obtaining services or products from another
country, and is often what news articles are really referring to when
they discuss outsourcing. While much offshoring involves outsourcing
production to another company it can also refer to simply re-location
certain aspects of a business to another country.
Concentration Strategies
• There are three concentration strategies:
• (a) Market penetration,
• (b) Market development, and
• (c) Product development.
Integration Strategies: Horizontal & Vertical
Diversification: Related & Unrelated
• Diversification means spreading your investments or business into
different things. There are two types: related and unrelated.
• Related Diversification: This is when you invest in or expand into
things that are connected or similar to what you're already doing. For
example, a company that makes cars might start making motorcycles
or trucks. It's like adding new branches to the same tree.
• Unrelated Diversification: This is when you invest in or expand into
things that have no connection to what you're already doing. For
instance, a company that makes cars might start a completely
different business, like selling food. It's like planting a new tree in a
different field.
Internationalization
• Internationalization has been one of the strategies being used by
most executives to reduce the cost of operations. Businesses with
overhead costs can have the excess cost cut down in countries that
have relatively deflated currencies as well as low cost of living.
Porters Model of Competitive Advantage of Nations
• Porter Diamond Model
• Porter Diamond is a model that emphasizes the competitive
advantage of an industry or business that makes it work better than
other competitors in a region or country. Also known as the Porter
Diamond Theory of National Advantage, the model explains why
certain industries thrive in particular nations. Companies use this
model to analyze the competitive environment in foreign markets
before entering them.

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