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Questions and Answers
What does vertical integration entail?
What does vertical integration entail?
What are the two types of forward integration?
What are the two types of forward integration?
What is typically associated with conglomerate companies regarding their share prices?
What is typically associated with conglomerate companies regarding their share prices?
What is backward integration focused on?
What is backward integration focused on?
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Which strategy involves improving a business’s existing market presence?
Which strategy involves improving a business’s existing market presence?
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What is a major challenge in managing conglomerate businesses?
What is a major challenge in managing conglomerate businesses?
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Which of the following is NOT a type of diversification mentioned?
Which of the following is NOT a type of diversification mentioned?
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Which aspect is considered crucial for successful diversification within corporations?
Which aspect is considered crucial for successful diversification within corporations?
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What does market development generally involve?
What does market development generally involve?
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Which of the following is an example of market development?
Which of the following is an example of market development?
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When a firm engages in unrelated diversification, what is it typically doing?
When a firm engages in unrelated diversification, what is it typically doing?
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What is a primary risk associated with product development projects?
What is a primary risk associated with product development projects?
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What does the Ansoff Matrix primarily focus on?
What does the Ansoff Matrix primarily focus on?
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Which strategy would NOT be considered market penetration?
Which strategy would NOT be considered market penetration?
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What characteristic is NOT commonly associated with market development efforts?
What characteristic is NOT commonly associated with market development efforts?
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Why is project complexity a crucial consideration in product development?
Why is project complexity a crucial consideration in product development?
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What is a potential risk associated with the market penetration strategy?
What is a potential risk associated with the market penetration strategy?
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Which strategy focuses on gaining a greater market share without entering new territories?
Which strategy focuses on gaining a greater market share without entering new territories?
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What is a benefit of pursuing market penetration as a strategy?
What is a benefit of pursuing market penetration as a strategy?
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Which of the following is a limitation of the market development strategy?
Which of the following is a limitation of the market development strategy?
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What is the primary role of a portfolio manager in corporate strategy?
What is the primary role of a portfolio manager in corporate strategy?
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What is a significant risk associated with a parental manager?
What is a significant risk associated with a parental manager?
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Which strategy type involves both existing markets and new products?
Which strategy type involves both existing markets and new products?
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What advantage does gaining market share provide according to Porter's five forces?
What advantage does gaining market share provide according to Porter's five forces?
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Which SBUs does the BCG Matrix classify as requiring high investments but yielding negative profits?
Which SBUs does the BCG Matrix classify as requiring high investments but yielding negative profits?
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Which risk is often heightened in mature markets when pursuing market penetration?
Which risk is often heightened in mature markets when pursuing market penetration?
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What does a 'cash cow' represent in the context of the BCG Matrix?
What does a 'cash cow' represent in the context of the BCG Matrix?
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Which of the following strategies is used for allocating investments towards SBUs?
Which of the following strategies is used for allocating investments towards SBUs?
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What is a consequence of excessive market power as a result of a market penetration strategy?
What is a consequence of excessive market power as a result of a market penetration strategy?
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What characteristic distinguishes 'dogs' in the BCG Matrix?
What characteristic distinguishes 'dogs' in the BCG Matrix?
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What does the term 'illusory synergies' refer to in corporate strategy?
What does the term 'illusory synergies' refer to in corporate strategy?
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Which risk is NOT associated with balancing SBUs portfolio?
Which risk is NOT associated with balancing SBUs portfolio?
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What is the primary aim of product development in the context of the Ansoff Matrix?
What is the primary aim of product development in the context of the Ansoff Matrix?
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Which strategy involves entering new markets with existing products?
Which strategy involves entering new markets with existing products?
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What are potential risks associated with the product development strategy?
What are potential risks associated with the product development strategy?
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In the context of the Ansoff Matrix, what does market penetration focus on?
In the context of the Ansoff Matrix, what does market penetration focus on?
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Diversification in the Ansoff Matrix is best defined as:
Diversification in the Ansoff Matrix is best defined as:
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Which factor contributes to the high risk of project failures in product development?
Which factor contributes to the high risk of project failures in product development?
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What similarity does Apple showcase in their corporate strategy regarding market segments and distribution?
What similarity does Apple showcase in their corporate strategy regarding market segments and distribution?
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What is a common challenge for firms pursuing market development?
What is a common challenge for firms pursuing market development?
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What does the assumption about mature industries suggest?
What does the assumption about mature industries suggest?
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What is a self-fulfilling prophecy in the context of cash cows?
What is a self-fulfilling prophecy in the context of cash cows?
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What is the main purpose of the GE-McKinsey Matrix?
What is the main purpose of the GE-McKinsey Matrix?
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Which strategy is applied to SBUs that are running at losses with uncertain cash flows?
Which strategy is applied to SBUs that are running at losses with uncertain cash flows?
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What does 'phased withdrawal' mean for a business unit?
What does 'phased withdrawal' mean for a business unit?
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What characterizes a 'cash generator' in the SBU portfolio?
What characterizes a 'cash generator' in the SBU portfolio?
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What strategy is used for SBUs that require additional resources to improve their competitive position?
What strategy is used for SBUs that require additional resources to improve their competitive position?
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What is the main goal for 'growth' SBUs in the portfolio?
What is the main goal for 'growth' SBUs in the portfolio?
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Study Notes
Advanced Strategic Management - Corporate Strategy
- Covering sessions 13-14
- Focuses on the strategic choices businesses make regarding their corporate strategy.
- Corporate strategy describes how to compete across different business lines.
- Includes how to pursue different strategies.
- Corporate strategy analyzes diversification degree and drivers.
Introduction to Corporate Strategy
- Business strategy is about competing in the market
- Corporate strategy is about competing across business lines
- Strategy methods describe how to pursue strategies.
- Corporate strategy looks at issues such as expansion into related and unrelated markets.
Diversification and Scope of the Organization
- Diversification drivers are reasons to diversify (expand into multiple markets).
- Diversification direction (horizontal/vertical)
- Companies must balance value creation and portfolio strength.
Corporate Strategy Examples and Models
- Shows examples like Alphabet, IKEA, Berkshire Hathaway, Barilla, GE and Meta.
- Charts displaying single business vs dominant business, related vs unrelated.
- Sharing value chain is discussed.
Why Firms Diversify
- Opportunistic motivations (e.g., hybris, incentives)
- Financial reasons for diversification
- Operational reasons for diversification
- Strategic reasons for diversification
Diversification: Financial Reasons
- Capitalizing opportunities in related and unrelated markets
- Reducing firm volatility
Diversification: Operational Reasons
- Exploiting scope economies (efficiency gains from applying existing resources to new markets).
- Stretching corporate management capabilities (e.g., marketing).
- Improving coordination between businesses.
Diversification: Strategic Reasons
- Increasing market power (e.g., cross-subsidizing price wars, being in the dominant market position).
- Raising rival costs.
- Mutual forbearance (reducing incentive to fight).
- The importance of increasing market power over rival competitors.
Ansoff Matrix
- A strategic tool to determine business strategy directions.
- Categorizes strategies based on market penetration (existing products, existing markets)
- product and services development (new products, existing markets)
- market development (existing products, new markets),
- diversification (new products, new markets)
- Examples of firms that apply these strategies such as Apple.
- Discuss how diverse products or services are offered to diverse markets.
- Includes a discussion of the risks involved in some strategies, relating to resources required and implementation challenges.
- Explains the limits of each strategy (retaliation, legal constraints, etc.)
Corporate Strategy- Vertical Integration
- Vertical integration: firms enter activities where they're also suppliers or customers.
- Backward integration: entering into the supplier side
- Forward integration: entering into the customer side
- Includes discussions of factors such as coordination, control, costs and risks involved, and strategic independence
Corporate Strategy - Corporate Parent Advantage
- Envisioning: Provide an overall vision
- Facilitating synergies
- Coaching: Providing central support services, investments, treasury operations.
- Intervening in business units to guarantee performance.
- Managing costs and complexity.
- obscuring financial performance
Corporate Strategy - Portfolio Management
- Portfolio management looks at under-valued assets
- Synergy management aims to enhance value across the business units.
- Parental managerial approach considers capabilities and adding value.
- Different approaches to managing parent-business units (portfolio manager, synergy manager, parental manager, parental developer)
- Discussions of risks.
Corporate Strategy - Portfolio Balancing
- Considering the different categories of business units (e.g., stars, question marks, cash cows, dogs).
- Using frameworks such as the BCG Matrix and the GE-McKinsey Matrix.
- Ways to allocate resources across different business units.
Corporate Strategy - Parenting Matrix
- Defining "Feel" and "Benefit" - Two key dimensions of fit.
- Importance of understanding the fit between the business unit and the parent company.
- Discussing potential value creation and issues connected to mismatches regarding company needs.
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Description
This quiz covers sessions 13-14 of Advanced Strategic Management, focusing on corporate strategy and strategic choices businesses face across various lines. Topics include diversification, competitive methods, and notable corporate strategy examples. Test your understanding of how companies balance value creation and portfolio strength.
