Week 5 - Corporate Level Strategy

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Questions and Answers

What does corporate level strategy specify?

Actions to increase market dominance

Actions to reduce product variety

Actions unrelated to business scope

Actions to gain competitive advantage (correct)

What is the focus of business unit or LOB strategy?

How a business competes successfully in a particular market.

What is operational strategy concerned with?

How each part of the business is organized to deliver strategic direction.

Corporate level strategy deals with two main issues: 1. In what product markets and businesses should the firm compete? 2. How will these businesses be managed by _____?

corporate headquarters Signup and view all the answers

What helps firms to select new strategic positions expected to increase value?

Corporate Level Strategies Signup and view all the answers

What determines the value of corporate-level strategy?

The degree to which the businesses in the portfolio are worth more under the management of the company. Signup and view all the answers

What is the growth strategy focused on?

The attainment of specific growth objectives. Signup and view all the answers

Match the following types of corporate growth strategies.

Concentration = Focus on primary business for growth Geographical = Expanding into new geographic markets Vertical integration = Managing multiple stages in the value chain Horizontal integration = Acquiring similar businesses for expansion Diversification = Entering new business areas Signup and view all the answers

Concentration Strategy is used when a single-business organization pursues _____ through increasing its level of operation.

growth Signup and view all the answers

What is a notable advantage of the concentration strategy?

The organization becomes very good at what it does. Signup and view all the answers

What is a drawback of the concentration strategy?

Vulnerability to industry and external environmental shifts. Signup and view all the answers

What is horizontal integration?

Different businesses in similar stages of the value chain. Signup and view all the answers

What are the two types of strategies that diversified firms need?

Corporate level strategy and business level strategy. Signup and view all the answers

When is a firm considered to have low levels of diversification?

When it generates 95% or more of its sales from its core business area. Signup and view all the answers

What type of diversification occurs when businesses share links across products, technologies, or distribution channels?

Related diversification. Signup and view all the answers

Study Notes

Corporate Strategy

Encompasses actions firms take to achieve competitive advantage by managing various businesses across different markets.
Focuses on fulfilling stakeholder expectations and guiding strategic decisions at all organizational levels.

Business Unit / LOB Strategy

Targets how businesses compete in specific markets.
Involves strategic choices regarding product offerings, customer needs, and competitive advantages.

Operational Strategy

Relates to the organization of business components to execute corporate and business-unit strategies effectively.

Key Issues in Corporate Level Strategy

Determines which product markets and businesses the firm will compete in.
Outlines the management approach for these businesses at the corporate level.

Corporate Level Strategy Dynamics

Facilitates the selection of strategic positions anticipated to enhance firm value.
Firms may adopt either defensive or offensive strategies to achieve growth, reflecting varied strategic intents.

Value of Corporate Level Strategy

Assessing the worth of businesses under corporate management compared to other ownership is crucial for strategy valuation.

Growth Strategy

Focuses on achieving specific growth targets through the expansion of operational capacity.

Typical Business Growth Objectives

Increase sales revenues, enhance earnings or profits, and improve overall performance metrics.

Types of Corporate Growth Strategies

Concentration
Geographical expansion
Vertical integration (backward or forward)
Horizontal integration
Diversification (related or unrelated)

Concentration Strategy

Emphasizes growth within a primary line of business.
Single-business organizations utilize this strategy to achieve growth through increased operational scale.

Concentration Strategy Advantages and Drawbacks

Advantage: Expertise in the primary business area.
Drawback: Increased vulnerability to market and environmental changes.

Horizontal Integration: Involves businesses at similar value chain stages, often with high relatedness (concentric diversification).
Vertical Integration: Engages in multiple stages of the value chain, including forward (distribution) and backward (supply).

Diversification Strategies

Involvement in new business areas can be related or unrelated, leveraging excess resources for added value.
Requires corporate-level and business-level strategies for effective management across diverse product markets.

Connections across products, technologies, and distribution channels enhance organizational synergy.
"Unrelated" diversification signifies the lack of direct links among business activities.

Levels of Diversification

Low Levels: Single Business Strategy generates 95%+ of revenue from core business; Dominant Business Strategy accounts for 70-95% of sales in a primary field.
Moderate to High Levels: Related constrained strategies leverage businesses that are interlinked strategically.

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Description

Explore the key concepts of corporate level strategy, focusing on actions taken by firms to secure competitive advantages. This quiz will help reinforce understanding of how businesses manage diverse operations and align with stakeholder expectations.