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AMM-M7- Corporate strategy and diversification (Strategy Directions is…
AMM-M7-
Corporate strategy and diversification
Strategy Directions
is about in which areas a company should grow
Ansoff matrix (p.175)
A. Market penetration
- increase market share
Features
builds on established strategic capabilities
scope unchanged
increased power vis-a-vis buyers and suppliers
Constraints
retaliation from competitors
legal constraints
economic constraints (market downturn)
D. Conglomerate / unrelated Diversification
B. New products and services
related diversification
described as horizontal integration
C. Market development
2 basic forms
new users
new geographies
Diversification drivers
Positive reasons:
exploiting economies of scope: existing resources or competencies to new markets or services. eg. university serve conference rooms in the summer holiday
stretching corporate management competences (dominant logic)
exploiting superior internal process (as in many developing economies, imperfect market cannot offer)
increasing market power: 1) mutual forbearance 2) cross-subsidise to drive competitors out
=> Synergy
Negative reasons (negative drivers):
responding to market decline (eg. Kodak acquisition)
spreading risk (not considered a task for the board but for the shareholders)
managerial ambition
Vertical integration
Forward and backward
Value creation and the corporate parent
Value-adding activities
envisioning
facilitating synergiers
coaching
providing central services and resources
intervening
Corporate parenting roles
portfolio manager
synergy manager
parental developer
Value-destroying activities
adding management costs
bureaucracy
obscuring financial performance
BCG (Growth/ share) Matrix (p.190)
Diversify internationally
(the matrix on p.193)
Key problem: global-local dilemma:
standardised across national boundaries vs. adapted to meet specific market
4 basic international strategies
Global
maximises global integration with little adaption
standardised products suit all markets
centrally controlled
common for commodity products
Export strategy
leverage home country capabilities
suitable for strong brands
key risk: home country centered view vs. skilled local rivals
Multi-domestic
different products for different countries
low level of international coordination
independent units
in marketing oriented companies eg. food companies
risk: manufacturing inefficiencies and brand dilution
Transnational
complex to maximise both
aims to maximise learning and knowledge exchange between dispersed units
hard to achieve but GE is
Methods for expansion
Organic development
knowledge and learning can be enhanced
spreading investment over time
no available constraints
strategic independence
less risk of culture clash
Mergers and acquisition
motives:
extension: geography, products or markets
consolidation: increasing scale, efficiency and market power
capabilities
financial and managerial
Strategic alliances
scale alliances: more bargaining power
access alliances: partner provided needed capabilities eg. distribution outlets or licenses
complementary eg. GM-Toyota
collusive alliances: to increas market power (need to be secret)