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LN10-Corporate Strategy - Horizontal Diversification, Corporation 2, Core…
LN10-Corporate Strategy - Horizontal Diversification
Implementation Issues
the interests of employees=
the interests of the firm
Information flows
Decision made
Influence the behavior
Refocusing
a conglomeration discount may exist
the corporation may lack necessary skills
expected economies of scope may not exist
the corporation may need funds for core activities
effects
listed company
laws and financial report
stock
Sharing Resources
Share resources such as expertise, equipment, technology and human capital
Maximize efficiency and market competitive edge
Diversification
Related
Diversifying into business lines in the same industry
Volkswagen acquiring Audi
Unrelated
Lack of common ground in technology, products or markets between the industries.
To develop a new business
Formosa Plastics invests in Chang Gung Memorial Hospital
Spans two or more different industries
Type of Diversification
Dominant Business
Related Diversification
Related Constrained
Related Linked
Single Business
Revenues from Primary Activity & Sample Firms
<70%, Johnson & Johnson
B
A
C
<70%, Berkshire Hathaway, GE
A
>
95% , Coca-Cola, Google
A
70-90%, Microsoft, Nestlé
A
B
<70%, Amazon, Disney
B
A
C
Unrelated Diversification
Performance
ㅤ
Single Business
Dominant Business
Related Diversification
Related-Constrained
Related-Linked
Unrelated Diversification
ㅤ
Level of Diversification
Review
Corporate Strategy
Business Strategy
definition
Business strategy is the strategic initiatives a company pursues to create value for the organization and its stakeholders and gain a competitive advantage in the market.
(Division’s competitive strategy.)
Types
Single-business Corporation
Multi-business Corporation
Corporate Strategy
definition
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.
(Discuss the overall growth strategy of the company.)
Components
Allocation of resources
Human resources
/
Capital
Organizational design
Head office
/
Organizational structure
Strategic tradeoffs
Managing risk
/
Generating returns
/
Incentives
Portfolio management
The Strategic Management Process
Growth Scope
Geographical Expansion
Extending a company's operations or presence into new geographic regions to increase market reach and capitalize on opportunities.
Organic Growth
Achieving expansion through internal means such as increased sales, enhanced productivity, and product development, rather than acquisitions or mergers.
Product Diversification
Expanding a company's product line or entering new markets to mitigate risk and enhance growth opportunities.
Merger & Acquition
The consolidation of two companies through either a merger (joining) or
acquisition (purchase), often for strategic growth or synergy.
Vertical Integration
A company controls different stages of production or distribution of a product, from raw materials to final sale.
Strategic Alliance
A cooperative agreement between two or more companies to pursue shared objectives while maintaining their separate identities and operations.
Horizontally Diversify
Synergy among different businesses
Complements
Cross-Selling
A seller promotes additional or complementary products or services to a customer
Cost-Sharing
Sharing the costs of a project or activity jointly or dividing certain expenses in a collaboration.
ex. Joint Investment, Expense Sharing, Collaborative Development
1+1>2
Leveraging Core Competencies = stick-to-the-knitting
Focusing on Unique strengths and capabilities
To gain a competitive advantage
Synergy
The combined or cooperative effects produced by the collaboration of two or more entities
>
the sum of their individual effects
Multi-market Contact
Exploiting (aggregate) market power
Mutual forbearance
:red_cross: Immediately resorting to legal action or punitive measures
:check: Collaboration, trust, understanding :
Parenting advantages
Cooperate/Sharing
General management skills
Dominant Logic
Invisible assets
Coordination across businesses & Add value
Encourage Learning
Portfolio Management - BCG Matrix
used to determined where a business currently sits in relation to other business
its market share
:question:
:star:
cow
dog
low growth,low share
shouldn't invest anymore
low growth,high share
no space for improvement & stable
high growth,high share
invest more for the market growth and share
high growth,low share
still have spaces for new inversters
dog
its market growth
Sony’s Web of Corporate-Level Strategy
Corporation 2
Multi-business Copporation
(多事業體企業)
BU 2
BU 1
BU 3
Core Industry Consumer Electronics
Related Diversification(e.g. computer, small smart phones)
Forward Vertical Integration(e.g. movies and music)
Unrelated Diversification(e.g. internal venturing of the PlayStation)
Backward Vertical Integration(e.g. production of electronic components)
spin-off
MBO
privatization
IPO
publicitization
divest assets
reduction
Single-business Copporation
(單事業體企業)
Corporation 1
BU 1
Mission
Objectives
External Analysis
Strategic Choice
Strategy Implementation
Corporate Level Strategy
Which Businesses to enter?
Vertical Integration
Diversificatoin
Internal Analysis
Performance
ㅤ
How :question:
e.g.
e.g.
or
Competitive Advantage
B
C