Strategy Formulation: Corporate Strategy
CHAPTER 6
STRATEGY FORMULATION: CORPORATE STRATEGY
Corporate Strategy
Corporate strategy deals with three key issues facing the corporation as a whole: 1. Directional strategy- the firm’s overall orientation toward growth, stability, or retrenchment
2. Portfolio strategy- the industries or markets in which the firm competes through its products and business units
3. Parenting strategy- the manner in which management coordinates activities, transfer resources, and cultivates capabilities among product lines and business units
Corporate strategy is primarily about the choice of direction of the firm as a whole. In other words, this includes decisions regarding the flow of financial and other resources to and from a company’s product lines and business units.
This whole chapter is organized in three parts that examine corporate strategy in terms of directional strategy (orientation toward growth), portfolio analysis (coordination of cash flow among units), and corporate parenting ( building corporate synergies through resource sharing and development).
Directional Strategy Every corporation must decide its orientation toward growth by asking the following questions: 1. Should we expand, cut back or continue our operations unchanged? 2. Should we concentrate our activities within our current industry or should we diversify into other industries? 3. If we want to grow and expand nationally and/or globally, should we do so through internal development or external acquisitions, mergers or strategic alliances?
A corporation’s directional strategy is composed of three general orientations (also called grand strategies): • Growth strategies expand the company’s activities. • Stability strategies make no change to the company’s current activities. • Retrenchment strategies reduce the company’s level of activities.
Growth Strategies A corporation can grow internally by expanding its operations
STRATEGY FORMULATION: CORPORATE STRATEGY
Corporate Strategy
Corporate strategy deals with three key issues facing the corporation as a whole: 1. Directional strategy- the firm’s overall orientation toward growth, stability, or retrenchment
2. Portfolio strategy- the industries or markets in which the firm competes through its products and business units
3. Parenting strategy- the manner in which management coordinates activities, transfer resources, and cultivates capabilities among product lines and business units
Corporate strategy is primarily about the choice of direction of the firm as a whole. In other words, this includes decisions regarding the flow of financial and other resources to and from a company’s product lines and business units.
This whole chapter is organized in three parts that examine corporate strategy in terms of directional strategy (orientation toward growth), portfolio analysis (coordination of cash flow among units), and corporate parenting ( building corporate synergies through resource sharing and development).
Directional Strategy Every corporation must decide its orientation toward growth by asking the following questions: 1. Should we expand, cut back or continue our operations unchanged? 2. Should we concentrate our activities within our current industry or should we diversify into other industries? 3. If we want to grow and expand nationally and/or globally, should we do so through internal development or external acquisitions, mergers or strategic alliances?
A corporation’s directional strategy is composed of three general orientations (also called grand strategies): • Growth strategies expand the company’s activities. • Stability strategies make no change to the company’s current activities. • Retrenchment strategies reduce the company’s level of activities.
Growth Strategies A corporation can grow internally by expanding its operations