Chapter 5
CORPORATE STRATEGIES
Integrative Growth Strategies
● Essentially External growth strategies and
Acquisition strategies
● The overall plan for the future of the business.
● Involves investing the resources of the
organization in another company or business to
achieve growth goals.
Types of Integrative Growth Strategies
1. Horizontal Integration
- a strategy where the organization
acquires another competing business
- First, organizations may employ
horizontal integration to eliminate real
or potential competitors because some
competitors can present themselves as
deadly threats to an organization
- Second, the desire of the organization to
simply expand its reach, expand its
market , and maintain its market status
as market leader.
- Third, to help increase its revenue.
- Ex. Jollibee purchases Mang Inasal for
fear of losing their market share in the
fast food industry
2. Vertical Integration
- the process of consolidating into an
organization other companies involved
in all aspects of a product or service
process from raw materials to
distribution
- adopted by an organization to gain
control over its suppliers and
distributors, to increase the company’s
market share, to minimize transaction
and inventory costs, and to ensure
adequate stocks in the retail stores
a. Backward Integration
- organization buys one of its
suppliers
- to better control its supply chain
and ensure a more reliable or
cost-effective supply of input;
eliminate inefficiencies; secure
quality outputs or according to
set conformance standards; help
increase the profitability of an
organization; and thus, create
competitive advantage
- Beneficial to the organization
because the cost of buying from
supplier decrease significantly
- Ex.Nokia is a manufacturer of
mobile phones, it can buy its
supplier of phone cases.
b. Forward Integration
- organization buys distribution
companies that are part of its
distribution chain
- the organization is able to
remove the intermediary, thus,
eliminating distribution costs
- allows an organization to
reinvent its marketing outlook
and redesign its marketing
strategies
- The organization takes over the
marketing activities of its
retailer.
The Boston Consulting Group Model
● The BCG Growth/Share Paradigm started to
make its impact on corporate strategy in early
1970s
● Bruce Henderson developed BCG model
● This model classifies the product or business
units of an organization in terms of two
parameters namely: market share and market
growth, in relation to marketing leaders.
Market Share
- The relative sales percentage of a company in
relation to the total sales percentage of the
market in consideration
- This metric value gives a general idea of how
the company stands with respect to the market
and its competitors.
Market Growth
- An increase in demand over time It may be high
or low
The BCG Model illustrates Four Broad Categories in
relation to market share (low, high) & market growth
(low, high)
❖ Stars
- A high market share in a high market
growth
- They are the market leaders and if the
market continues to grow, they are likely
to become cash cows
❖ Cash Cows
- A high market share in a low market
growth
- Since they are the market leaders in a
mature market growth, establishing a
competitive advantage can generate a lot
of cash flow & bring about high profit
margins
❖ Question Marks
- A low market share in a high market
growth
- Essentially new products need
promotional strategies
❖ Dogs
- A low market share in a low market
growth
- Should be minimized if not avoided
- They can be expensive to the company
The General Electric Model
● McKinsey conceptualized the General Electric
(GE) Model
● This model is an improvement of the BCG
Model, it is used to assess the strength of a
strategic business unit (SBU) of an organization
● It takes into consideration two parameters to
determine the overall strength of an SBU:
market attractiveness & business strengths
- Cell 1,2,3 - favorable positions with relatively
attractive growth opportunities
- Cell 4,5,6 - possess medium attractiveness, and
caution must be taken in making additional
investments
- Cell 7,8,9 - not attractive and the company
should think of getting out.
● External Factors that may affect the
market:attractiveness:
- Market size and growth
- Market niche and segmentation
- Demand
- Overall risk
● Internal Factors that may affect business
strength:
- Brand strength
- Staying power
- Profit margin
- Quality
- Customer patronage
Global Strategies
● Organizations pursue global strategies for
external business expansion
● Global Strategies cover Three Main Areas
➔ International Strategies
- Companies who sell excess
products outside their home
markets
- A company said to be doing
international business, although
its focus is the home market.
➔ Multinational Strategies
- When a company is involved in
a number of markets outside the
home country
 - To sell competitive & distinct
products that are suited to the
customer demands of different
countries
➔ Global Strategies
- Company treats or consider the world as
a whole, one market & one source of
supply with slight local variations

Benefits of Global Strategies

● Larger sales & earnings
● Can benefit from the global branding of their
products & services : Earnings from economies
of scale
● Higher production volume with efficiency
increases savings & creates greater advantage
for companies
● Sourcing of labor can be studied to optimize
labor costs

Resources Required
● Substantial capitalization
● Managerial & strategic leadership to be able to
come up with the best strategies for success
● Expertise & capabilities on the part of
management & employees
● Quality & differentiated products