CORPORATE

LEVEL STRATEGY
BY- DEVESH HARI
ROLL.NO.- 15
MPMIR 3rd SEMESTER

DEFINITION
Corporate-Level Strategy - specifies
actions a firm takes to gain a competitive
advantage by selecting and managing a
portfolio of businesses that compete in
different product markets or industries.
Corporate level strategic management
consists of activities that defines the overall
characters and mission of the organisation,
products and service segments it will
pursue or exit.

SOME COMMON QUESTIONS WHICH RISES AT

CORPORATE LEVEL

What business are we in? What business

should we be in?
What are our basic directions for the future?
What is our culture and leadership style?
What is our attitude to strategic change? What
should it be?

Mintzberg (1988) argues that corporate

strategy consists of four main blocks:

Plan, how to get from point A to point B.

Pattern of actions over timeframe
Strategy is position
Strategy is perspective, that is, vision and
direction

Types of Strategies

Forward Integration
Backward Integration
Horizontal Integration
Market Penetration
Market Development
Product Development

Cont

Related Diversification
Unrelated Diversification
Retrenchment
Divestiture
Liquidation

Integration Strategies
Forward integration, backward
integration, and horizontal
integration are sometimes
collectively referred to as vertical
integration strategies. Vertical
integration strategies allow a firm to
gain control over distributors,
suppliers, and/or competitors.

Forward Integration
Definition- Gaining ownership or increased
control over distributors or retailers
Exp.- PepsiCo launched a
hostile takeover of Pepsi Bottling Group after
its $4.2 billion offer was rejected.
An effective means of implementing
forward integration is franchising.
Businesses can expand rapidly by
franchising because costs and opportunities
are spread among many individuals.

Backward Integration
Backward integration is a strategy of
seeking ownership or increased control of
a firms suppliers.
This strategy can be especially
appropriate when a firms current
suppliers are unreliable, too costly, or
cannot meet the firms needs.
Exp.-Chinese carmaker Geely
Automobile Holdings Ltd. purchased
Australian car-parts maker Drivetrain
Systems International Pty. Ltd.

Horizontal Integration
Horizontal integration refers to a strategy
of seeking ownership of or increased
control over a firms competitors.
One of the most significant trends in
strategic management today is the
increased use of horizontal integration as a
growth strategy.
Mergers, acquisitions, and takeovers
among competitors allow for increased
economies of scale and enhanced
transfer of resources and competencies.
Exp.- Pfizer acquires Wyeth; both are
huge drug companies

Intensive Strategies
Market penetration, market
development, and product
development are sometimes
referred to as intensive strategies
because they require intensive
efforts if a firms competitive position
with existing products is to improve

Market Penetration
A market penetration strategy seeks to
increase market share for present products or
services in present markets through greater
marketing efforts.
This strategy is widely used alone and in
combination with other strategies.
Market penetration includes increasing the
number of salespersons, increasing
advertising expenditures, offering extensive
sales promotion items, or increasing publicity
efforts.
Exp.- Coke spending millions on its
new slogan Open Happiness.

Market Development
Market development involves
introducing present products or
services into new geographical areas.
Exp.- Time Warner purchased 31
percent of Central European Media
Enterprises Ltd. in order to expand
into Romania, Czech
Republic,Ukraine, and Bulgaria

Product Development
Product development is a strategy
that seeks increased sales by
improving or modifying present
products or services. Product
development usually entails large
research and development
expenditures.
Exp.- Googles new Chrome OS
operating system illuminates years of
monies spent on product

Diversification Strategies
There are two general types of
diversification strategies: related and
unrelated

Businesses are said to be related when

their value chains posses competitively
valuable cross-business strategic fits
Businesses are said to be unrelated
when their value chains are so dissimilar
that no competitively valuable crossbusiness relationships exist

Related Diversification
Adding new but related products or
services
Exp.- When Merck & Co.
acquired rival Schering-Plough Corp
for $41.1 billion in 2009, that
acquisition brought to Merck three
new, related businesses. The three
new areas of business are biotech,
consumer health, and animal health.

Unrelated Diversification
An unrelated diversification strategy favors
capitalizing on a portfolio of businesses that are
capable of delivering excellent financial
performance in their respective industries, rather
than striving to capitalize on value chain strategic
fits among the businesses
Pursuing unrelated diversification entails being on
the hunt to acquire companies whose assets are
undervalued, or companies that are financially
distressed, or companies that have high growth
prospects but are short on investment capital

Defensive Strategies
In addition to integrative, intensive,
and diversification strategies,
organizations also could pursue
retrenchment , divestiture , or
liquidation.

Retrenchment
Retrenchment occurs when an organization
regroups through cost and asset
reduction to reverse declining sales and
profits. Sometimes called a turnaround or
reorganizational strategy, retrenchment
is designed to fortify an organizations basic
distinctive competence.
Exp.Smithfield Foods, the worlds
largest pork processor, is closing 6 of its 40
plants, laying off 1,800 employees, and
cutting production by 10 percent in 2009 in
efforts to stop the liquidity drain on the firm.

Divestiture
Selling a division or part of an organization is
called divestiture. Divestiture often is used
to raise capital for further strategic
acquisitions or investments.
Exp.-Ailing Lehman Brothers Holdings
divested its venture-capital division in 2009
as the firm shed assets to raise cash and pay
creditors. The acquiring firm, HarbourVEst
Partners LLC, changed the name of the
Lehman division to Tenaya Capital

Liquidation
Selling all of a companys assets, in
parts, for their tangible worth is called
liquidation. Liquidation is a recognition
of defeat and consequently can be an
emotionally difficult strategy.
Exp.-Based in Knoxville, Tennessee,
Goodys Family Clothing liquidated all its
282 stores in 2009 and all 10,000 of its
employees lost their jobs