An Introduction to Corporate Strategy

Collis & Montgomery

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Subtopics
The Need for Corporate
01 Strategy

What is Corporate Strategy?

02
A Framework for Corporate
03 Strategy
The Need for Corporate Strategy
CEO failure Modern Global
1995-2000 Economy
Unable to develop a
Efficient working 
They suffered reversal strategy that effectively
effectiveness of
fortunes  S&P 500 nearly addressed the changing
corporate strategy 
tripled  these firms barely competitive environment
work for, work with, or
maintained their value or capitalized on the
compete against a
potential benefits of
diversified corporation
Ex: Mattel even destroyed owning a wide set of
value businesses.

Companies Involuntary CEO Setting Corporate

Aetna, BankOne, turnover Strategy
Campbell Soup, Coca-
Not necessarily due to - The impact is so
Cola, Mattel, Xerox
poor management skills, pervasive and long
but because of the lasting.
In the past, all have
failure of corporate - Critical task &
enjoyed profit above
strategies. responsibility of CEO
industry norms
Pressure for Shareholder Value
2000s: RETHINKING
 Accounting scandals
 Corporate governance
(Sarbanes-Oxley Act)
 Global market retreat

1990s: INTENSE
 Active shareholders
 Active boards
 Global product markets
1980s: INCREASING  Global capital markets
1970s: LITTLE  Restructuring
pathological portfolios
 Growth at any cost  Takeover premium
 Weak rivals increase
 Fragmented, passive
shareholders
 Ineffective boards
 What is Corporate Strategy?
Corporate strategy addressed any
and every strategic issue facing a
company
Corporate strategy is the way a
company creates value through
the configuration and coordination
of its multimarket activities.
1. Value creation
2. Multimarket scope (configuration)
3. How the firm manages the activities and
businesses that lie within the corporate
hierarchy (coordination).
1
Describe the pattern of decisions that
determined a company's goals, produced the
principal policies for achieving these goals,
2 and defined the range of businesses the
company wants to pursue
3 Business-level strategy  the issue of how
to build a sustainable competitive advantage
4
in a discrete and identifiable market.
Corporate-level strategy  the overall plan
for a diversified company
5
Regardless of the type of strategy a firm is
pursuing, most of its value will ultimately be
6 realized in the business units, through their
enhanced ability to produce and deliver goods
and services to customers.
 A Framework for
Corporate Strategy

VISION

GOALS &
OBJECTIVES

No one right corporate

strategy
 Vision
 If you don't know where you are going, any
road can take you there.
 Successful corporations were those that had
Ambitious
a vision and were committed to fulfill it over aspiration
Central
an extended period of time. role

 In the 1920s, Ford wanted to put "a car in

every home“
 In the 1980s, Apple looked toward the future
VISION
and saw "a computer in every home.“
 By the 1990s, Bill Gates had gone further
Domain
yet: "a computer on every desk, and in Ethical
(Boundaries)
values
every home, running on Microsoft software."
 Goals and Objectives

Objectives refer to
Shorter-term specific short- and
medium-term
quantitative targets

Goals and objectives

Goals refer to can become powerful
qualitative intentions in incentives that support
the same time frame a formal reward
structure
 Resources Infographic Style
Assets Skills Capabilities

They determine not Many valuable resources

what a firm wants to enable a firm to compete
do, but what it can do. successfully in more than
one market.

They determine the range of market Resources are the

opportunities that are appropriate ultimate source of value
for a firm to pursue and so have a creation both within and
major impact on corporate strategy. across businesses.
 Business
Industry choice is critical to the
long-term success of a corporate
strategy.
1 Refers to the industries in which a firm
operates, as well as to the competitive

2 strategy it adopts in each.

Only effective strategies that create

competitive advantages produce
superior returns in the long run.
3 The particular competitive strategy a firm
pursues within each industry also affects

4
corporate performance.

An analysis of a firm's businesses should

5 include the attractiveness of their industries,

the competitive strategy the firm will adopt in
each, as well as the constraints on, and
opportunities that exist for, crossfertilization.
Structures, Systems, and Processes
Structure refers to the way Systems are the set of formal
the corporation is divided into policies and routines that
discrete units. It describes the govern organizational behavior.
for- mal organization chart They are the set of rules that
that delineates the allocation define how tasks, from strategic
of authority inside the planning to personnel
corporate hierarchy. evaluations, are to be fulfilled.

Processes describe the

informal elements of an
organization's activities.
 Corporate Advantage

Does ownership of the business create

benefit somewhere in the corporation?

Value creation
Are those benefits greater than the cost of
corporate overhead?

Does the corporation create more value with

the business than any other possible corporate
parent or alternative governance structure?
Thank You