CATEGORIES OF BUSINESS ORGANIZATIONS

SINGLE PROPRIETORSHIP PARTNERSHIP CORPORATION COOPERATIVE

Group of Companies
Parent Company Subsidiaries

NATURE OF CORPORATE LEVEL STRATEGY

CORPORATE LEVEL STRATEGY CORPORATE STRATEGY

4 Es to Addressing Corporate Strategy 1.Extend 2.Expand 3.Exit 4.Enhance

ENHANCE E X I T EXPAND EXPANSION Add products and services within an existing business.

EXIT Drop a product or service line or exit a business.

Figure 16. Ways that a Business Strategy can Evolve

EXTEND

ENHANCEMENT Add functionality or improve a product or service that is currently offered.

EXTENSION Adopt new business model or enter new business.

Key Issues is Corporate Level Strategy a)Directional Strategy b)Portfolio Strategy c)Parenting Strategy

Strategic Choices at Corporate Level

a.Business Closure b.Business Disposal c.Business Acquisition d.Business Reorganization e.Business Start up

f. The impact of doing nothing different

V E R T I C A L

I N D I R E C T C O M P E T I T O R S

Customers/End Users
Forward integration

D I R E C T

I N T E G R A T I O N

Horizontal diversification

The Company

Horizontal integration

Backward integration Suppliers Horizontal integration/diversification

C O M P E T I T O R S

Figure 18. Basic Model for Integration and Diversification Options

Vertical integration - is the degree to which a firm owns its upstream suppliers and its downstream buyers. - the term VI describes a style of management control

Three (3) varieties:

backward (upstream) vertical integration forward (downstream) vertical integration

balanced (both upstream and downstream) vertical integration

a.Full Integration b.Taper Integration

c.Quasi- Integration
d.Long-term Contracts

Horizontal integration - is a strategy where a company acquires, mergers or takes over another company in the same industry value chain.

Merger is the joining of two similar sizes, independent companies to make one joint entity. Acquisition is the purchase of another company. Hostile takeover is the acquisition of the company, which does not want to be acquired.

Horizontal Diversification
Generally perceived as a strategy that evolves around the idea of seeking ownership or increased control over the direct and indirect competitors of the business.

Direct and Indirect competitors

Direct competitors can be classified as: Offering the same products and/or services as you are offering to your clients and/or customers. Having the same targeted field of clients, customers and/or demographics. Using the same tactics in advertising or bringing news/informations of products/services to your targeted demographics.

Indirect competitors can be classified as wanting to have a share of the pie

Corporate strategy Business (Division level strategy)

Functional strategy

Figure 19. Hierarchy of Strategy

 Corporate strategy this strategy seeks to determine what businesses a company should be in or wants to be in. Corporate strategy determines the direction that the organization is going and the roles that each business unit in the organization will plan in pursuing that direction. Business strategy this strategy seeks to determine how an organization should compete in each of its businesses. Functional strategy this strategy seeks to determine how to support the business strategy.

Conglomerate Diversification Unrelated Diversification

In an effort to extend growth beyond its turf, large companies dream of expanding their image beyond profit objectives . Fame and corporate image beyond the boundaries of the industry or sector they are known for are among the motivations that drive corporate giants to go into conglomerate diversification.

Is a corporate diversification option that involves engaging or dealing with products or services that are somehow related to or associated with what the firm is presently handling.

When an organization competes in a no-growth or a slow-growth industry; When adding new, but related products significantly would enhance the sales of current products; When new, but related, products could be offered at highly competitive prices; When new, but related, products have seasonal sales levels that counterbalance an organizations existing peaks and valley; When an organizations products are currently in the decline stage of the product life cycle; and When an organization has a strong management team.

Product Fit Is achieved when distribution channels, sales forces, promotion techniques, or customers can be handled at the same time for more than one product or service. Operating Fit Involves economies being realized in certain areas like purchasing, warehousing, production and operations, research and development, or personnel from more than one product or services. Management Fit Occurs when managers are given responsibility over areas of accumulated exposure from one line of business to another.

Growth Strategy expands the companys activities; Stability Strategies make no chance to the companys current activities; and Retrenchment Strategies reduce the companys level of activities

Merger- Involves a transaction involving two or more corporations in which a stock is exchanged or swapped among independent business organizations from which only one company services Acquisition- Is an option that involves the purchase of a company then completely absorbed as in operating subsidiary or division of the acquiring corporation. Strategic alliance- is another option involving a partnership among two or more corporations or business units to achieved strategically significant objectives that are mutually beneficial.

Pause/proceed with caution. This is in effect, a sort of time out. It is an opportunity to rest before continuing a growth or retrenchment strategy. No change strategy. It involves a decision to do nothing new. Profit strategy. It involves a decision to do nothing new in a worsening situation and instead, to act as though the companys problems are only temporary.

Turnaround strategy. This strategy emphasizes on the improvement of operational efficiency and is probably most appropriate when a corporations problems are pervasive but not yet critical. -Contraction -Consolidation Sell-out/Divestment strategy. This strategy is resorted to when a company has a weak competitive position in its industry. Bankruptcy strategy. Involves giving up management of the firm to the courts in return for some settlement of the corporations obligations. Liquidation strategy. Is the termination of the firms business operation.

Exporting Shipping goods to other country. Licensing Grants rights tp another firm in thr host cou0ntry to prudce or sell prodcut or services. Franchising Grants rights to another company to open a business.

Joint Venture Companies Combine the resources & Expertise needed to develop new Products or Technologies. Acquisition Acquiring or Purchasing another company. Greenfield Development Building its own manufacturing plant and distribution system.

Production Sharing

Turnkey Operations Construction of Operating facilities in exchange for fee. Management Contract A corporation may use its personnel to assist a firm in a host country for a specified fee & period of time. Build-Operate-Transfer / BOT Concept

Outsourcing