Chapter+7+-+Strategy+Formulation+Corporate+Strategy.ppt

Corporate strategy- the choice of direction of the firm as a whole and the management of its business or product portfolio and concerns: Directional strategy Portfolio analysis Parenting strategy Directional strategy- the firm’s overall orientation toward growth, stability, or retrenchment Portfolio analysis- industries or markets in which the firm competes through its products and business unites Parenting strategy- the manner in which management coordinates activities and transfers resources and cultivates capabilities among product lines and business units Growth Strategy: Concentration and Diversification Merger- a transaction involving two or more corporations in which stock is exchanged but in which only one corporation survives Acquisition- the purchase of a company that is completely absorbed by the subsidiary or division of the acquiring corporation Growth Strategy Concentration Vertical Horizontal Diversification Concentric Conglomerate Concentration strategies Vertical growth- taking over the function previously provided by a supplier or by a distributor Vertical integration- the degree to which a firm operates vertically in multiple locations on an industry’s value chain from extracting raw materials to manufacturing to retailing Backward integration- assuming a function previously provided by a supplier Forward integration- assuming a function previously provided by a distributor Concentration strategies Transaction cost economies- vertical integration is more efficient than contracting for goods and services in the marketplace when the transaction costs of buying on the open market become too great Full integration- a firm internally makes 100% of its key suppliers and completely controls its distributors Taper integration- a firm internally produces less than half of its own requirements and buys the rest from outside suppliers Quasi-integration- a company does not make any of its key supplies but purchases most of its requirements