Week 7: corporate level strategies

CORPORATE LEVEL STRATEGY

Corporate level strategy to identify strategies that corporations or organizations decide to pursue for the benefit of the whole organization.

The various corporate level strategies will be discussed under the following:

                  

                           

ii) Secondary level strategies

The Expansion Strategy

The strategy basically is to grow and increase its operations through the existing activities. In other words, the measure is to increase the volume of the existing operations. 

No new product will be introduced and the final measure of an expansion strategy is the volume increase of its current activities is to be the same as that of the previous year.

For example:

–        Supermarkets (Giant, Tesco)                     

–        Petrol stations (Petronas, Shell)

–        Fast food chain outlets (Kentucky Fried Chicken, Secret Recipe)

The integration strategy

Integration strategy is to seek control of its operations.

Control here refers to the activities along the supply chain right from the raw material production until the purchase of the final product by the ultimate consumer.

For example:

–        A furniture manufacturer would buy the sawn timber as its raw material and subject them to a series of processes to finally be assembled into a furniture form (dining set).

The Diversification Strategy

Diversification is basically increasing the number of outputs produced or services rendered. Thus, a company wanting to diversify is looking at how to increase the variety of activities in its present operations.

There are four decisions that come under this category:

Concentric diversification strategy is when a company would want to increase the variety of its manufactured products that are related to its present operations.

–        Conglomerate diversification strategy is adding variety in a different or unrelated sector.

E.g. Sime Darby, YTL, Hong Leong Group

–        Horizontal diversification strategy (term quite rarely used) refers to a company having to diversify because of requests by its regular clients. In order for it to continue doing business with the regular clients, it is some what obliged to meet the request.

–        Geographical diversification strategy is when a company goes into a new country for the first time to carry out its current business activites. Although no new variety is added, the ‘new variety’ covers  the new country as market development strategy (functional level strategy) rarely talks about going into a new country.

–        Turnaround Strategies

These are strategies that are grouped together as they all represent actions commonly used in corporations facing some difficulties in their operations as reflected in their negative performance indicators. Such indicators are like negative growth rate, rate of return.

–        Liquidation strategy is the most extreme type of turnaround strategy. If retrenchment and divestiture are not able to turnaround the company, then liquidation or selling of the whole company is the only alternative left.

iii) Tactical level strategy

Joint venture

Setting up a new company with equity participation of all the parties involved (can be more than two).

Merger

The establishment of a new company while the two or more names of those involved in the merger will not exist anymore.

E.g. Bank Bumiputera + Commercial Bank = Bumiputera Commerce …. + Southern Bank = CIMB

E.g. Golden Hope+Sime Darby+H&C =   Sime Plantation

Acquisition/takeover

Buying the majority equity of a company

Strategic alliances

Alliances or Understanding between 2 or more party

Licensing/ franchising

• Seek permission to run a business based on that of the licensor
• E.g. KFC, McD, Secret Recipe, SmartReaders, Menara Opticals, Levis

 CORPORATE LEVEL STRATEGY

Corporate level strategy to identify strategies that corporations or organizations decide to pursue for the benefit of the whole organization.

The various corporate level strategies will be discussed under the following:

                            

ii) Secondary level strategies

The Expansion Strategy

The strategy basically is to grow and increase its operations through the existing activities. In other words, the measure is to increase the volume of the existing operations. 

No new product will be introduced and the final measure of an expansion strategy is the volume increase of its current activities is to be the same as that of the previous year.

For example:

–        Supermarkets (Giant, Tesco)                     

–        Petrol stations (Petronas, Shell)

–        Fast food chain outlets (Kentucky Fried Chicken, Secret Recipe)

The integration strategy

Integration strategy is to seek control of its operations.

Control here refers to the activities along the supply chain right from the raw material production until the purchase of the final product by the ultimate consumer.

For example:

–        A furniture manufacturer would buy the sawn timber as its raw material and subject them to a series of processes to finally be assembled into a furniture form (dining set).

The Diversification Strategy

Diversification is basically increasing the number of outputs produced or services rendered. Thus, a company wanting to diversify is looking at how to increase the variety of activities in its present operations.

There are four decisions that come under this category:

Concentric diversification strategy is when a company would want to increase the variety of its manufactured products that are related to its present operations.

–        Conglomerate diversification strategy is adding variety in a different or unrelated sector.

E.g. Sime Darby, YTL, Hong Leong Group

–        Horizontal diversification strategy (term quite rarely used) refers to a company having to diversify because of requests by its regular clients. In order for it to continue doing business with the regular clients, it is some what obliged to meet the request.

–        Geographical diversification strategy is when a company goes into a new country for the first time to carry out its current business activites. Although no new variety is added, the ‘new variety’ covers  the new country as market development strategy (functional level strategy) rarely talks about going into a new country.

–        Turnaround Strategies

These are strategies that are grouped together as they all represent actions commonly used in corporations facing some difficulties in their operations as reflected in their negative performance indicators. Such indicators are like negative growth rate, rate of return.

–        Liquidation strategy is the most extreme type of turnaround strategy. If retrenchment and divestiture are not able to turnaround the company, then liquidation or selling of the whole company is the only alternative left.

iii) Tactical level strategy

Joint venture

Setting up a new company with equity participation of all the parties involved (can be more than two).

Merger

The establishment of a new company while the two or more names of those involved in the merger will not exist anymore.

E.g. Bank Bumiputera + Commercial Bank = Bumiputera Commerce …. + Southern Bank = CIMB

E.g. Golden Hope+Sime Darby+H&C =   Sime Plantation

Acquisition/takeover

Buying the majority equity of a company

Strategic alliances

Alliances or Understanding between 2 or more party

Licensing/ franchising

• Seek permission to run a business based on that of the licensor
• E.g. KFC, McD, Secret Recipe, SmartReaders, Menara Opticals, Levis