Prentice Hall, 2004 Chapter 6Wheelen/Hunger

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Corporate Directional Strategies

Prentice Hall, 2004 Chapter 6Wheelen/Hunger

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Corporate Strategy

Directional Strategy:– Three Grand Strategies:• Growth strategies• Stability strategies• Retrenchment strategies

Prentice Hall, 2004 Chapter 6Wheelen/Hunger

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Corporate Strategy Growth Strategies:

– Most widely pursued strategies– External mechanisms:• Mergers

– Transaction involving two or more firms in which stock is exchanged but only one firm survives.

• Acquisition– Purchase of a firm that is absorbed as an operating

subsidiary of the acquiring firm.

• Strategic Alliance– Partnership of two or more firms to achieve

strategically significant objectives that are mutually beneficial.

Prentice Hall, 2004 Chapter 6Wheelen/Hunger

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Corporate Strategy

2 Basic Growth Strategies:

–Concentration– Current product line in one industry

–Diversification– Into other product lines in other industries

Prentice Hall, 2004 Chapter 6Wheelen/Hunger

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Corporate Strategy

Basic Concentration Strategies:

–Vertical growth

–Horizontal growth

Prentice Hall, 2004 Chapter 6Wheelen/Hunger

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Corporate Strategy

Concentration:

Vertical growth

– Vertical integration• Full integration• Taper integration• Quasi-integration

– Backward integration

– Forward integration

Prentice Hall, 2004 Chapter 6Wheelen/Hunger

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Corporate Strategy

Concentration:

Horizontal Growth

–Horizontal integration

Prentice Hall, 2004 Chapter 6Wheelen/Hunger

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Corporate Strategy

Basic Diversification Strategies:

–Concentric Diversification

–Conglomerate Diversification

Prentice Hall, 2004 Chapter 6Wheelen/Hunger

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Corporate Strategy

Diversification:

Concentric:

–Growth into related industry–Search for synergies

Prentice Hall, 2004 Chapter 6Wheelen/Hunger

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Corporate Strategy

Diversification:

Conglomerate:

–Growth into unrelated industry–Concern with financial considerations

Prentice Hall, 2004 Chapter 6Wheelen/Hunger

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Corporate Strategy

InternationalEntry

Options

ExportingLicensing

FranchisingJoint Ventures

AcquisitionsGreen-Field Development

Production SharingTurnkey Operations

BOT ConceptManagement Contracts

Prentice Hall, 2004 Chapter 6Wheelen/Hunger

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Corporate Strategy

Stability Strategies:

–Pause/proceed with caution

–No change

–Profit strategies

Prentice Hall, 2004 Chapter 6Wheelen/Hunger

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Corporate Strategy

Retrenchment Strategies:

– Turnaround

–Captive Company Strategy

–Selling out

–Bankruptcy

– Liquidation

Prentice Hall, 2004 Chapter 6Wheelen/Hunger

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International Portfolio Analysis

2 Factors:

• Country’s attractiveness• Market size, rate of growth, regulation

• Competitive strength• Market share, product fit, contribution

margin, market support