Strategy Formulation:

1
Chapter 6

• Strategy Formulation
• Corporate Strategy
• Globalization

2
Corporate Strategy

• Directional Strategy
• Orientation toward growth
• Expand, cut back, status quo?
• Concentrate within current industry, diversify
  into other industries?
• Growth and expansion through internal development
  or acquisitions, mergers, or strategic
  alliances?

3
Corporate Strategy

• Growth Strategies
• Most widely pursued
• 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.

4
Corporate Strategy

• 2 Basic Growth Strategies
• Concentration
• Current product line in one industry
• Diversification
• Into other product lines in other industries

5
Corporate Strategy

• Basic Concentration Strategies
• Vertical growth
• Horizontal growth

6
Corporate Strategy

• Concentration
• Vertical growth
• Vertical integration
• Backward integration
• Forward integration

7
Corporate Strategy

• Concentration
• Horizontal Growth
• Horizontal integration

8
Corporate Strategy

• Basic Diversification Strategies
• Concentric Diversification
• Conglomerate Diversification

9
Corporate Strategy

• Concentric Diversification
• Growth into related industry
• Search for synergies
• Conglomerate Diversification
• Growth into unrelated industry
• Concern with financial considerations

10
Corporate Strategy

• Stability Strategies
• Pause/proceed with caution
• No change
• Profit strategies

11
Corporate Strategy

• Retrenchment Strategies
• Turnaround
• Captive Company Strategy
• Selling out
• Bankruptcy
• Liquidation

12
Corporate Strategy

• Portfolio Analysis
• How much of our time and money should we spend on
  our best products to ensure that they continue to
  be successful?
• How much of our time and money should we spend
  developing new costly products, most of which
  will never be successful?

13
Corporate Strategy

• Portfolio Analysis
• BCG (Boston Consulting Group) Matrix
• Product life cycle and funding decisions
• Question marks
• Stars
• Cash cows
• Dogs

14
Describe the corporate strategy(ies) and
mechanisms that I.M.P. Group is using.

• ) 1/30/2003 "I.M.P. Grows Healthcare Business"
• CAN-med Surgical, the medical division of I.M.P.
  Group Ltd, has recently purchased the assets of
  the Champion Radiographic Division of Champion
  Photochemistry Inc. With offices located in
  Toronto and Montreal, Quebec, Champion's
  Radiographic Division specializes in the
  distribution of products and services to the
  radiographic healthcare industry across Canada.
• Stephen Rowe, Executive VP C.O.O. of I.M.P.'s
  Commercial Core Group of companies, said,
  "Champion's products and services are
  complementary to our existing healthcare
  business, which includes CAN-med Surgical, Dental
  Source Canada and MEDIchair Halifax.
• Employing over 3,500 employees, I.M.P. Group
  Limited is a diversified group of companies
  engaged in the aerospace, airline, hospitality,
  marine and healthcare industries in Canada, the
  U.S., and Russia.

15
Stages of International Development

• Domestic companysome exporting
• Domestic companyexport division
• Domestic companyinternational division
• Multinational corporationmultidomestic emphasis
• Multinational corporationglobal emphasis

16
Globalization

• Ongoing process of integration and
  interconnection of states, markets, technologies,
  and firms
• Barkema, Baum, Mannix (2002)

17
What Is Globalization?

• Globalization is everything and its oppositeIt
  leaves you behind faster and faster, and it
  catches up to you faster and faster. While it is
  homogenizing cultures, it is also enabling people
  to share their unique individuality farther and
  widerIt enables us to reach into the world as
  never before and it enables the world to reach
  into us as never before.
• Thomas Friedman,
• The Lexus and the Olive Tree

18
What is Driving Globalization?

• Freeing, opening, deregulating, privatizing
  economies to make them more open to investment
• Digitization of technologies revolutionizing
  communications
• Barkema, Baum, Mannix (2002)

19
Overlapping Domains of Globalization

• Nation States
• Super-markets (NY, Tokyo, Hong Kong, London,
  Paris)
• Super-powered individuals (i.e., Wall Street
  brokers, George Soros, Internet Terrorists)

20
What are the Implications for Strategy?

• Competitiveness used to be tied to capturing and
  sustaining an advantage
• Now, view is all competitive advantages erode
  firms must constantly seek the next
  advantage Barkema, Baum, Mannix (2002)

21

• Global market convergence homogeniety of needs
  and tastes marketing the world same standards
  and service worldwide
• Cost advantages standardization, economies of
  scale, central sourcing (e.g., IKEA)

22
Globalization and Value Chain

• Each activity is located geographically in the
  most advantageous country (e.g., Boeing)
• Ie., Value chain activities sited in lowest cost
  location

23
Global vs Multidomestic

• One size fits all approach does not always work
  e.g, Heineken beer in The Netherlands
• multiple markets and diverse customers

24
Ethical Dimensions of Globalization

• Is globalization inevitable?
• Is the world becoming more just?
• Must globalization result in the Americanization
  of the world?
• www.themeatrix.com
• Are global strategies amoral?

25
Ethical Issues in a Global Context

• Providing questionable products to various
  markets (cigarettes, contaminated goods)
• Price discrimination (gouging, dumping)
• Taking advantage of slack environmental or labor
  standards in other countries
• Human rights violations
• Bribery and foreign corrupt practices

26
Shrinking the World to 100

• 57 Asians, 21 Europeans, 14 Western Hemisphere, 8
  Africans
• 51 female, 49 male
• 70 non-white, 30 white
• 60 wealth in hands of 6 (all U.S.)
• 70 unable to read, substandard housing
• 50 suffering from malnutrition
• 1 with university education
• No one would own a computer

27
Distributive Justice

• The richest fifth of the population receives 85
  of total world income.
• The poorest fifth receives 1.5 of total world
  income
• 15 of worlds population living in high-income
  countries account for 56 of worlds total
  consumption
• 1/3 of worlds total grain harvest is fed to
  livestock while 1b people suffer from chronic
  hunger and malnutrition

• (UN press release June 2003).

28
Chi sem Universal consciousness

• The wealth of the rich is maintained through
  neglect of the poor.
• Dalai Lama

29
When Corporations Rule the World

• Corporations have emerged as the dominant
  governance institutions on the planet, with the
  largest among them reaching into virtually every
  country in the world and exceeding most
  governments in size and power.
• David Korton

30
When Corporations Rule the World

• 51 of 100 largest economies are corporations
  (e.g., GMs annual sales GDP of Denmark)
• 1-2 Americans own controlling stock in 90 of
  the biggest corporations
• 1 Americans make 90 political campaign
  distributions
• Has competition increased with globalization?

31

• Deep down, people sense that theres a
  wonderful upside, but also a terrific downside to
  the way the planet is evolving. Intuitively, they
  sense that time is running out that it is high
  noon.
• J.F. Rischard, 2003
• V.P. Europe, World Bank

32

• Never doubt that a small group of thoughtful,
  committed citizens can change the world. Indeed,
  it is the only thing that ever has.
• Margaret Mead
• Somebody has to do something and its just
  incredibly pathetic that it has to be us.
• Jerry Garcia, The Grateful Dead