Week 7

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Week 7

• Strategy Formulation Corporate Strategy

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Three Levels of Strategy
Corporate Strategy
Business (Division Level) Strategy
Functional Strategy
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Corporate Strategy

• Two choices at corporate level (affect business
  level and functional levels)
• Corporate directional strategies of growth,
  stability or retrenchment
• Portfolio strategy analysis techniques to guide
  decisions to enter and exit businesses

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Directional Strategies

• Three choices . . .
• Growth strategies
• Stability strategies (status quo)
• Retrenchment strategies (shrink)

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Directional Strategy 1 Growth

• 2 Basic Growth Strategies
• Concentration (Current product line in one
  industry)
• Vertical Growth -gt same market, along supply
  chain
• Horizontal Growth -gt new markets
• Diversification (New product lines in other
  industries)
• Diversification -gt related industry
• Conglomerate -gt unrelated industry

Name companies that have successfully used these
strategies to grow.
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Directional Strategy 2 Stability

• Pause/proceed with caution
• No change
• Profit strategy

When would you choose to adopt a stability
strategy for your company?
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Directional Strategy 3 Retrenchment

• Turnaround
• Captive Company Strategy
• Sell-out
• Bankruptcy
• Liquidation

Name companies that have recently chosen (or been
forced to) adopt these retrenchment strategies?
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RetrenchmentTurnaround Strategy

• Emphasizes the improvement of operational
  efficiency
• Most appropriate when problems are severe but not
  critical
• Two Phases
• Contraction
• stop the bleeding
• Across-the-board cutbacks in size and costs
• Consolidation
• Stabilize the now leaner organization
• Reduce overhead, justify costs of functional
  activities

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Portfolio Strategies

• 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?

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Portfolio Strategies

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

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BCG Matrix
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Portfolio Strategies

• Portfolio Analysis
• Advantages
• Top management evaluates each of firms
  businesses individually
• Externally-oriented data is used to supplement
  management judgment
• Raises issue of cash flow availability
• Facilitates communication
• Disadvantages
• Difficult to define product/market segments
• Standard strategies can miss opportunities
• Illusion of scientific rigor

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In-Class Exercise 6BCG Matrix

• Handout from www.marketingteacher.com
• Students form into your BSG teams
• Complete the BCG Matrices for your shoe industry
• Add names to 1 sheet and hand in

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Quiz 2 PreparationPractice Exercise

• (Handout)
• Students work in pairs or threes to complete the
  Practice Exercise