Corporate Level and International Strategy

Report
Corporate-Level and
International Strategy
Introduction
Corporate level issues
Corporate parent
The corporate parent refers to the levels
of management above that of the business
units and therefore without direct
interaction with buyers and competitors
PRODUCT/MARKET
DIVERSITY
Diversification is a strategy that takes
the organisation into both new markets
and products or services
Reasons for diversification
 Efficiency gains from resources (by-
products)
 Gains from corporate managerial
capabilities
 Increase market power
 Response to environmental change
 Risk diversification
 Powerful stockholder's pressure
Related diversification

Related diversification can be defined as
strategy development beyond current
products and markets, but within the
capabilities or value network of the
organisation
Related diversification is often seen as
superior to unrelated diversification
 Time and cost saving

The difficulty for business-unit managers
in sharing resources with other business
units
Vertical integration
 Backward integration
 Forward integration
Horizontal integration
Unrelated diversification
Unrelated diversification is the development of
products or services beyond the current
capabilities or value network.
 Unrelated diversification is described as a
‘conglomerate strategy’
 Exploiting dominant logic (focusing major
business)
 Effective in underdeveloped markets
Diversification and
performance
International diversity and
international strategy
Reasons for international diversity
 Globalization of markets
 Following customers while internationalizing
 Bypass home market limitations
 Exploit differences between countries and geographical
regions
* Difference in culture
* Administrative difference
* Geographical specific differences
* Specific economic factor (labor)
 Economic benefits
* Reap economies of scale
* Stabilization of earning across markets
To broaden the size of the market to
exploit strategic capabilities
 Internationalization of value adding
activities
 To enhance their knowledge base

Market selection and entry
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Macro economic condition
Political environment
Infrastructure
Transport and communication
Availability of local resources
Tariff and non-tariff barrier
Similarity of cultural norms
Extent of political and legal risks
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Entry modes
Exporting, contractual arrangements, joint ventures,
foreign direct investment
Market entry Modes, Advantages
and Disadvantages
Market entry Modes, Advantages
and Disadvantages
Market entry Modes, Advantages
and Disadvantages
Market entry Modes, Advantages
and Disadvantages
International value framework
Global sourcing: Purchasing services and
components from the most appropriate
suppliers around the world regardless of
their location
 Locational advantages
 Cost advantage
 Existence of unique capabilities as
competitive advantage
International strategies
Global-local dilemma (standardization)
 Concentration of assets and capabilities in
limited
 location (mostly home)
Generic strategies
 Multi-domestic strategy
 Value adding in individual national market to
unique local requirements
 Global strategy
 Standardized products
Value Creation and The Corporate
Parent
Value-adding and value-destroying
activities of corporate parents
 The value-adding activities
Focus
Clarity to external stakeholders:
Clarity to business units:
Providing expertise and services
Knowledge creation and sharing processes
Value-destroying activities
 Corporate parents can add cost with
systems and hierarchies that delay decisions,
create a ‘bureaucratic fog’ and hinder market
responsiveness.
 Executives are not truly answerable for the
performance of their businesses.
 Diversity and size of some corporations make it
very difficult to see what they are about.
VALUE CREATION AND THE
CORPORATE PARENT
The value-adding activities
1. Envisioning
 Focus:
 Clarity to external stakeholders:
 Clarity to business units:
2. Intervening
 monitoring the performance
 improve business-unit level performance
 coaching and training
Value-destroying activities
 Bureaucratic fog’ hinder market
responsiveness
 Executives are not truly answerable for
the performance of their businesses.
 Diversity and size of some corporations
make it very difficult to see what they are
about
MANAGING THE
CORPORATE PORTFOLIO
The growth share (or BCG) matrix
 A star is a business unit which has a high
market share in a growing market
 A question mark (or problem child) is a
business unit in a growing market, but
without a high market share
 A cash cow is a business unit with a high
market share in a mature market
 Dogs are business units with a low share
in static or declining markets

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