Organizations make usage of three categories of strategy, namely corporate, functional as well as competitive. (See through Exhibit 9-3) In this portion of the chapter, mostly corporate strategies would be focused on. For your knowledge, the top levels of managers are probably responsible for handling corporate strategy, middle level handles competitive strategy, and the lowest level looks for functional strategy.
What do you mean by Corporate Strategy?
The term corporate strategy aims to determine what type of business the company is acting or else wished to be through, and what else can they do with the business. It depends solely upon the mission as well as other goals of an organization along with what roles the business organization plays. Some of the instance for both these could be seen at PepsiCo. The company focuses mostly upon the food and other beverages for world premiere. Pursuing such mission would be possible only with proper corporate strategy which has been put through the business of PepsiCo Beverages (that includes Gatorade, beverages along with Pepsi), America’s PepsiCo Foods (including Frito-Lay from North America, North America Quaker foods, and Foods of Latin) and other International PepsiCo products. Best part of the corporate strategies is felt when managers think about their proper use of their business along with how to grow them process.
Let’s have a look at three categories of corporate strategy. These include growth, renewal and stability.
Growth strategy inculcates especially when the organization tries to expand the rate of markets being served along with products being offered either with the help of its present business or some new one. Best example would be Walmart a largest retailer, found its growth internationally on a continuous basis. Because of such growth strategies, different organization would be able to increase their revenues, employee’s number and also market shares. What makes organization grow? Simple, it is because of concentration, horizontal and vertical integration, or else diversification.
It has been seen that organization grows well with the help of concentration when it focuses mainly on the lines of business with simultaneous increase through products number. For example, Beckman Coulter, a Fullerton, from California, has tried using $3.2 billion of annual revenues concentration to be the largest diagnosis and research medical equipment company in the world. Bose Corporation of Framingham has been another best example of a company that uses concentration. The Company generally focuses upon the development of innovative category audio speakers and simultaneously become the largest companies for speaker retailer with other automotive as well as other audio services with over $2 billion.
On the other hand, a company might also choose vertical integration for its growth from both sides. In case of vertical integration, a company or rather an organization could become a self supplier in order to control the inputs of its own organization. For example, the company eBay has a business of online pay which probably helps them to serve clients with secure transactions also controlling the vital processes. While in case of forward vertical integration, organization turns to become their self distributor and can control outputs easily. For instance, Apple possesses to have 287 plus retailing stores across world such that products can be distributed.
Whereas, when a company develops by combination of its competitors then it falls under horizontal integration. A best example would be Giant French cosmetics L’Oreal that slowly acquired a shape. Second example would be for live concert from United States. Such concert genuinely includes combine operation of HOB entertainments and also an operator of House Club of Blues. U.S Federal has been scrutinizing in order to find out whether consumers are affected by decreased rate of competition. In fact, other countries too followed same restriction. This happened because of maximized number of horizontal integration usage in industries for past years. The European Commission, “Watchdog” has conducted a depth survey for the Unilever’s body and also for the laundry caring units for Sara Lee.
Diversification can happen whenever a company tries to combine with different but somewhere related companies. This shows how well a company can grow well through diversification. For instance, New Jersey based company American Standard Cos., has been engaged for different businesses that includes fixtures for bathrooms, air conditioners as well as heating unit, brakes for truck, parts of plumbing, etc. Though often this business mixture turns out odd, but it is the strategic fits that make them efficient for developing standards for business goals.
Unrelated diver sifications are one where companies combine with different unrelated company. For an example, The Tata Group from India has been doing business in different platforms like, chemicals, IT and communication, energy, engineering, consumer product as well as material services. This does not include strategic fitness but yet is an odd mix.
Sprint-Nextel a financial cum Real Estate Business Company has faced huge loss of financial issues by losing $2.4 billion. Not only Sprint, but yet another company Symantec has accompanied it in the year 2009 by losing $6.7 billion. Whenever organizations are seen being under trouble then managers tries making strategies for development and named it as renewal strategies. Renewal strategy addresses company’s performance declination. Retrenchment strategy along with Turnaround strategy forms two special category of renewal strategy. To handle minor performance issues retrenchment strategy has been developed. This strategy probably helps the organization to stabilize their work along with revitalize the organization resources. They also prepare the companies to compete one more time. Apart from this turnaround strategy is used when a company’s problems are drastic. Measures taken in retrenchment strategies are lower extensive than those of turnaround strategy as the managers perform two things like cut the costs and also restructure the operations.
Stability strategy is another form in which companies continue to do what they are engaged in currently. For example, U.S candy and chocolate sales have slowed, dragging of global recession, half of the sale by Cadbury Schweppes, they all are maintaining their current work. These all shows that the company keeps on serving their clients by providing them with similar products as well as maintaining shares of markets. This keeps them intact and prevents the organization from any downfall.
How to manage corporate strategies?
Managers are seen using tools like corporate portfolio matrix in order to encompass multiple businesses. In fact, they provide basis for better understanding of business by the managers. This is done by establishing priority for resources. Initial portfolio matrix was created by Boston Consulting Group with an aim that any organization could evaluate their business with the help of 2×2 matrixes named BCG matrix. For better understanding follow Exhibit 9-4. This is done to identify the offer higher potential, which else can be drained with resources. From the figure horizontal axis is for market shares be it high or low whereas the vertical one is for anticipated growth of markets (high or low). SWOT analysis is used to evaluate any business and then pace them from any of the 4 categories.
Now let’s have a look at BCG matrix implications. Dogs have a low share within markets thus they should be liquidated at a lower growth rate. Whereas the managers should be ready to increase the milk cash cows and also limits the investment over the cash being generated this will help them to improve the market shares. Heavy investment choices would help to enjoy advantage of market shares at a higher rate. Stars usually develop to cash cows such that this slows down the sales growth. After having careful observation some of them would get sell whereas others would be nurtured with proper strategies to stars.