Corporate Level Strategies in Strategic Management

Overview

What is Corporate Level Strategies?

INTRODUCTION: Strategies refers to managerial process of developing strategic vision, setting objectives, crafting a strategy, implementing and evaluating strategy & initiating corrective measures where deemed appropriate

LEVELS OF STARATEGIES

• Corporate level Strategy
• Business Level strategy
• Functional level Strategy

CORPORATE LEVEL STRATEGIES/GRAND STRATEGIES

• Stability Strategy

• Expansion Strategy
• Retrenchment Strategy
• Combination Strategy

A.STABILITY STRATEGY

A stability is pursued by a firm when it continues to serve in same or similar markets & deals in same or similar products & services. Strategic decisions focuses on incremental improvement of functional performance. Under Stability Strategy firm stays with same business, same product-market and functions, in other words it does not involve any redefinition of business or any fresh investment. It is basically a safety oriented strategy and involves improvements in product and its packaging i.e concentrating its resources and attention on existing business/products and markets. Risk involved under this strategy is very less.

Reasons for a Stability strategy

A product has reached maturity stage of product life cycle or the environment faced is relatively stable. It is very less risky as it involves less changes & staff feels

comfortable with things as they are.

B.EXPANSION STRATEGY

It involves redefinition of business and is opposite of stability strategy. It is a process of renewal of firm of firm through fresh investments and new businesses leading to business growth. It is highly versatile strategy and requires several permutations and combination.

Reasons for Growth/Expansion Strategy

It may lead to greater control over market and imperative when enviroment demand increases in pace of activity. It leads to advantages from experience curve and scale of operations may be accrued.

Types of Growth/Expansion Strategy

i) Expansion through Diversification: Under this strategy firms tends to enter into neew markets with new products. It involves high risk.

a) vertically integrated diversification

b) horizontal integrated diversification

c) concentric diversification

d) conglomerate diversification

ii)Expansion through mergers and aquisitions: Under Mergers two organizations come together to meet their financial or organization goals,and the new business is run under a new name HOWEVER under acquisition a one organization acquires other business and the business is run the name of powerful business. Types of merger strategy

a) Vertical Merger

b)Horizontal Merger

c)Co-Generic Merger

d)Conglomerate Merger

iii)Expansion through Strategic Alliance: A strategic alliance is an agreement between two or more entities that share strengths, risk, rewards, assets carries on a agreed objective while remaining independent organization. Strategic Alliance has an Organizational, Economical, Strategic, Political advantages to an organization.

C.RETRENCHMENT STRATEGY

1.Retrenchment strategy: It is followed when an organization substantially reduces scope of its activity, business is becoming unprofitable& unviable, failure of existing strategy, inability to cope up with cut throat competition. If organization chooses to focus on ways& means to reverse process of decline, it adopts at turnaround strategy.

2.Turnaround Strategy: Circumstances/Indicators which points out that a turnaround is needed are persistent negative cash flows from business, uncompetitive product or services, Decling market share, Mismanagement, Over-staffing, high turnover of employees etc.

Action Plan for a Turnaround Strategy:

a) Assessment of current problems.

b) Analyze situation & develop a strategic plan

c) Implementing an emergency action plan.

d) Restructuring Business

e) Returning to Normal

Important elements of action plan of turnaround strategy

a) changes in top management

b) Quick cost reduction

c) Revenue generation

d) Better internal coordination

e) identifying quick pay off activities

3. Liquidation Strategy: A retrenchment strategy considered most extreme and unattractive is liquidation strategy, which involves closing down of a firm and selling off its assets.

Reasons for Retrenchment

Persistent negative cash flows from a business from a particular business create financial problems for whole company.

Business could be more viable by divesting some of activities.

Management no longer wishes to remain in business continuous losses and unviability.

D.COMBINATION STRATEGY

Enterprise possible to adopt a mix strategies to suit particular situations .An enterprise may seek stability in some areas of activity, expansion in some & retrenchment in other.

Reasons for a Combination Strategy

Organization is large and faces a complex environment or composed to different businesses, each of which lies in a different industry requiring different responses in terms of strategy formulation.