Session 4: Corporate-level Strategies

Transcription

1 Session 4: Corporate-level Strategies Dr Panagiota Sapouna, Strategic Business Decisions in Shipping

2 Corporate level strategy 2

3 The exploring strategy model 3

4 Learning outcomes Identify alternative strategy options, including market penetration, product development, market development and diversification. Distinguish between different diversification strategies (related and conglomerate diversification) and evaluate diversification drivers. Assess the relative benefits of vertical integration and outsourcing. 4

5 Three Levels of Strategy (1) Corporate Strategy Head Office Business Level Strategy Firm A Firm B Functional Strategies Marketing/Sal es Human Resources Finance Production R&D R&D HR Finance Production Marketing/Sal es 5

6 Corporate strategy directions Source: Adapted from H.I. Ansoff, Corporate Strategy, Penguin, 1988, Chapter 6. Ansoff originally had a matrix with four separate boxes, but in practice strategic directions involve more continuous axes. The Ansoff matrix itself was later developed see Reference 1 Johnson, Whittington and Scholes, Fundamentals of Strategy, 2 nd Edition, Copyright Pearson 2017 Education Dr Panagiota Limited Sapouna

7 Diversification Diversification involves increasing the range of products or markets served by an organisation. Related diversification involves diversifying into products or services with relationships to the existing business. Conglomerate (unrelated) diversification involves diversifying into products or services with no relationships to the existing businesses. 7

8 Market penetration Market penetration refers to a strategy of increasing share of current markets with the current product range. This strategy builds on established capabilities and does not require the organization to venture into unchartered territory. Three constraints: 1. Retaliation from the competitors 2. Legal Constraints (e.g., In the UK, the Competition Commission can investigate any merger or acquisition activity that would account for more than 25% of the national market. 3. Economic Constraints Johnson, Whittington and Scholes, Fundamentals of Strategy, 2 nd Edition, Copyright Pearson 2017 Education Dr Panagiota Limited Sapouna

9 Product development Product development refers to a strategy by which an organisation delivers modified or new products to existing markets. This strategy : can be an expensive and high risk may require new strategic capabilities 9

10 Market development Market development refers to a strategy by which an organisation offers existing products to new markets This strategy may also entail some product development (e.g. new styling or packaging); can take the form of new geographies (e.g. extending the market covered to new areas international markets being the most important); must meet the critical success factors of the new market if it is to succeed; may require new strategic capabilities especially in marketing. 10 Johnson, Whittington and Scholes, Exploring Strategy, 9 th Edition, Copyright Pearson 2017 Education Dr Panagiota Limited Sapouna 2011

11 Conglomerate diversification Conglomerate (or unrelated) diversification takes the organisation beyond both its existing markets and its existing products and radically increases the organisation s scope. Johnson, Whittington and Scholes, Exploring Strategy, 9 th Edition, Copyright Pearson 2017 Education Dr Panagiota Limited Sapouna

12 Two important things to remember regarding Ansoff s matrix. 1. Sometimes boundaries of the Ansoff boxes are hard to define. 2. It might be better to think of the axes as continua, along which boxes can be plotted relatively, rather than clear-cut and discrete boxes. 12

13 Vertical integration Vertical integration describes entering activities where the organisation is its own supplier or customer. Backward integration refers to development into activities concerned with the inputs into the company s current business. Forward integration refers to development into activities concerned with the outputs of a company s current business. 13

14 To outsource or not? Outsourcing is the process by which activities previously carried out internally are subcontracted to external suppliers. The decision to integrate or subcontract rests on the balance between two distinct factors: Relative strategic capabilities: Does the subcontractor have the potential to do the work significantly better? Risk of opportunism: Is the subcontractor likely to take advantage of the relationship over time? 14

15 References Johnson, Whittington & Scholes (2011) Fundamentals of Strategy, FT Prentice Hall, chapter 6,9. Grant & Jordan (2013) Foundations of Strategy, Wiley Publications, chapter 7 Dess, Lumpkin, Eisner, McNamara & Kim (2012) Strategic Management, McGraw Hill, chapter 6. Rothaermel (2013) Strategic Management, McGraw Hill, chapter 8. Ireland, Hoskisson & Hitt (2013) The Management of Strategy, Cengage Learning, chapter 4. Leslie, E. P., Cardinal, L. B., Miller, C. C Curvilinearity in the diversification-performance linkage: an examination of over three decades of research. Strategic Management Journal, 21(2):

16 Thank you! Dr Panagiota Sapouna, Strategic Business Decisions in Shipping 16