What are corporate level strategies
Drives the company’s business model over time and determine which types of business and functional level strategies managers will choose to maximize long term profitability
What choice must strategic managers make
- Decide on the business and industries a company should compete
- Select which value creation activities it should perform in those businesses
- Determining how it is should enter, consolidate or exit businesses to maximize long term profits
What must managers adopt when formulating corporate level strategies
Managers must adopt a long term perspective and consider how changes take place in an industry and its products, technology, customers and competitors
What are the three types of corporate level strategies
- Horizontal integration
- Vertical integration
- Strategic outsourcing
What does corporate level strategies enable a company to do
- Perform value chain functional activities
- Lower costs
- Increase differentiation
What are the two levels that a company must do to construct its business model
- Develop a business model and strategies for each business unit or division in every industry where it competes
- Develops a higher level of multi business model that justifies its entry into different businesses and industries
What happens when a business decide to expand into new industries
Must develop a business model and strategies for each business unit in every industry in which is competes
What are the advantages of staying in one industry
- Allows a company to focus on managerial, financial, technological and functional resources and capabilities to successfully compete in one area
- It stays focused on what it knows and does best
What must managers do to ensure they are competing in a changing environment
Improving their company’s existing products or service lines that they fail to recognize
What are the tasks of corporate level managers (technologies)
- Analyze emerging technologies
- Understand why these technologies might change customer needs and customer groups
- Distinctive competencies
What is horizontal integration
Process of acquiring or merging with industry competitors to achieve the competitive advantages that arise from a large size and scope operations
What are the benefits of horizontal integration
- Company can focus all its managerial, financial, technological and functional resources and capabilities on competing successfully
- Company sticks to the knitting meaning that it stays focus on what it knows and does best
- Lower cost structure
- Increased Product Differentiation
- Reduced industry rivalry
- Increased bargaining power
What is an acquisition
When one company uses capital resources such as stock, debt, or cash
What is merger
An agreement between equals to pool their operations and create new entities
What are the problems with Horizontal Integration
- Different company culture
- High management turnover in the acquired company
- Tendency to overestimate the potential benefits and underestimate the costs and problems in merging their operations
What is vertical integration
Expands its operations in backward industry that produces inputs for the company’s product or forward into an industry that uses, distributes or sells the company’s products
What is backward integration
Moving into component parts manufacturing and raw materials production
What is forward integration
Moving into distribution and sales
What is the process of vertical integration
Raw Materials
Component parts Manufacturing
Final Assembly
Retail
Customer
What are the benefits of vertical integration
Increases differentiation, lower costs or reduces industry competition
What must happen to ensure the benefits of vertical integration
- Facilitates investments in efficiency-enhancing, specialized assets
- Protects product quality
- Results in improved scheduling
What does product bundling mean
Offers customers the opportunity to purchase a range of products at a single, combined price; which increases the value of a companys product line because customers often obtain a price discount when purchasing a set of products at one time and customers become used to dealing with only one company and representatitives
What is tacit price coordination in horizontal integration
Helps reduces the numb er of competitors in an industry between rivals to coordinate fix prices without communication
What is cross selling
When a company takes advantage of or leverages its established relationship with customers by way of acquiring additional product lines or categories that it can sell to them to increase differentiation
