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STRATEGIC MANAGEMENT

AND BUSINESS POLICYTHIRD EDITION

Chapter 5Corporate-level strategies:Concentration, Integration

and Diversification

AZHAR KAZMI

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Learning objectives

Define and explain four types of genericcorporate-level strategies

Describe the various types of expansionstrategies

Discuss the conditions under whichconcentration, integration, anddiversification strategies are used

Discuss the risks of using concentration,

integration, and diversification strategies Discuss diversification strategies in the

Indian context

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Corporate strategies

Corporate-level strategies arebasically about decisions related to:

allocating resources among thedifferent businesses of a firm

transferring resources from one set of businesses to others, and

managing and nurturing a portfolio of businesses.

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Four strategic alternatives

Expansion strategies

Stability strategies

Retrenchment strategies Combination strategies

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Concentration strategies

Concentration is a simple, first-leveltype of expansion strategy. Itinvolves converging resources in oneor more of a firm's businesses interms of their respective customerneeds, customer functions, or

alternative technologies - eithersingly or jointly - in such a mannerthat expansion results.

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Ansoff’s product-market matrix

PRODUCT

PRESENT NEW

MARKET

MARKET PRODUCT

PRESENT PENETRATION DEVELOPMENT

MARKET DIVERSIFICATION

 NEW DEVELOPMENT

Adapted from H. I. Ansoff: “Strategies for Diversification” in Harvard Business Review , 1957, 5,pp. 113-124.

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Ansoff’s matrix for diversificationstrategies

------------------------------------------------------------------------- -----New products 

------------------------------------------------------------------------------Related technology Unrelated technology

------------------------------------------------------------------------------New functions ------------------------------------------------------------------------------Firm its own Vertical integrationcustomer------------------------------------------------------------------------------Same type Horizontal diversificationof product------------------------------------------------------------------------------Similar type Marketing and Marketing related

of product technology-related concentricdiversification diversification

------------------------------------------------------------------------------New type Technology-related Conglomerateof product concentric diversification diversification------------------------------------------------------------------------------Adapted from H.I. Ansoff: Corporate Strategy (New York: McGraw-Hill, 1965), p.132.

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Integration strategies

Horizontal integration: When an organisation takes upthe same type of products at the same level of production or marketing process

Vertical integration: When an organisation starts

making new products that serve its own needs Taper integration strategies require firms to make a

part of their own requirements and to buy the restfrom outsiders.

Quasi integration strategies firms purchase most of 

their requirements from other firms in which theyhave an ownership stake.

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Diversification strategies

Diversification involves a substantialchange in business definition - singlyor jointly - in terms of customerfunctions, customer groups, oralternative technologies of one ormore of a firm's businesses.

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Concentric or related diversification

Marketing-related concentricdiversification

Technology-related concentricdiversification

Marketing- and technology-relatedconcentric diversification

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Conglomerate or unrelateddiversification

When an organisation adopts astrategy which requires taking upthose activities which are unrelated tothe existing business definition of oneor more of its businesses either interms of their respective customer

groups, customer functions oralternative technologies