A.A.MOHAMED FAISAL

Corporate strategy

INTRODUCTIONAccording to Michael Porter, a firm must

formulate a business strategy that incorporates either cost leadership, differentiation or focus in order to achieve a sustainable competitive advantage and long-term success in its chosen areas or industries.

According to W. Chan Kim and Renée Mauborgne, an organization can achieve high growth and profits by creating a Blue Ocean Strategy that breaks the previous value-cost trade off by simultaneously pursuing both differentiation and low cost.

Firms must learn to compete differently if Firms must learn to compete differently if they are to achieve strategic they are to achieve strategic competitiveness in the 21competitiveness in the 21stst-century -century competitive landscape. To provide an idea competitive landscape. To provide an idea of what this means, new ways of competing of what this means, new ways of competing may include:may include:

bringing new good and services to market bringing new good and services to market more quicklymore quickly

The use of new technologies (e.g., The use of new technologies (e.g., Amazon.com)Amazon.com)

Diversifying the product line (e.g., Barnes Diversifying the product line (e.g., Barnes and Nobles into music as a catalyst for and Nobles into music as a catalyst for growth)growth)

The New Reality - #1

Shifting product emphasis (e.g., U-Haul’s Shifting product emphasis (e.g., U-Haul’s new focus on accessory sales) (i.e., Dual new focus on accessory sales) (i.e., Dual Branding)Branding)

Consolidation (e.g., the merger of Exxon Consolidation (e.g., the merger of Exxon and Mobil)and Mobil)

Combining online selling with physical Combining online selling with physical stores (e.g., CompUSA’s new strategy)stores (e.g., CompUSA’s new strategy)

The New Reality - #2

Dell Model for GrowthDell Model for Growth

Have New Business Model (maybe Have New Business Model (maybe changes every 5 years?)changes every 5 years?)

Identify Core Competencies and then Identify Core Competencies and then improve the four capabilitiesimprove the four capabilities

Outsource non-core competenciesOutsource non-core competencies

Create a “Brand Management Company”Create a “Brand Management Company”

The New Reality - #3

Brief Overview of Corporate Strategy

Those strategies concerned with the broad and long-term questions of what business(es) the organization is in and what it wants to do with those businesses

1. What businesses should the corporation/enterprise be in?

2. How should the corporate/G.O. office manage the array of business units (GBU’s/SBU’s/ Wholly owed subsidiaries)

Corporate Strategy is what makes the corporate whole add up to more than the sum of its business unit parts

Key Questions of Corporate/Firm-level

Strategies

21st Century Organization Strategies for Growth and Profitability Multi-International: One Consumer Products Company (Corporate Level)

DrivingGrowth (8)

FundingGrowth (5)

Creating theBest Place

To Work (10)

Global Scope

Consumer Promotion

3600 Marketing

Superior Knowledge ofCustomers/Consumers

Strong Alliances/Partnershipswith Customers

Coverage of Trade

Acquisitions/JV’s

Focus on ProductQuality

Innovative New Products/Services

Vision Direction: Guiding Core Values, Philosophies, Principles, Mission, & Others

RegionalizationWith Local Control

Lean & FlatStructures

Shared Leadership, Coaching & Feedback

Horizontal, Structures, Systems, & Processes: Integration/communication/coordination

Empower People

Stimulating Careers

Streamline and obtainA Seamless Supply Chain/Demand Side (Value Chain)Integration

Use of Technologies to create Cost Savings

IS/SAP/ConsolidatedPartnership

Move to “Global”And “Local” RegionalBusiness

HPWS

CommunityInvolvement

Recognition & Financial Rewards

Demand Side Strategies: Supply Chain Strategies:

Source: Barry A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA (forthcoming)

Corporate (and International) Strategies

Three directions for corporate strategyGrowth

M&A , JV, and SA (external growth)International (internal growth)

Stability (internal growth)Renewal (internal growth)

RetrenchmentTurnaroundIncrease the four capabilities via core

competencies

Organizational Growth: External and/or Internal

External and Internal Growth StrategyOne that involves the attainment of specific growth objectives by increasing the level of an organization’s capabilities

Typical growth strategies include goals for:Increase in sales revenuesProfitsOther balanced scorecard performance measures

Types of Growth Strategies

OrganizationalGrowth

HorizontalIntegration:

Along Value Chain

International

Concentration

Diversification•Related Businesses•Unrelated Businesses

Vertical Integration•Related Businesses•Unrelated Businesses

Concentration

Product-Market Exploitation

Product Development

Market Focused Development

Product/Market DiversificationC

usto

mers

Product(s)

Another Possible Way for Growth

The “Right” People or the “Right” Organization?

• What are our basic Principles, Philosophies and Core Values?• What do we believe in?

• What policies and practices are consistent with these Values and Philosophies?

•What can we do for the customer better than our competitors?

• Given our core capabilities, how can we deliver value (EVA) to customers in a way our competitors cannot easily imitate?

• Senior management “manages” the values and culture of the firm.

A Values-Based View of Strategy

Fundamental Values or Beliefs

Design Management PracticesThat Reflect and Embody

These Values

Use These to Build Core Capabilities

Invent a Strategy That is Consistentwith the Values and Uses the

Talents & your four Capabilities toCompete in

New and Unusual Ways

Senior Management’s Role

Another Way: Diversification

RelatedDiversification

ProductSimilarities

DistributionChannels

Value Chain Capabilities/Core Competencies

CustomerUse

SimilarTechnology

Levels and Types of DiversificationLow Levels of

Diversification

Moderate to High Levels of Diversification

Very High Levels of Diversification

Related linked (mixed)< 70% of revenues from dominant business, and only limited links exist

AA

BB CC

Single business > 95% of revenues from a single business unit

AA

Dominant business Between 70% and 95% of revenues from a single business unit BB

AA

Unrelated-DiversifiedUnrelated-DiversifiedBusiness units not closely related

AA

BB CC

< 70% of revenues from dominant business; all businesses share product, technological and distribution linkages

Related constrainedAA

BB CC