A number of ways can be used to accomplish the objective of making profits and generating funds. They also choose this strategy when they go through a period of rapid expansion and need to consolidate their operations before going for another bout of expansion. A cost-benefit analysis of prospective sharing opportunities can determine whether synergy is possible. Wal-Mart emphasizes on the long-term strategy of cost leadership. Please seek permission to reproduce the same in public forms and presentations. Essentially, it's like holding a portfolio.
Of course, some similarities are common; one can imagine them at some level between almost any pair of businesses. Other benefits have also eroded. A company adding related product lines to battle competitors is practicing horizontal integration. Countless companies have fallen into the trap of diversifying too readily because of similarities; mere similarity is not enough. The transfer of skills can be one-time or ongoing. Royal Dutch Shell and other leading oil companies have had this unhappy experience in a number of chemicals businesses, where poor industry structures overcame the benefits of vertical integration and skills in process technology. With a holding strategy the company continues at its present rate of development.
Determine options for capacity expansion 2. Stability When a company is seeking slow growth or stagnation, management may seek a strategy that centers on stability. Retrenchment is a corporate-level strategy that seeks to reduce the size or diversity of an organization's operations. Only through such an assessment can an understanding of good corporate strategy grow. It introduces professional management skills and discipline.
Niche players also prefer this strategy for the same reasons. One cost is the greater coordination required to manage a shared activity. This is a form of retrenchment strategy used by businesses when they downsize the scope of their business activities. Hanson emphasizes low costs and tight financial controls. Corporate-level strategies define a plan to hit a specific target needed to achieve business goals.
But my study clearly shows that when companies ignored one or two of them, the strategic results were disastrous. Sharing must involve activities that are significant to competitive advantage, not just any activity. Growth A company seeking growth faces a subset of growth choices: horizontal growth concentration , diversification and vertical integration. By cutting corporate staff to the bone and giving business units nearly complete autonomy, they believe they avoid the pitfalls. Stability strategy is most likely to be pursued by small businesses or firms in a mature stage of development. Retrieved on May 8th, 2013, from Coca Cola Company The organization of choice for this paper is the Coca-Cola Company that is operating in beverage industry for more than a century principally manufacturing, distributing, and marketing nonalcoholic beverages globally.
Transferring skills meets the tests of diversification if the company truly mobilizes proprietary expertise across units. If the internal resources are already stretched thin, companies will often scale down a bit and focus on quality control. When a company has the internal strength to start up a unit, it can be safer and less costly to launch a company than to rely solely on an acquisition and then have to deal with the problem of integration. There are two types of diversification. The industries the company chooses for diversification must pass the attractiveness test.
The company will have to reassign critical personnel, even on a permanent basis, and the participation and support of high-level management in skills transfer is essential. My data paint a sobering picture of the success ratio of these moves see Exhibit 2. Paying dividends so that the shareholders can be the portfolio managers. The company provides capital on favorable terms that reflect corporatewide fundraising ability. Corporate Strategy involves the careful analysis of the selection of businesses the company can successful compete in.
With related diversification, synergy rises because the related activity can increase value and the economies of scale can save money. Marriott then began broadening its base of family restaurants and entered the hotel industry. They normally use it in combination with the other , adopting stability for some businesses while pursuing expansion for the others. Sometimes the buyer has an inside track or the owner is anxious to sell. The Management has to select the one that best suits the corporate objective. The management may not be motivated and adventurous to try new strategies to change the status quo. The need to rethink corporate strategy could hardly be more urgent.