final sheet - Chapter 9: Corporate-Level Strategy Corporate...

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Chapter 9: Corporate-Level Strategy Corporate Business (most important) : 1 focuses on what customers need 2 market segments 3 distinctive competencies . Functional Corporate Advantage – does a company have any incremental value above and beyond being part of this corporate firm than it would have than standing by itself? If I can’t give it some added value, then I shouldn’t be owning that company. What are the 3 major roles of corporate strategy? 1. What businesses/industries should a company compete in? 2. Which value creation activities should a business perform? 3. How should the company enter/leave the business/industry? Levels: 1 Horizontal 2 Vertical 3. Strategic Alliances 4. Outsourcing How would a company think about business models if it decides to expand into different industries? Horizontal Integration – when a company expands within a single industry. Acquire or merge. Large scale. Consolidation. Electronic firm: Intel chips HP/IBM Dell/Gateway Best Buy/Circuit City Benefits 1 Lower cost structure – EOS 2 Share resources – reduce waste/duplication 3 Replicate business models 4 Increase product differentiation - “one- stop shopping” 5 Reduce industry rivalry 6 Increase bargaining power Problems Rates : 1 Failure rate = 30% 2 Nothing happens = 40% 3 Benefit = 30% 4. Anti-trust Vertical Integration – expand into new industries . Backward integration – produces inputs for the company’s products . Forward integration – sells the company’s products Benefits Determine quality of raw materials with own standards 2 Improve scheduling 3 Hold-up – being taken advantage of by a trading partner after the investment in specialized assets has been made. Specialized skill (Bugatti) Problems: 1 Bureaucratic Costs – coordination/integration 2 Technological Change – obsolete 3 Demand Unpredictability – over/underproduction . Alternatives to vertical integration : Cooperative Relationships a. Short-term contracting < 1 year b. c. Outsourcing (IT) Strategic Outsourcing: Benefits 1 Lowers cost 2 Enhanced differentiation 3 Focus on core business Risks 1 Holdup 2 Loss of information Full integration – producing all of particular input for its processes or disposes all of its completed products through its own operations. Taper integration – company buys from independent supplier in addition to company-owned suppliers or disposes of its completed products through interdependent outlets in addition to company-owned outlets. Chapter 10: Corporate-Level Strategy: Diversification
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final sheet - Chapter 9: Corporate-Level Strategy Corporate...

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