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Unformatted text preview: 397 Section 6 Lecture Notes for Chapter 8 Chapter 8 Strategies for Multibusiness Corporations Chapter Summary Chapter Eight moves up one level in the strategy-making hierarchy, from strategy making in a single business enterprise to strategy making in a diversifi ed enterprise. The chapter begins with a description of the various paths through which a company can become diversifi ed and provides an explanation of how a company can use diversifi cation to create or compound competitive advantage for its business units. The chapter also examines the techniques and procedures for assessing the strategic attractiveness of a diversifi ed companys business portfolio and surveys the strategic options open to already-diversifi ed companies. Lecture Outline I. Introduction 1. In most diversifi ed companies, corporate level executives delegate considerable strategy-making authority to the heads of each business, usually giving them the latitude to craft a business strategy suited to their particular industry and competitive circumstances and holding them accountable for producing good results. However, the task of crafting a diversifi ed companys overall or corporate strategy falls squarely on the shoulders of top-level corporate executives. 2. Devising a corporate strategy has four distinct facets: a. Picking new industries to enter and deciding on the means of entry b. Pursuing opportunities to leverage cross-business value chain relationships and strategic fi ts into competitive advantage c. Steering corporate resources into the most attractive business units d. Initiating actions to boost the combined performances of the corporations collection of businesses II. When Business Diversifi cation Becomes a Consideration 1. Diversifying into new industries always merits strong consideration whenever a single-business company encounters diminishing market opportunities and stagnating sales in its principle business. 2. There are four other instances in which a company becomes a prime candidate for diversifying: a. When it spots opportunities for expanding into industries whose technologies and products complement its present business. 397 Section 6 Instructors Manual for Essentials of Strategic Management 398 b. When it can leverage existing competencies and capabilities by expanding into businesses where these same resource strengths are key success factors and valuable competitive assets. c. When diversifying into closely related businesses opens new venues for reducing costs. d. When it has a powerful and well-known brand name that can be transferred to the products of other businesses and thereby used as a lever for driving up the sales and profi ts of such a business....
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