Chapter 6

Chapter 6 - Chapter 6 Corporate-Level Strategy NOTE:...

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Chapter 6 Corporate-Level Strategy NOTE: Chapters 4 and 5 the discussion centered around selecting and implementing a business-level or competitive strategy—actions a firm should take to compete in a single industry or product market—and the actions and responses that affect the competitive dynamics of a single industry or product market. Chapter 6 discusses corporate level strategies. When a firm diversifies its operations by operating business in several industries, corporate level strategy becomes a primary focus. This means that a diversified firm has two levels of strategy: business-level (or competitive) and corporate-level (or company-wide), the latter of which entails selecting a strategy that focuses on the selection and management of a mix of businesses. Example: PepsiCo and its portfolio of businesses prior to the 1997 spin-off of Tricon Global Restaurants, Inc., which later changed its name to Yum! Brands Inc. Yum controls Pizza Hut, Taco Bell, and KFC, all of which were part of PepsiCo at one time. PepsiCo’s strategy was at the corporate level, whereas the soft drink business, Pizza Hut, Taco Bell, and KFC each have separate, and very different, business-level strategies. PepsiCo’s corporate-level strategy was to generate synergies among the businesses (e.g., selling the firm’s soft drinks in all the restaurants). You can also readily see the differences in business-level strategies for soft drinks (integrated cost/differentiation), at Pizza Hut (differentiated product), Taco Bell (cost leadership), and KFC (perhaps somewhere in between). Corporate-level strategies detail actions taken to gain a competitive advantage through the selection and management of a mix of businesses competing in several industries or product markets. Primary concerns of corporate-level strategy are: What businesses should the firm be in? How should the corporate office manage its group of businesses? How can the corporation as a whole add up to more than the sum of its business parts? The ultimate measure of the value of a firm’s corporate-level strategy is that the businesses in the firm’s portfolio are worth more under current management (and by following the firm’s corporate- level strategy) than they would be under different ownership or management. LEVELS OF DIVERSIFICATION Diversified firms vary according to two factors: the level of diversification connection or linkages between and among business units Note: The five levels of diversification are listed and each is defined in Figure 6.1. It is recommended that you refer students to Figure 6.1 as you begin to discuss levels of diversification in more detail. Levels and Types of Diversification Low levels of diversification Single business Dominant business
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Moderate to high levels of diversification Related-constrained diversification Related-linked diversification (mixed related and unrelated) Very high levels of diversification Unrelated diversification
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This note was uploaded on 04/01/2012 for the course MGT 4476 taught by Professor Marthabrowski during the Spring '10 term at Troy.

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Chapter 6 - Chapter 6 Corporate-Level Strategy NOTE:...

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