Topic2.StrategyRevisited

Vertical integration value chain economies backward

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ration (Value chain economies!) Dairy Farmers (milk) Seed Companies Pizza Chains Leprino Foods (Mozzarella Cheese) Crop Farmers End Consumer Food Distributors 88 UPF - International Strategic Management 2012 Corporate-level strategies (a) 1. Vertical Integration (Value chain economies!) Backward Vertical Integration Dairy Farmers (milk) Seed Companies Pizza Chains Leprino Foods (Mozzarella Cheese) Crop Farmers End Consumer Food Distributors Forward Vertical Integration 44 28/04/12 89 UPF - International Strategic Management 2012 Corporate-level strategies (a) 1. Vertical Integration (Value chain economies!) Backward Vertical Integration Dairy Farmers (milk) Leprino Foods (Mozzarella Cheese) Food Distributors Why would a company do that? Forward Vertical Integration UPF - International Strategic Management 2012 90 Corporate-level strategies (a) 2. Portfolio Strategies •  Portfolio strategy is a corporate-level strategy that minimizes risk by diversifying investment among various business or product lines •  A “diversified firm” is one that operates in a number of different markets or industries simultaneously •  Product diversification; geographic market diversification; product- market diversification •  Not all diversified firms look alike: related / unrelated!!! •  Note: When firms vertically integrate, they may also be implementing a diversification strategy •  The difference is that, product diversification is a secondary consequence of vertical integration in previous cases! 45 28/04/12 91 UPF - International Strategic Management 2012 Corporate-level strategies (a) 2. Portfolio Strategies a) Limited Diversification > 95% of revenues from a single business unit Single business Dominant business A Between 70% and 95% of revenues from a single business unit B A Analysis is equivalent to the analysis single business strategies! UPF - International Strategic Management 2012 92 Corporate-level strategies (a) 2. Portfolio Strategies b) Moderate-High Levels of Diversification Related constrained < 70% of revenues from dominant business; all businesses share product, technological and distribution linkages A B E.g. Pepsi & its snack type products C A Related linked (mixed) < 70% of revenues from dominant business, and only limited links exist B C E.g. Disneyland 46 28/04/12 93 UPF - International Strategic Management 2012 Corporate-level strategies (a) 2. Portfolio Strategies c) Very High Levels of Diversification Unrelated-Diversified A Business units not closely related B C E.g. 3M7 business sectors for its 55,000 products: E.g. GE… • financial services • energy Consumers & offices (Post-its, Scotch-tape) Display & graphics (for computers, cell phones, PDAs, TVs) • industrial manufacturing Electronics & communications (flexible circuits used in printers) • healthcare Health care (medical, surgical, dental, and personal care products) • media industries Industrial (tapes, adhesives, supply chain software) Safety, security & protection services (fire protection products) Transportation (products & components for autos, aircrafts etc) UPF - International Strategic Management 2012 94 Corporate-level strategies (a) 2. Portfolio Strategies •  Proposition 1: The more businesses in which a corporation competes, the smaller its overall chances of failing (legs of a stool) •  Acquisition: Purchase of a company by another company >> Fit...
View Full Document

This note was uploaded on 10/18/2012 for the course BUSI 102 taught by Professor X during the Spring '12 term at Universitat Pompeu Fabra.

Ask a homework question - tutors are online