TOWS Matrix

Prentice Hall, Inc. 2006

7-1

Corporate Strategy

CORPORATE STRATEGY 3 Key Issues

Firms directional strategy Firms portfolio strategy Firms parenting strategy

Prentice Hall, Inc. 2006

7-2

Corporate Directional Strategies

Prentice Hall, Inc. 2006

7-3

Corporate Strategy

Directional Strategy
Orientation toward growth
Expansion, contraction, status quo Concentration or diversification Internal development or acquisitions, mergers, or alliances

Prentice Hall, Inc. 2006

7-4

Corporate Strategy

Directional Strategy
3 Grand Strategies
Growth strategies Stability strategies Retrenchment strategies

Prentice Hall, Inc. 2006

7-5

Corporate Strategy

Growth Strategies -External mechanisms

Mergers Acquisitions Strategic alliances

Prentice Hall, Inc. 2006

7-6

Corporate Strategy

Growth Strategies -2 Basic forms

Concentration Diversification

Prentice Hall, Inc. 2006

7-7

Corporate Strategy

Basic Concentration Strategies -Vertical growth Horizontal growth

Prentice Hall, Inc. 2006

7-8

Corporate Strategy

Vertical Growth -Vertical integration

Full integration (make 100% of supplies) Taper integration(make less than 50% of supplies) Quasi-integration(make/buy less than 20%) Long-term contract(no make/buy relationship)

Prentice Hall, Inc. 2006

7-9

Corporate Strategy

Vertical Growth -Backward integration Forward integration

Prentice Hall, Inc. 2006

7-10

Corporate Strategy

Concentration -Horizontal Growth

Horizontal integration-Duplicate same value chain activities in other geographies and/or for other companies

Prentice Hall, Inc. 2006

7-11

Corporate Strategy

Basic Diversification Strategies -Concentric Diversification Conglomerate Diversification

Prentice Hall, Inc. 2006

7-12

Corporate Strategy

Concentric Diversification -Growth into related industry Search for synergies

Prentice Hall, Inc. 2006

7-13

Corporate Strategy

Conglomerate diversification -Growth into unrelated industry Concern with financial considerations and risk exposure

Prentice Hall, Inc. 2006

7-14

Corporate Strategy

International Entry Options -Exporting (direct selling with or without brokerage) Licensing (transfer rights to local part to produce and/or sell products) Franchising (transfer rights to local part to retail product/service) Joint Ventures (joint ownership of an operation) Acquisitions Green-Field Development(build all operations from scratch)
Prentice Hall, Inc. 2006 7-15

Corporate Strategy

International Entry Options -Production Sharing(transfer labor intensive value chain activities to developing countries) Turnkey Operation(build operations in a remote market for a fee, generally involve licencing, continuous supply and technology transfer-not state-of-the-art) BOT Concept (Build, Operate, Transfer) Management Contracts(Local operator contracts management team from experienced multinational for a certain period)
Prentice Hall, Inc. 2006 7-16

EFFECTIVENESS OF GROWTH STRATEGIES

Related diversification is proven to be more successful when contextual conditions support such a move Marginal utility of growing into very similar and very dissimilar areas is proven to be low Mixed results exist for internal/externally driven growth. Research suggests that combination of both may be more lucrative.
Prentice Hall, Inc. 2006 7-17

Corporate Strategy

Stability Strategies -Pause/proceed with caution (take your breath after rapid growth, a temporary time-out) No change (Continuing the current course of action until a significant shift in strategic situation) Profit strategies (Not admitting a difficulty, pretending that the tight period is temporary, cut costs, sell less productive assets, stabilize profitability)
Prentice Hall, Inc. 2006 7-18

Corporate Strategy

Retrenchment Strategies -Turnaround (Contraction-general significant cut-back and consolidation-consolidate on what remains for future growth) Captive Company Strategy (sell or contract out company to a customer in exchange of secure finanacial resources) Selling out(Sell whole company for a fare price) Bankruptcy (Giving the management to court ruling in exchange for obligations) Liquidation (Sell assets to meet obligations by top management instead of court)
Prentice Hall, Inc. 2006 7-19

Corporate Strategy

Portfolio Analysis -Resource commitment on best products to ensure continued success Resource commitment on new costly products high risk

Prentice Hall, Inc. 2006

7-20

BCG Matrix (Portfolio Analysis)

Prentice Hall, Inc. 2006

7-21

GE Business Screen (Portfolio Analysis)

C Winners A High Winners B Question Marks D Winners E Medium

Average Businesses F Losers

Losers G Low Profit Producers Strong Average

Losers Weak

Business Strength/Competitive Position Prentice Hall, Inc. 2006 7-22

Calculating Industry Attractiveness

Prentice Hall, Inc. 2006

7-23

Corporate Strategy

Corporate Parenting Strategy -Creating value through coordinating across businesses

Strategic factors Performance improvement (see as parenting opportunities) Analyze fit(See if opportunities can be met by existing capabilities and/or resources)

Prentice Hall, Inc. 2006

7-24

Corporate Parenting Strategy

Prentice Hall, Inc. 2006

7-25

Strategic Alternatives for a Parent Looking to Diversify

Prentice Hall, Inc. 2006

7-26

Overall options for an unrelatedly diversified parent

Prentice Hall, Inc. 2006

7-27

Searching for value chain relations

Prentice Hall, Inc. 2006

7-28

Identifying cross- business synergies

Prentice Hall, Inc. 2006

7-29