Define Corporate-level strategy

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Strategies firms use to diversify their operations from single markets to several product markets and industries.

Tells firm:

1) what markets to comopete in?

2) how to manage them

Levels of Diversification: Figures 6.1 and 6.2

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Low Levels:

• Single Business A
• Dominant Business A--B

Moderate/High Levels:

• Related constrained A--B--C--B--A
• Related linked A--B--C

Very High Levels: 

• Unrelated A B C

Reasons for Diversification

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--Increase a firm's value by improving overall performance

• Value-Creating
• Value-Neutral
• Value-Reducing

How does diversification add value?

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Economies of Scope

Operational relatedness: Sharing activites/tangible

Corporate relatedness: Sharing core competencies/processes

Explain Related and Unrelated Diversification

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Related: businesses share links

• Constrained: Links among all businesses, (A-B-C)
• Linked: linked but not for all, A-->B-->C

Unrelated: businesses are unrelated

Define Merger

Define Acquisition

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Merger: a strategy where two firms agree to integrate their operations on a relatively EQUAL basis

Acqisition: a strategy where one firms buys controlling interest in another firm with intent of making the firm a subsidiary business within its portfolio

What are some reasons for acquisitions?

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Increased Market Power

Increased Diversification

Increased Speed to Market

Decreased Entry Barriers

Decreased cost of New Product Development

Decreased Risk than ground-up Development

Reshape Competitive Scope

Learning New Capabilities

What are some problems with achieving success with acquisitions?

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• Integration difficulty
• Large debt
• Inadequate targets
• No synergy
• Too much diversification
• Managers
• Too large

Explain Restructuring:

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• Strategy where a firm changes its set of businesses or financial structure.

Define International Strategy:

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• Strategy where firm sells its goods/sesrvices outside its domestic market

What is Porter's Diamond?

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The four determinants of competitive advantage of nations

1) Factors of production

2) Demand conditions

3) Related and supporting industries

4) Firm strategy/structure/rivalry

How does Porter's Diamond relate to determinants of national competitive advantage?

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Porter's Diamond affects four things that lead to a national competitive advantage:

1. Availability of resources/skills
2. Information that firms use to decide which opportunities to pursue with those resources/skills
3. Goals of individuals in companies
4. Pressure on companies to innovate/invest

What are the different types of international Corporate-level strategies?

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1. Multidomestic: decisions are decentralized to the specific location to tailor products to local market.
2. Global: firm's HOME office determines strategies to use in each country.
3. Transnational: firm seeks to achieve BOTH global efficiency and local responsiveness.

Explain the choice of entry mode:

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1. Exporting
2. Licensing
3. Strategic Alliances
4. Acquisitions
5. New wholly owned subsidiary

Explain Cooperative Strategy:

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Firms collaborate for the purpose of working together to achieve a shared objective; creates value for the customer

What are the different types of major strategic alliances?

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1. Joint Venture: create legally independent company
2. Equity Strategic Alliance: own percentages of new company
3. NonEquity Strategic Alliance: contract to share resources