CORPORATE STRATEGY

Corporate strategy

The overall scope and direction of a corporation and the way in which its various business operations work together to achieve particular goals.

 Corporate strategy is often stated explicitly in a "mission statement".

Corporate Strategy

Issues include:

• Scope of Business-----What Business you are in??

Product scope. How specialized should the firm be in terms of the range of products

it supplies? Coca-Cola (soft drinks), SAB Miller (beer), Gap (fashion retailing), and

Swiss Reliance (reinsurance) are specialized companies: they are engaged in a single

industry sector. General Electric, Samsung, and Bertelsmann are diversified

companies: each spans a number of different industries.

Geographical scope. What is the optimal geographical spread of activities for the

firm? In the restaurant business, Clyde’s owns 12 restaurants in the Washington DC

areas, Popeye’s Chicken and Biscuits operates throughout the US, McDonald’s

operates in 121 different countries.

Vertical scope. What range of vertically linked activities should the firm encompass?

Walt Disney Company is a vertically integrated company: it produces its own movies,

distributes them itself to cinemas and through its own TV networks (ABC and

Disney Channel), and uses the movies’ characters in its retail stores and theme parks.

Nike is much more vertically specialized: it engages in design and marketing but

outsources many activities in its value chain, including manufacturing, distribution,

and retailing.

• Resource deployment----How you are going to use your resources??
• Competitive advantage----What are your competitive advantages??
• Coordination of Production, Marketing, Personnel etc.----

Corporate planning

Corporate planning represents a formal, structured approach to achieving objectives and to implementing the corporate strategy of an organization.

It is the process of drawing up detailed action plans to achieve an organization's goals and objectives, taking into account the resources of the organization and the environment within which it operates.

Methods of developing Corporate Strategy

1.            Boston   matrix

Market Share and Market Growth

To understand the Boston Matrix, you need to understand how market share and market growth interrelate.

Market share is the percentage of the total market that is being serviced by your company, measured either in revenue terms or unit volume terms. The higher your market share, the higher the proportion of the market you control.

 Market growth is used as a measure of a market's attractiveness. Markets experiencing high growth are ones where the total market is expanding, meaning that it’s relatively easy for businesses to grow their profits, even if their market share remains stable.

Understanding the Matrix

The Boston Matrix categorizes opportunities into four groups, shown on axes of Market Growth and Market Share:

These groups are explained below:

Dogs: Low Market Share / Low Market Growth
In these areas, your market presence is weak, so it's going to take a lot of hard work to get noticed. You won't enjoy the scale economies of the larger players, so it's going to be difficult to make a profit. And because market growth is low, it's going to take a lot of hard work to improve the situation.

Cash Cows:
High Market Share / Low Market Growth
Here, you're well-established, so it's easier to get attention and exploit new opportunities. However it's only worth expending a certain amount of effort, because the market isn't growing, and your opportunities are limited.

Stars:
High Market Share / High Market Growth
Here you're well-established, and growth is exciting! There should be some strong opportunities here, and you should work hard to realize them.

Question Marks (Problem Child):
Low Market Share / High Market Growth
These are the opportunities no one knows what to do with. They aren't generating much revenue right now because you don't have a large market share. But, they are in high growth markets so the potential to make money is there.

2.            SWOT Analysis/TOWS Matrix

The SWOT analysis allows managers to develop a strategic plan by examining organizational strengths and weaknesses in terms of the opportunities and threats presented by its environmental elements. Subsequent strategies and tactical decisions can produce a competitive advantage.

A SWOT Analysis examines the companies:

• Strengths...Internal
• Weaknesses...Internal
• Opportunites...External
• Threats...External
• 
  
  

By developing a SWOT analysis, a company can determine what its distinctive competencies are. This will help determine what the organization should be in business for, what its mission should be.

3.            Product life cycle
Four Stages to the Product Life Cycle:

1. Introduction
2. Growth
3. Maturity
4. Decline

Introduction

Failure rate for new products can range from 60%-90%, depending on the industry. A product does not have to be an entirely new product, can be a new model (car).

Marketing Mix(MM) considerations

Need to build channels of distribution/selective distribution
Dealers offered promotional assistance to support the product...PUSH strategy.
Develop primary demand/pioneering information, communications should stress the benefits of the product to the consumer, as opposed to the brand name of the particular product, since there will be little competition at this stage and you need to educate consumers of the product's benefits.
Price skimming...set a high price in order to recover developmental costs as soon as possible.
Price penetration...set a low price in order to avoid encouraging competitors to enter the market, also helps increase demand and therefore allows the company to take advantage of economies of scale.
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Growth

Need to encourage strong brand loyalty, competitors are entering the market place. Profits begin to decline late in the growth stage.
May need to pursue further segmentation.

MM considerations

May need to perform some type of product modification to correct weak or omitted attributes in the product.
Need to build brand loyalty (selective demand), communications should stress the brand of the product, since consumers are more aware of the products benefits and there is more competition, must differentiate your offering from your competitors.
May begin to move toward intensive distribution-the product is more accepted, therefore intermediaries are more inclined to risk accepting the product.
Price dealing/cutting or meeting competition, especially if previously adopted a price skimming strategy.

Maturity

Sales curve peaks-severe competition, consumers are now experienced specialists.

MM Considerations

A product may be rejuvenated through a change in the packaging, new models or aesthetic changes.
Advertising focuses on differentiating a brand, sales promotion aimed at customer (PULL) and reseller (PUSH).
Move to more intense distribution
Price dealing/cutting or meeting competition
Provides company with a large, loyal group of stable customers. Generally cash cows that can support other products.
Strategies during maturity include:

Decline

Sales fall off rapidly. Can be caused by new technology or a social trend.
Can justify continuing with the product as long as it contributes to profits or enhances the effectiveness of the product mix.
Need to decide to eliminate or reposition to extend its life.

MM Considerations

Some competition drop out
Need to time and execute properly the introduction, alteration and termination of a product.