Welcome to Week 11!
Entrepreneurship: Chapter 6
Ashton Converse
Corporate Level Strategy
Objectives/Schedule
 Welcome
 Review
 Chapter 5 and 6
 Business Level and Corporate
Level Strategies
 Business Plan Professionalizing
 Corporate Level Strategy
Review
 What is the market segmentation?
 What is the target?
 What is Business level strategy
 What 3 areas define the relationship
between the firm and customers?
 What is the overall purpose of business-
level strategy?
Wrap-up Chapter 5:
Business Level Strategies
 Cost Leadership Strategy:
 Set of actions taken to produce goods or
services with features that are acceptable
to customers at the lowest cost, relative to
that of competitors
 Products with a likable cost
 Differentiation Strategy:
 Set of actions taken to produce goods or
services that customers view as being
different in ways that are important to them
 Products with extra value to them
Wrap-Up Chapter 5:
Business Level Strategies
 Focus Strategy:
 Set of actions taken to produce goods or
services that serve the needs of a particular
target.
 Simple Detailed Goals
 Integrated Cost Leadership/Differentiation Strategy:
 The actions needed to allow a company pursue
low cost and differentiation at the same time
 Products with likeable costs and good value
Final Chapter 5 Thought
 Total Quality Management (TQM):
 Shows total commitment to the customer and
continuous improvement of every part of the
company
 Firms use TQM systems to
1. Increase customer satisfaction/happiness
2. Cut costs
3. Reduce the amount of time required to
introduce innovative products to the market
4. Hold the Competitive Advantage (be dynamic)
5. Numerous more advantages
Two Main Points
1. Corporate Level Strategy
2. Diversification
 Corporate Level Strategy:
 This specifies actions a firm takes to gain a
competitive advantage by selecting and managing
a group of different businesses competing in different
product markets.
 What does diversification mean?
 Adding variety (differences)
 The act of manufacturing a variety of products,
investing in a variety of securities, selling a variety of
products,
 Moving from single business competing to several
product markets and/or into several businesses
Corporate Level Strategy
 Concerned with 2 Key Issues:
 What product markets and businesses the
firm should compete with
 How corporate headquarters should
manage those businesses
 Similarly to Business-Level Strategy, Corporate
level strategy is used to create value
 As it creates value, the businesses will have
above average returns/profits
Why Diversify?
 Create Value
 Lower Risk
 Improve Overall Performance
 Workers
 Products
 Numerous More
 Reduce Costs
******LET IT SNOW!*******
Welcome to Week 11
Day 2!
Entrepreneurship and Strategies
Chapter 6 - 7
Objectives/Schedule
 Welcome: Next Week is Thanksgiving!
 Quick Review: what do you remember
 Finish Chapter 6 and Corporate Level
Strategy
 Market Power
 Business Plan Reasoning and Learning
 Business Plan Work
 Enjoy the Weekend!
Quick Review
 What were some things we talked
about yesterday?
 What are some things we learned?
Value Creating
Diversification
 Economies of Scope:
 Saving costs by sharing resources with
other businesses within the corporation
 Market Power
 When a company is able to sell its
products above the average market
value
 And/or reduce its costs to below the
competitive level.
Unrelated Diversification
 Financial Economies:
 Cost savings realized through improved
allocations of financial resources based on
investments inside or outside the firm
 Saving money through wise use of financial
resources
 The Two Parts
 Efficient Internal Capital Market Allocation
 Spreading the money for more profits
 Restructuring Assets
 Buy, restructure (make), and then sell
Value-Neutral Diversification
 Used when there is a desire to balance,
or match the competitor
 Antitrust Regulation and Tax Laws
 Government made laws to not allow
mergers that created powerful markets
 Low Performance
 Too high of performance gets rid of te
need for diversification, too low of
performance shows need for
diversification
 Low performance shows need
Value Neutral Cont.
 Uncertain Future Cash Flows
 Mature companies or companies in mature
industries need to diversify for long-term
survival or success.
 Synergy and Firm Risk Reduction
 Working together to lower risk
 As things work together, the more efficient
work is completed
 Resources and Diversification
 Resources must be there for diversification to
work…and they must be rare and unique
Value Reducing
Diversification
Main Reasons for Value Reducing:
 Lowers Risk and increases managerial
compensation.
 Very good for managers
 Provides extra benefits to managers that other
stockholders do not get to enjoy
 Could be used for companies where
stockholders may rule
Chapter 7
Acquisition and Restructuring Strategies
 We will learn about both strategies and why
firms use them
 Advantages
 Seven problems that work against these
strategies success
 Define the restructuring strategy
 Explain short and long-term outcomes of
the restructuring strategy
The Main Points
Merger
 Strategy where two firms agree to
integrate their operations (create one firm)
Acquisition (most common)
 Strategy where a firm buys the majority or
100% interest in another firm with the
desire to make the firm part of its business
Takeover
 Acquisition strategy where the one firm
does not solicit their firm (power is used)
Reasons for Acquisitions
Increased Market Power (to achieve)
 Horizontal Acquisition
 Acquisition of company competing in the
same industry
 Vertical Acquisition
 A firm acquires a supplier or distributor of
one or more of its goods or services
 Related Acquisition
 Acquiring a firm from a highly related
industry
Business Plan Expansion and
Professionalization
1. Think of Location:
 Where, and why will that be a good
location?
2. Answer: Why Your Business Will be Good
for the Location?
 How will it improve the community?
 What will it bring to the community or
give the community?
Business Plan Expansion and
Professionalization
1. Think of Investors:
 Who will invest in your business?
 Also who do you want to invest in your
business?
 Why will they invest in your business?
 What will they get in return from investing in your
business
2. Think of How Your Business will be Successful
 What actions will make it succeed? What is the
company’s definition of success? (how will it
know it reached success?