Corporate
Strategy
-Kishore Kumar
August 2005
Characteristics of Strategic Decisions







Concerned with the scope of an organization’s activities
Matching the organization’s activities to its environment
Matching the organization’s activities to its resource capability
Strategic decisions have major resource implications
Affect operational decisions
Influenced by values and expectations of shareholders
Determine long-term direction of an organization
Levels of Strategy






Corporate Level
Competitive or Business Strategy
Operational Strategy
Corporate strategy... defines the scope of the business in terms of
the industries and markets in which it competes.
 includes decisions about diversification, vertical integration,
acquisitions, new ventures, divestments, allocation of scarce
resources between business units
Business strategy... is concerned with how the firm competes within
a particular industry or market... to win a business unit must adopt a
strategy that establishes a competitive advantage over its rivals.
Functional strategy... the detailed deployment of resources at the
operational level
Vocabulary of Strategy








Mission
Goals
Objective
Strategy
Tactics
Action
Control
Rewards
Characteristics of Strategic Decisions







Concerned with the scope of an organization’s activities
Matching the organization’s activities to its environment
Matching the organization’s activities to its resource capability
Strategic decisions have major resource implications
Affect operational decisions
Influenced by values and expectations of shareholders
Determine long-term direction of an organization
Strategic Management
Strategic Analysis
Strategic Choice
Strategy Implementation
Elements of Strategic Management

Strategic Analysis
 The Environment
 Culture and Stakeholder Expectations
 Resources and Strategic Capability

Strategic Choice
 Identifying Strategic Options
 Evaluating Options
 Selecting Strategy

Strategy Implementation
 Planning and Allocating Resources
 Organization Structure and Design
 Managing Strategic Change
Patterns of Strategy Development

Natural selection view
Planning view
Logical incremental view
Cultural view
Political view
Visionary view

Integrating views of strategy development





Cultural Web
Paradigm






Stories
Symbols
Power Structure
Organizational structures
Control systems
Rituals and routines
Strategic Drift
Analyzing the Environment
Macro Environmental Analysis
PESTLE






Political
Economics
Social
Technological
Legal
Environmental
Michael Porter’s 5 Forces Analysis
Porter’s Five Forces Analysis
Threat of New Entry
Bargaining Power
of Suppliers
• Differentiation of inputs
• Switching costs
• Presence of substitute
inputs
• Supplier concentration
• Importance of volume to
supplier
• Cost relative to total
purchases
• Impact of inputs on cost or
differentiation
• Threat of forward
integration
• Economies of scale
• Proprietary product
differences
• Brand identity
• Switching costs
•
•
•
•
•
Capital requirements
Access to distribution
Absolute cost advantages
Government policy
Expected retaliation
Rivalry Among
Existing Competitors
• Industry growth
• Fixed costs / value
added
• Overcapacity
• Product differences
• Brand identity
•
•
•
•
•
•
Switching costs
Concentration and balance
Informational complexity
Diversity of competitors
Corporate stakes
Exit barriers
Threat of Substitutes
• Relative price performance of substitutes
• Switching costs
• Buyer propensity to substitute
Bargaining Power
of Customers
•
•
•
•
•
•
•
•
•
•
•
Buyer concentration
Buyer volume
Buyer switching costs
Buyer information
Ability to integrate
backward
Substitute products
Price / total purchases
Product differences
Brand identity
Impact of quality /
performance
Buyer profits
High
Low
Annual real rate of market growth %
Group Analysis Matrix
BCGStrategic
Growth-Share
Earnings:
high stable, growing
Earnings:
Cash flow:
neutral
Cash flow: negative
Strategy:
invest for growth
Strategy:
Earnings:
high stable
Earnings:
low, unstable
Cash flow:
high stable
Cash flow:
neutral or negative
Strategy:
milk
Strategy:
divest
High
low, unstable, growing
analyze to determine
whether business can
be grown into a
star, or
will degenerate
into a dog
Relative Market Share
Low
Strategic Capability
Resource Audit




Physical resources
Human resources
Financial
Intangibles
Value-Chain Analysis
Comparative Analysis



Historical analysis
Comparison with Industry norms
Best practice analysis
Balance of Resources
Portfolio analysis
Balance of skills/personalities
Financial resources
Flexibility of resources
Key Issues
SWOT analysis
Strength
Weakness
Opportunities
Threat
Core Competency
Who owns the competency
How durable are the competences
How transferable are the competences
How replicable are the competences
Culture and Stakeholder Expectations
Cultural Context – External and Internal
Influence
Expectations – Individuals, External stakeholders, Internal stakeholders
Power
Purposes – Mission, Objectives
Influence
Strategies
Cultural Context of Strategy
External influences
Values of Society
Organized groups
Internal influences
Paradigm
Stakeholder Analysis
Power – hierarchy, influence, control of strategic resources, knowledge or skills,
control of environment, decision-making expertise
Dynamism
Interest
Strategic Choice
Development Strategies
What Basis – Generic Strategies: price based, differentiation, focus
Which Direction – Alternative Directions: withdrawal, consolidation, market
penetration, product development, market development, diversification
(related or unrelated)
How - Alternative Methods: internal development, acquisition, joint development
alliances
Strategic Evaluation
Evaluation Criteria
Suitability
Feasibility
Acceptability
Also check portfolio analysis, PLC, Value-chain and profitability
Strategy Implementation
Resource Allocation


identifying resources
fit with existing resources – new requirements, changing old…consistency and
linkages
Organization Structure and Design




Simple structure
Functional structure
Multidivisional structure
Matrix
Strategic Change








Understanding processes of strategic change
Diagnosing strategic change needs
Managing the strategic change process
Styles of managing change
Changing organizational routines
Symbolic activity
Political activity
Leadership and change agency