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Corporate Growth Strategies Explained

The document outlines the directional strategy corporations must consider for growth, including whether to expand, diversify, or pursue internal development versus acquisitions. It highlights growth strategies aimed at increasing sales, assets, and profits, emphasizing the advantages of larger firms in competitive markets. Additionally, it differentiates between mergers and acquisitions, noting the benefits of growth such as increased market demand and job opportunities for executives.

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6 views2 pages

Corporate Growth Strategies Explained

The document outlines the directional strategy corporations must consider for growth, including whether to expand, diversify, or pursue internal development versus acquisitions. It highlights growth strategies aimed at increasing sales, assets, and profits, emphasizing the advantages of larger firms in competitive markets. Additionally, it differentiates between mergers and acquisitions, noting the benefits of growth such as increased market demand and job opportunities for executives.

Uploaded by

antioquiakyzennicole2300835
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

●​ DIRECTIONAL STRATEGY

●​ every corporation must decide its orientation toward growth by asking the ff. three
questions:

a.​ Should we expand, cut back, or continue our operations unchanged?


b.​ Should we concentrate our activities within our current industry, or should we
diversify into other industries?
c.​ If we want to grow and expand nationally and/or globally, should we do so
through internal development or through acquisitions, mergers, or strategic
alliances?

Three General Orientations / Grand Strategies


●​ useful both to corporations operating in only one industry with one product line and to
those operating in many industries with many product lines

GROWTH STRATEGIES
●​ expand the company’s activities
●​ designed to achieve growth in sales, assets, profits, or some combination
●​ continuing growth
○​ increasing sales and a chance to take advantage of the experience curve
to reduce the per-unit cost of products sold, thereby increasing profits
●​ the cost reduction becomes extremely important if:
○​ corporation’s industry is growing quickly or consolidating
○​ competitors are engaging in price wars in attempts to increase their
shares of the market
●​ popular strategy because larger businesses tend to survive longer than
smaller companies due to the greater availability of financial resources,
organizational routines, and external ties

★​ A corporation can grow internally by expanding its operations both globally and
domestically, or it can grow through mergers, acquisitions, and strategic
alliances.

Merger
●​ transaction involving two or more corporations in which stock exchanged but in which
only one corporation survives
●​ usually occur between firms of somewhat similar size and are usually “friendly”
●​ resulting firm is likely to have a name derived from its composite firmS

Acquisition
●​ purchase of a company that is completely absorbed as an operating subsidiary or
division of the acquiring corporation
●​ takeovers: hostile acquisitions

Growth is very attractive strategy for two key reasons:


a.​ it is based on increasing market demand may mask flaws in a company — flaws that
would immediately evident in a stable or declining market
i.​ growing flow of revenue into a highly leveraged corporation can create a large
amount of organization slack (unused resources) that can be used to quickly
resolve problems and conflicts between departments and divisions
ii.​ growth also provides a big cushion for turnaround in case a strategic error is
made
iii.​ larger firms also have more bargaining power than do small firms and are more
likely to obtain support from key stakeholders in case of difficulty
b.​ growing firm offers more opportunities for advancement, promotion, and interesting jobs
i.​ it is exciting and ego-enhancing for CEOs
ii.​ it is viewed as a “winner” or “on the move” by marketplace and potential investors
iii.​ executive compensation tends to get bigger as an organization increases in size
iv.​ large firms are more difficult to acquire, thus an executive’s job in a large firm is
more secure

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