Module 3 : Corporate Level Strategies

Module 3:Corporate Level Strategies

12 Sessions [Apply]

Corporate-Level Strategies; Business Level

Strategies; Methods for Pursuing strategies-
Strategic Analysis & Choice.

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Corporate Level Strategies

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Corporate Level Strategies
• Stability
• Expansion
• Retrenchment
• Combination

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• Stability
• The corporate strategy of stability is adopted by an organization when it
attempts at incremental improvement of its performance by marginally
changing one or more of its businesses in terms of their respective customer
groups, customer functions, and alternative technologies—either singly or
collectively

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Examples
A packaged tea company provides special service to its institutional
buyers (College, Hotels, restaurants) apart from its consumer sales
through market intermediaries, in order to encourage bulk buying and
thus improve its marketing efficiency. (customer Groups)

A copier machine company provides better after-sales service to its

existing customers to improve its company and product image and
increase sales of accessories and consumables. (Customer function)

A steel company modernizes its plant to improve efficiency and

productivity. (alternative Technologies)

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3 types
• No change /Do Nothing : As the term indicates, this stability
strategy is a conscious decision to do nothing new, i.e. to continue with the
present business definition. This could be characterized as an absence of strategy
though in reality it is not so. Taking no decision sometimes is a decision too!
(Business Definition is not changed).

• Profit: An organisation may assess the situation and assume that its problems
are short-lived and will go away with time. Till then, the organisation tries to
sustain its profitability with short-term measures such as by adopting a profit
strategy. For instance, in a situation where the profitability is drifting lower,
organisations undertake measures to reduce investments, cut costs, raise prices,
increase productivity, or adopt some such measures to tide over what are
assumed to be temporary difficulties (both favorable and unfavorable
condition are balanced- Parle G)(It doesn't have many ingredients (it's just wheat
flour, vegetable oil and sugar), which means there are fewer production costs. In
1994, the price of a small packet of Parle-G was Rs 4 and it remained that until 2021,
when it was hiked by a rupee. As of today, a small packet costs Rs 5.

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• Pause /Proceed with caution
• In the Indian shoe market dominated by Bata and Liberty with increasing
presence of global brands such as Adidas, Nike, or Reebok, some of you might
not be aware that Hindustan Unilever (HUL), better known for soaps and
detergents, produced substantial quantities of shoes and shoe uppers for the
export markets.
• In late-2000, it started unobtrusively to sell a few thousand pairs in the cities to
gauge market reaction. This was a proceed-with-caution strategy before it
decided to focus on the export markets through Ponds Exports based at
Pondicherry. Shoes were clearly a non-core area for HUL

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2. Expansion
• The corporate strategy of expansion is followed when an organisation aims at
high growth by substantially broadening the scope of one or more of its
businesses in terms of their respective customer groups, customer functions,
and alternative technologies—singly or jointly—in order to improve its overall
performance.
• Examples
• A chocolate manufacturer expands its customer groups to include middle-aged
and old persons to its existing customers comprising children and adolescents.
• A stockbroker's firm offers personalised financial services to high net-worth
investors apart from its normal functions of dealing in shares and debentures in
order to increase the scope of its business and spread its risks.
• A printing firm changes from the traditional letter press printing to desk-top
publishing in order to in- crease its production and efficiency.

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Concentration
• Concentration is a simple, first-level type of expansion strategy. It involves
converging resources in one or more of a firm’s businesses in terms of their
respective customer needs, customer functions, or alternative technologies—
either singly or jointly—in such a manner that expansion results

• In practical terms, concentration strategies involve investment of resources in a

product line for an identified market with the help of proven technology

• Inpods, Camu Investment in Resources …..(Concentration Expansion )

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• Market penetration involves selling more products to the same market. A firm
may attempt focussing intensely on existing markets with present products using
a market penetration type of concentration. Besides the primary objective of
increasing usage by existing customers, market penetration strategies are also
used to maintain or increase market share of present products, restructure a
mature market by driving out competitors, and secure dominance in growth
markets. Low-cost airlines in India went into aggressive marketing with low
pricing adopting a market penetration type of concentration strategy
resulting in a very high growth rate for the aviation industry for several
years.

Market development involves selling same products to new markets. It may try
attracting new users for existing products resulting in a market development type
of concentration. New markets are not necessarily in the geographical sense; they
can be demographic, for instance, offering the same product with a different
pricing to a different set of customers. Yet, finding new regions where the same
product could be sold remains the basic thrust in a market development strategy.
Coir is a major agricultural commodity produced in southern, north-eastern, and
western India. Coir industry has faced severe crisis due to the synthetic foam and
fibres products. Market development type of concentration strategies in the coir
industry have attempted to present coir products as an environment-friendly
product for discerning customers especially in exports markets.
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• Product development involves selling new products to same markets. It may
introduce newer products in existing markets by concentration on product
development. Tourism industry in India has not been able to attract new
customers in significant numbers. New products such as selling India as a
golfing or Ayurveda-based medical treatment destination are some of the product
development efforts in tourism industry to attract more tourists.
• Bajaj Auto has consistently concentrated on two- and three-wheelers since the
last several years as it finds it to be a high growth and attractive industry to
invest in. It has tried various means to sustain its market share in a competitive
market. At different times it has adopted variations of concentration strategy of
market penetration (e.g. selling more in urban centres), market
development (e.g. selling to upwardly mobile customers in rural areas), and
product development (e.g. state-of-the-art motorcycles and ungeared
scooters) For its rivals, it remained a formidable competitor with proven
products manufactured through tried and tested technology and sold in familiar
markets until more agile competitors like Honda India and Hero MotoCorp.

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Integration
• In contrast to concentration strategies where organisations do not move beyond
their own boundaries, integration strategies push the organisations outside their
boundaries. Integration means expanding through combining businesses or
activities related to the present business or activity of a firm. This can be
done in two ways. One, the organisation can take over or partner with another
firm at the same point of production to expand its size of operations in the
present business. This is integrating horizontally. (coke Bottling)
• A shoemaker making ladies’ shoes can take over or partner with another
shoemaker making ladies’ shoes or one making gents shoes integrating
horizontally. Two, an organisation can take over or partner with another firm at
a different point of production in which case it is integrating vertically. The
shoemaker can enter into marketing ar- rangement with a wholesaler of leather
products orcan take over or partner with a finished leather producer making it a
vertical integration

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Horizontal Integration
• When an organisation takes up the same or similar types of products at the same
level of production or marketing process keeping it at the same stage of the value
chain, it is said to follow a strategy of horizontal integration. For example, a
luggage company taking over its rival luggage company is horizontal
integra- tion (also known as takeover, acquisition, or merger)

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Vertical Integration
• When an organisation starts making new products that serve its own needs,
vertical integration takes place. In other words, any new activity undertaken
with the purpose of either supplying inputs (such as raw materials) or serving as
a customer for outputs (such as marketing of firm’s product) is vertical
integration.
•Vertical integration could be of two types: backward and forward integration.
Backward integration means retreating to the source of raw materials. Forward
integration means moving the organisation to the ultimate customer or end user.

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Diversification
• Diversification involves a substantial change in business definition—singly or
jointly—in terms of customer functions, customer groups, or alternative
technologies of one or more of a firm’s businesses
• There could be many types of diversification strategies depending on whether the
organisation uses related or unrelated technology to make its new products for
new markets

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1. Marketing-related concentric diversification: A similar type of product is offered with
the help of unrelated technology, e.g. a company in the sewing machine business
diversifies into kitchenware and household appliances, which are sold through a chain
of retail stores to family consumers. The market relatedness here is in terms of the
common distribution channel for sewing machines, kitchenware, and household
appliances.
2. Technology-related concentric diversification: A new type of product or service is
provided with the help of related technology, e.g. a leasing firm offering hire-purchase
services to institutional customers also starts consumer financing for purchase of
durables to individual customers. The technology relatedness is in terms of the
procedure of financing service to institutional and individual customers.
3. Marketing- and technology-related concentric diversification: A similar type of product
or service is provided with the help of related technology, e.g. a synthetic water tank
manufacturer makes other synthetic items such as pre-fabricated doors and windows for
residential and commercial establishments sold through hardware suppliers network.
The market relatedness here is in terms of the common distribution channels for water
tanks and pre-fabricated doors and windows while the technology relatedness is in the
common technology of plastic moulding and engineering required for manufacturing
these products.

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• When an organisation adopts a strategy which requires taking up those
activities which are unrelated to the existing business definition of one or more
of its businesses either in terms of their respective customer groups, customer
functions, or alternative technologies, it is conglomerate diversification. A book
publisher going into carpet manufacturing, sporting goods manufacturer entering
restaurant business, and a financial services company moving into information
technology enabled services are all examples of unrelated di- versification.
• Ex: AV Birla Group is in a variety of unrelated businesses such as agri-business, carbon
black, cement, chemicals, financial services, insulators, mining, non-ferrous metals,
retail, telecommunications, textiles, trading solutions and wind power. T.T.
Krishnamachari (TTK) Prestige Group has presence in such diverse areas such as
consumer products, condoms, health insurance, and pharmaceuticals

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Internationalization
• International strategies are a type of expansion strategies that require
organizations to market their products or services beyond the domestic or
national market. For doing so, an organization would have to assess the
international environment, evaluate its own capabilities, and devise strategies to
enter foreign markets.

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Firms adopt an international strategy when they create value by
transferring products and services to foreign markets where
these products and services are not available. This is a simple
strategy in the sense that an international firm, by maintaining tight
control over its overseas operations, offers standardised products and
services in different countries with little or no differentiation.

Firms adopt a multidomestic strategy when they try to achieve a

high level of local responsiveness by customizing their products
and services according to the local conditions present in the
different countries they operate in. Obviously, this leads to a high-
cost structure as functions such as research and development (R&D),
production, and marketing may have to be duplicated.

KFC – (

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Firms adopt a global strategy when they rely on a 1low-cost
approach based on reaping the benefits of 2experience-curve
effects and 3location economies and 4offering standardized
products and services across different countries.
EX: Pepsi (American MNC), 1989…Selling the beverages.
The global firm tries to intensively focus on a low-cost structure by
leveraging their expertise in providing certain products and services
and concentrating the production of these standardized products and
services at a few favorable locations around the world. These products
and services are offered in an undifferentiated manner in all countries
the global firm operates in usually at competitive prices.
Firms adopt a transnational strategy when they adopt a combined
approach of low-cost and high local responsiveness(Multi-
domestic and transnational) simultaneously for their products
and services. Dealing with these two often contradictory objectives is
a difficult proposition and calls for a creative approach to managing the
production and marketing of products and services. (Ex:
Walmart)

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3. Retrenchment
• The corporate strategy of retrenchment is followed when an organization aims at contraction of its
activities through substantial reduction or elimination of the scope of one or more of its
businesses in terms of their respective customer groups, customer functions, or alternative
technologies—either singly or jointly—in order to improve its overall performance.

•Retrenchment involves total or partial withdrawal from a customer group, customer function,
or use of an alternative technology in one or more of a firm’s businesses as can be seen from the
following situations:
 A pharmaceutical firm pulls out from retail selling to concentrate on institutional
selling in order to reduce the size of its sales force and increase marketing efficiency.
 A corporate hospital decides to focus only on specialty treatment and realize higher
revenues by reducing its commitment to general cases which are typically less
profitable to deal with.
 A training institution attempts to serve larger clientele through the distance learning
system and discard its face-to-face interaction methodology of training in order to
reduce its expenses and use the existing facilities and personnel more efficiently.

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• Turnaround Strategies
• Turnaround strategies derive their name from the action involved, i.e. reversing
a negative trend and turning around the organization to profitability.
• Conditions for turnaround strategies There are certain conditions or
indicators which point out that a turnaround is needed if the organization has to
survive.
• Some of major danger signs are:
1. Persistent negative cash flow
2. Negative profits
3. Declining market share
4. Deterioration in physical facilities
5. Over manning, high turnover of employees, and low morale
6. Uncompetitive products or services
7. Mismanagement
• An organization which faces one or more of these problems is often referred to
as a ‘sick’ company.

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• Divestment Strategies
• Divestment (dai-vest-munt) (also called divestiture or cutback) strategy
involves the sale or liquidation of a portion of business, or a major division,
profit centre or SBU.
• Divestment is usually a part of rehabilitation or restructuring plan and is adopted
when a turnaround has been attempted but has proven to be unsuccessful. The
option of a turnaround may even be ignored if it is obvious that divestment
is the only answer. Harvesting strategies, a variant of the divestment strategies,
involve a process of gradually letting a company or business wither away in a
carefully controlled and calibrated manner. Spin-off may be done when a
business unit is carved out to create an independent or subsidiary business.
•Another term common in the Indian context is disinvestment which should
not be confused with divestment. (Disinvestment is not a corporate strategy in
the sense we are using here. It means the sale of equity in public sector
enterprises to dilute government shareholding (LIC)
•Ex: CCD CEO- Malavika Hegde- debt was 7000 crs, reduced to 2000cr.

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• Liquidation Strategies
• Liquidation is the ‘last resort’ strategy when the organization cannot be turned
around or it cannot be divested as there are no buyers.
• It is a retrenchment strategy that is considered the most extreme and
unattractive is liquidation strategy, which involves closing down an
organisation and selling its assets.

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4. Combination
The combination strategy is followed when an organization adopts a mixture of stability,
expansion, and retrenchment strategies either at the same time in its different
businesses or at different times in one of its business with the aim of improving its
performance.
Combination strategies (also referred to as mixed or hybrid strategies) are a
mixture of stability, expansion, or retrenchment strategies applied either
simultaneously (at the same time in different businesses) or sequentially (at
different times in the same business).
The major reasons for adopting combination strategy are as follows:
The organisation is large and faces a complex environment.
The organisation is composed of different businesses, each of which
lies in a different industry requiring a different response.
Any combination strategy is the result of a serious attempt on the part of strategists to take into account
the variety of environmental and organizational factors that affect the process of strategy
formulation. Complicated situations generally require complex solutions. Combination strategies are the
complex solutions that strategists have to offer when faced with the challenges of real-life business.

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 •Combination strategies (also referred to as mixed or
hybrid strategies) are a mixture of stability, expansion, or
retrenchment strategies applied either simultaneously (at
the same time in different businesses) or sequentially (at
different times in the same business).
• The major reasons for adopting combination strategy are
as follows:
The organisation is large and faces a complex
environment.
The organisation is composed of different
businesses, each of which lies in a different
industry requiring a different response.

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Business Level Strategies
• Porters Generic Business Strategies
• LIFE CYCLE

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Porters Generic Business
Strategies

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• Broad Low cost
• In the broad-low cost strategy, the firm is focused on providing a cost-based advantage
over a broad market group. “appealing to a wide group of customers”. Typically, to
be successful in a broad low-cost strategy, the firm needs to be excellent in
leveraging economies of scale.
• Very efficient logistics.
• A low-cost base (labor, materials, facilities), and a way of sustainably cutting
costs below those of other competitors.
Ex: FMCG

Colgate – Palmolive

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• Broad differentiation (Apple, Cadbury)
• The firm that employs a broad-differentiation strategy is seeking to have products
and/or services that appeal to a broad spectrum of buyers through
differentiation.
• Good research, development and innovation.
• The ability to deliver high-quality products or services.
• Effective sales and marketing, so that the market understands the benefits offered by the
differentiated offerings.

• Apple and BMW, are example brands. They focus on creating a hip and innovative
products (differentiation) that the masses would want. The masses would pay a
premium for their products (relative to competing products), and choose their
products over other products because of their differentiation.
• Apple would focus on functional simplicity, whereas BMW’s focus would be on
vehicle performance. Both brands would create product versions that have a price
point that the masses can somewhat comfortably adopt (Apple’s 32GB product line
and BMW’s i3 series are lower priced).
• To be successful in using broad-differentiation strategies the firm should have
adequate adaptive advantages that would allow it to continuously innovate or be
able to leverage economies of scale (that comes with selling to the masses) to create
sustainable differentiation. The attractiveness of the selected differentiation should
be enough that the price of the product/service would not deter the masses from
purchasing it. Typically broad-differentiation products/services are not the
lowest prices in their market.

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• [Link]
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• Focused Low Cost strategy (Parle-G)
• A focused low-cost strategy is when the firm focuses on a narrow customer
segment and provides low-cost services and products. They are able to
improve their costs by focusing on a narrow market.
• Focus strategies concentrate on particular niche markets and, by
understanding the dynamics of that market and the unique needs of
customers within it, develop uniquely low-cost or well-specified
products for the market

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• 4. Focused Differentiation strategy (Dark & Fantasy)
• A focused differentiation strategy is when the firm focuses on a
narrow segment and gives its customers products or services
with distinct attributes that other firms find difficulty doing.

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Methods for Pursuing strategies
• Strategic Alliance
• Joint Ventures
• Mergers and Acquisitions

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• Strategic Alliance Vs Joint Venture
• By contrast, with a strategic alliance, each
company works together but no new legal
entity is created. Alliance is an approach in
which two or more companies agree to pool their
resources together to form a combined force in
the marketplace.
• With a joint venture, two or more companies
create a single legal entity in which each owns
a share.

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• A merger occurs when two separate entities
combine forces to create a new, joint
organization.
• An acquisition refers to the takeover of one
entity by another.

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• Reasons for Strategic Alliance
• Entering New Markets
• (if a company explores company foreign market)
•

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Strategic Analysis
• BCG Matrix

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