Professional Documents
Culture Documents
Kristen Hodge
Katelyn Reed
Venessa Rodriguez
Monica Longer
What is your strategy?
◦ Small, single business firms
Clear, concise answer
◦ Large, multi-business
corporations
Identify 3-5 strategic themes
Aligns behaviors and decision
making at all levels within the
company
Corporate strategy
◦ Concerned with decisions about
which businesses a company
operates in.
Shaping the corporate portfolio
and how to create value within it
by exploiting synergies among
multiple business units.
Shaping the Corporate Portfolio
◦ Economics of scale and scope
Is bigger better?
◦ Defining the portfolio’s core and
potential growth
◦ Growth strategies at corporate
level
◦ Divestment Options
Economies of scale- Cost per unit
decreases as volume goes up
◦ Better use of technologies in
production
◦ Greater buyer power in large
scale purchasing situations
◦ Better ways to perform given
tasks
Economies of Scope- unit cost of an
activity falls because the asset used is
shared with some other activity.
◦ using the same raw and semifinished
materials and production processes to
make a variety of different products
◦ 3 Decision opportunities for creating
economies of scope: horizontal,
geographical, and vertical scope.
Horizontal Scope Decisions
◦ Choices of product scope, including tangible and
intangible assets.
◦ GE has interests in appliances, medical systems, aircraft
engines, financing, and more.
◦ Sony’s expertise in miniaturizing products.
Geographical Scope Decisions
◦ Choices about geographical coverage
◦ McDonald’s has operations in almost 100 countries
◦ Whirlpool has production facilities in only a few
countries but markets its products in many more
◦ Internet Companies like eBay or Amazon have a virtual
geographical scope.
Vertical Scope Decisions
◦ Concerned with how a company links its value chain
activities vertically.
◦ In order to reap benefits that scale and scope can bring
a company must
Make related investments to create global marketing and
distribution organizations.
Create the right management infrastructure to effectively
coordinate the multiple activities that makeup a
multinational company.
Be a first mover
Makes challengers build productive capacity while the first
mover is perfecting their production process and developing
marketing and distribution strategies to compete for existing
market share.
Most valuable customers, products, channels or
distinctive capabilities.
Differentiate the company in a way that builds on
REAL strengths and capabilities.
Many companies tend to under exploit the full
potential of their strongly performing business
units.
Don’t misunderstand the relationship between
returns and competitive strength.
◦ 3 Traps:
Assuming that business units that are performing well
have reached their limit, and thus deciding not to make
any further investments in the core business.
Assuming that there is greater upside potential in
underperforming businesses and making unwarranted,
more risky investment in underperforming portfolio
components.
Prematurely abandoning core businesses
Colgate
◦ Share price delivered a return three
times that of S&P 500 and
outperformed GE; while its revenue
grew less than 2 percent each year
between 1996 and 2000.
◦ In the same period, its stock price
almost tripled because of major
investments in the company’s core
business.
A company must analyze its strengths and
weaknesses, how it delivers value to
customers, and what growth strategies its
culture can effectively support