CORPORATE STRATEGYPresented by GASCON, Marc R.

BSBA 022: Strategic Mgmt | Summer Term 2011.04.29

OUTLINE OF DISCUSSION•Introduction•What is CORPORATE Strategy?•Corporate Strategy as an Ongoing Process

•Reasons for Developing Corporate Strategies

•Summary•References

INTRODUCTION

•ETYMOLOGY: The concept of STRATEGY in business has been borrowed from military tactics, originating in these Greek terms…▫‘stratos’ = “field, spread out like a

structure”▫‘agos’ = “leader”

INTRODUCTION

•Its original rough definition was to think ahead in order to counter the movements of the enemy forces.

•In the domain of business, a strategy points to the:▫accomplishment of enterprise goals.▫broad program of action involving the

deployment of resources towards attaining comprehensive organizational objective/s.

INTRODUCTION•In the modern era, the key

word STRATEGY has become widely used in other domains such as in sports & academics.

•Generally speaking, a strategy is narrowly defined as a set of key decisions designed to meet a set of targets.

INTRODUCTION• In the business sense, Johnson & Scholes (2006)

define STRATEGY as: “the basic long-term direction and scope of an organization.”

•In other words, the strategy of a business organization refers to a comprehensive master plan stating how the organization will achieve its duty or long-term goals.

•In the field of MANAGEMENT, STRATEGY involves…

INTRODUCTION

▫the appropriate configuration of resources within a challenging environment in order to meet the needs of markets and to fulfill stakeholder expectations.

▫the consistent patterns in organizational decision-making in order to deliver a unique mix of value and quality in the global arena.

•Strategies are plans that must change frequently, in light of the plans of the competitors and as adaptation to the constantly evolving market’s conditions.▫ EXAMPLE: If Company X’s management sees the

price cut by its competitor, Company X may decide to implement strategies like product/service re-launching or online viral ad campaign to educate the target market and assure the customer/s of the unique edge of Company X’s product/service.

INTRODUCTION

•The several aspects of Corporate Strategy are challenging, not only for large firms but also for small local enterprises.

•That is because strategies exist at many differing levels in any organization, from the overall business (or group of businesses) down to the individuals working in it.

INTRODUCTION

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INTRODUCTION

What is CORPORATE Strategy?

•Heavily influenced by investors as well as other stakeholders, CORPORATE STRATEGY is an ongoing cycle undertaken to guide decision-making all throughout the business.

What is CORPORATE Strategy?

What is CORPORATE Strategy?•It is concerned with the overall purpose &

scope of the business to meet stakeholder expectations.

What is CORPORATE Strategy?•It is the kind of plan that is usually explicitly

conveyed in an organization’s ‘Vision-Mission Statement’

An ONGOING PROCESS•Corporate Strategy is a continuous cycle

that extends over a diversified company’s business structure.

•It is a network-wide planning activity considering all the elements & boundaries of the micro+macro environments of a firm.

An ONGOING PROCESS•Across time, studying the Corporate Strategy

of different organizations would reveal common patterns of overall directions which include:▫Expansion▫Stability▫Retrenchment▫Combination▫GrowthEXAMPLE: Coca Cola Inc. has followed their Corporate

Strategies for GROWTH with ACQUISITION. This international company known mainly for soda (‘softdrinks’ in Pinoy parlance) has been acquiring several local bottling units in addition to many other non-soda-related industries to emerge as the popular beverage market leader.

An ONGOING PROCESS• The continuous cycle of developing the overall

managerial plan for the organization, a.k.a. the Corporate Strategy, involves the following sub-processes:▫Making the moves to achieve diversification by

trying to establish a role in different trades.▫ Initiating actions to boost the combined

performance of the different trades that the firm has diversified into.

▫Pursuing ways to capture valuable cross-trade recognitions and turn these into competitive advantage.

▫Establishing enduring investment priorities and steering corporate resources into the most attractive/lucrative trade units.

An ONGOING PROCESS•The ff. are the key tasks of the process of

developing and implementing a Corporate Strategy:▫Exploring and determining the vision of the

company in the form of a Vision Statement.▫Developing a Mission Statement of the

company that should include statement of methodology for achieving the objectives, purposes, and the philosophy of the organization adequately reflected in the vision statement.

▫Defining the Company Profile which includes the internal analysis of culture, strengths and capabilities of an organization.

An ONGOING PROCESS•The ff. are the key tasks of the process of

developing and implementing a Corporate Strategy:▫Making external environmental analysis to

identify factors as threats, opportunities etc.▫Finding out ways by which a company profile

can be matched with its environment to be able to accomplish mission statement.

▫Deciding on the most desirable courses of actions for accomplishing the mission of an organization.

▫Selecting a set of long-term objectives and also the corresponding strategies to be adopted in line with vision statement.

An ONGOING PROCESS•The ff. are the key tasks of the process of

developing and implementing a Corporate Strategy:▫Evolving short-term and annual objectives

and defining the corresponding strategies that would be compatible with the mission and vision statement.

▫Implementing the chosen strategies in a planned way based on budgets and allocation of resource, outlining the action programs and tasks.

▫Installation of a continuous comparable review system to create a controlling mechanism and also generate data for selecting future course of action

•Johnson & Scholes (2006) presented a Corporate Strategy Evaluation Model in which strategic options are evaluated against the ff. trio of key success criteria:▫SUITABILITY

(Would the plan work?)▫FEASIBILITY

(Can the plan be made to work?)

▫ACCEPTABILITY (Will the managers execute the plan?)

An ONGOING PROCESS

•SUITABILITY: Would the plan work?▫Suitability deals with the overall rationale of

the strategy. The key point to consider is whether the strategy would address the key strategic issues underlined by the organization's strategic position. The ff. questions should be answered: Does the plan make economic sense? Would the organization obtain economies of scale

or economies of scope? Would the plan be suitable in terms of

environment and capabilities?

An ONGOING PROCESS

•FEASIBILITY: Can the plan be made to work?▫Feasibility is concerned with whether the

resources required to implement the strategy are available, can be developed or obtained. Resources include: Funding Time People involved Available information

An ONGOING PROCESS

•ACCEPTABILITY: Will the managers execute the plan?▫Acceptability is concerned with the

expectations of the identified stakeholders [the shareholders, the employees, and the clients of the company] with the expected performance outcomes: Return (financial & non-financial benefits for

shareholders, employees, clients) Risk (probability + consequences of failure) Reactions (anticipating the likely response of

shareholders, employees, clients, working unions)

An ONGOING PROCESS

Reasons for Developing Corporate Strategies

•Bennett (1999) asserted that Corporate Strategies foster “the commitments, careful decisions, and intuitive actions required fora firm to achieve competitive advantage and earn beyond-average returns” in an interconnected worldwhich is vigorously changing.

Reasons for Developing Corp. Strategies

Reasons for Developing Corp. Strategies

•Corporate Strategy also helps managers and even entry-level employees to exercise the choice of direction that an organization adopts. ▫EXAMPLE: There could be a small business firm

involved in a single business or a large, complex and diversified conglomerate with several different businesses. The corporate strategy in both these cases would be about the basic direction of the firm as a whole.

CORPORATE STRATEGY•Long-term plan according to circumstances and expectations of stakeholders

•Guide for allocation of resources

•Concerned with the company as a whole

•Formulated to meet environment threats and opportunities

S U M M A R Y

• Bennett, R. (1999). Corporate strategy (2nd ed.). New York, USA: McGraw Hill.

• Johnson, G. & Scholes, K. (2006). Exploring corporate strategy: Text and cases (7th ed.). New Jersey, USA: FT Prentice Hall.

• Pettigrew, A., Thomas, H. & Whittington, R. (2002). The handbook of strategy and management. England, UK: SAGE.

• Thompson, L. & Strickland, R. (2003). Strategic management: concepts and cases. New Delhi, India: McGraw Hill.

R E F E R E N C E S