Unit 4: Corporate Strategy
Corporate strategy is perhaps the most important strategy, because it sets the metric by which all other strategies are formed within the company. For example, BMW has a focus on quality vehicles that they can sell for a premium. If a business unit of BMW decides to pursue a cost leadership strategy that will not work well with the overall firm strategy, it would be very difficult and could tarnish BMW's brand image, although that is not to say that it is impossible.
The subject of corporate strategy is vast; however, corporate strategies are usually based around one central goal: growth. It is up to the management to determine the best way to achieve growth. Some prefer to integrate into the value chain. For BMW, this would mean pursuing opportunities to produce parts for its cars instead of paying contractors. Other firms may want to grow by diversifying. While a firm like GE, which has produced engines, financial products and entertainment programming, can diversify across industries, most diversify with closely-related industries. BMW also makes motorcycles and owns the Mini and Rolls-Royce brands, which cater to different markets than do BMW vehicles. Companies may create subsidiaries, different branches of a major company, in order to cater to these different markets. For example, in educational textbook publishing, a company like Pearson Education also has subsidiaries (although this company has since moved to combine these subsidiaries into the whole of Pearson Education, Inc.). The subsidiaries Prentice Hall and Addison-Wesley focus on specific fields, such as mathematics and economics, in which to market textbooks. At one point, these subsidiaries competed against each other, while at the same time both brought in market share for the Pearson Education company as a whole. Pearson Education has since merged these subsidiaries, although it has kept the names for branding, and now focuses on selling its products without this internal competition.
This unit focuses on the various methods a firm can use to pursue growth. Growing is not just about buying the competition, because that is not always possible or expeditious. This unit will explore why that is and how to determine the best strategy for growth.
Completing this unit should take you approximately 8 hours.
Upon successful completion of this unit, you will be able to:
- explain commonly used corporate strategies;
- analyze which strategy alternatives will create the most value; and
- relate strategy theory to specific applications.
4.1: Growth Strategies
Skim this book about ancient Chinese philosophy and strategy. Pay attention to passages about being victorious over rivals. Consider these general ideas in light of corporate actions like takeovers, price wars, and buyouts.
Read this chapter for an expanded view of growth theories. What areas might affect strategic planning?
4.2: Retrenchment
Read the section of this article concerning corporate strategies. Not all firms can make a profit, and sometimes they must cut back. Consider the pros and cons of each retrenchment strategy: turnaround, divestment, bankruptcy, and liquidation.
Read this section to reinforce what you learned about retrenchment and restructuring. By the end of this section, you should be able to distinguish between the two strategies and understand why a firm would want to shrink or exit from its business.
4.3: Corporate Strategy Selection
Unit 4 Assessments
- Receive a grade
Take this assessment to see how well you understood this unit.
- This assessment does not count towards your grade. It is just for practice!
- You will see the correct answers when you submit your answers. Use this to help you study for the final exam!
- You can take this assessment as many times as you want, whenever you want.
- Receive a grade
Complete this writing exercise to check your understanding of the material presented in this unit.
