CORPORATE STRATEGY

Lecturer
Jubilee Leonard Kakwezi
BA Educ, Econ. MBA-IT. MSc. Finance. PhD-BAF (Cand)
 COURSE OUTLINE
• Introduction to Corporate Strategy
• Different types of corporate strategy
• corporate strategy structure
• Strategies In Emerging Markets
• Designing business growth strategies
• Developing Strategic Human Resources
• Managing strategic innovations
• Strategic Team Building and Management
• Strategic analysis for corporate strategic decisions-making
• Channels for strategic communication.
 What is corporate strategy?
• Corporate strategy is a unique plan or framework that is long-term in
nature, designed with an objective to gain a competitive advantage
over other market participants while delivering both on
customer/client and stakeholder promises (i.e. shareholder value).
• A corporate strategy is a valuable tool for expanding and
defining the values of a company.
• Companies use corporate strategies to create and identify
long-term goals aimed toward improvement.
• Understanding what a corporate strategy is, can help
managers increase overall profits and financial stability of
company.
Why does good corporate strategy important
• Concerned with the overall purpose and scope of the
business to meet stakeholder expectations,
• corporate strategy is heavily influenced by investors in the
business and acts to guide strategic decision-making
throughout the enterprise at all levels.
• To succeed, a good strategy needs both a solid foundation
and the ability to evolve and change in real-time. Business is
not static, corporate strategy shouldn’t be either.
Why is a good corporate strategy important?
• Organizations face several challenges when designing and
putting into practice corporate strategies.
• So, what exactly is the foundation of a solid corporate
strategy?
• A good corporate strategy consists of six elements that
together promote a corporate advantage.

• These elements can be represented in a Corporate

Strategy Triangle, where the sides of the triangles are the
foundations of a solid strategy: Resources, Businesses,
Organization
The importance of corporate strategy is in focusing on an
organization with all its resources and capabilities on
accomplishing clearly defined mid- and long-term
objectives.
 Observations
• Professor Richard Rumelt of UCLA argues that where
companies go wrong is when they make their strategy too
complicated.
• It is also by our natural tendency to try and satisfy all possible
constituencies (the CEO, the Board, key investors, etc.), it is
here that strategies often become convoluted and lose focus.
• To achieve a competitive advantage, each arm of the triangle
has to be strong enough to support the triangle uniformly, yet
flexible enough to evolve with the business.
• The business must be in a position to leverage this triangle of
strengths to bring about a competitive advantage. The point is
when these three arms of the triangle do not match up, any
advantage that a business has eventually fallen away.
10 Components of corporate strategy

• A good corporate strategy is more than a description of the company’s vision

or mission. It is not a long list of tasks that need to be accomplished. We
believe that a good corporate strategy has several essential components:
1.A set of clearly defined objectives which are quantified, anchored in financials
(e.g. enterprise value, profitability, growth) and linked to a timeline
2.A clearly defined product or/and service offering that clarifies four
dimensions:
1. What products/services do we offer (including clearly defined value-added)?
2.  Who is our customer/client?
3. What markets do we serve (e.g. geography)?
4. At what price do we offer our product/service?
3.A clear understanding of the market/industry and competitive landscape.
4.Core capabilities that the organization has AND does not have (e.g.
innovation, cost advantage, etc.)
 10 Components of corporate strategy cont.
5. Execution approach defining how objectives will be achieved (e.g. through organic
growth, acquisitions, etc.)
6. Key elements of performance management to track the execution journey (e.g. Key
Performance Indicators -KPIs)
7. Agreed risk management approach (i.e. identified risks and mitigation strategies)
8. Clear change management and leadership approach to drive changes necessary to
succeed.
9. A clearly defined strategic roadmap laying out the path forward (i.e. milestones,
activities, responsibilities, associated resources, etc.)
10.A well-defined strategy considers different scenarios that represent potential
strategic developments and feasible versions of future developments to ensure that
the company is prepared for unexpected.
• For example, if a company plans for essential growth that includes both organic and
acquisition-based growth, it should have in its back pocket a scenario of a “pure
organic growth” in the event that there are no companies in the market to acquire.
Another possible scenario is changes in regulation that are often hard to predict.
 Corporate strategy vs Business strategy vs
Functional strategy: How are they different?
• Very often people talk about different types of strategies referring
to strategies that relate only to a particular part of an organization.
• Often, there is a confusion when talking about corporate strategy
vs business strategy vs functional strategy.

• Typically, there are three different levels of strategies to distinguish

between:
• Corporate strategy
• Business strategy (also called business level strategy), and
• Functional Strategy
Corporate VS Business VS Functional
strategy
 Geschäftsstrategie

STRATEGY FOCUS EXAMPLES OF QUESTIONS COVERED

Business strategy (or business

level strategy or business unit 1. What are the services and
strategy) determines the path products we want to provide our
forward for a particular business customers/clients?
and customers/clients it is 2. In what geographies/market
focusing on. Such aspects as segments we want to play?
profitability, sustainability, 3. How can we drive profitability
product/service offering, pricing, while delivering better
customer/client segmentation are products/services?
focal topics of a business strategy.
 Functional Strategy
STRATEGY FOCUS EXAMPLES OF QUESTIONS COVERED

Functional strategy deals with a path

forward for a particular organization
function (e.g. HR, Contact Centre, 1. How can we best enable both
Digital, Technology/IT) in the context internal end external clients?
of the entire organization (i.e. how 2. How can we deliver the best
this function adds value to the rest of quality of services in an efficient way?
the organization). Such as aspects as 3. How can we help create synergies
services offered, internal pricing, and apply best-practices serving
enabling capabilities, quality of various parts of the organization?
services are in the focus of a
functional strategy
 Corporate Strategy
STRATEGY FOCUS EXAMPLES OF QUESTIONS COVERED

The focus of the corporate

strategy is on the entire 1. How we add value to
organization. It determines the shareholders / increase
path to create value both for enterprise value?
shareholders and 2. What are the key businesses
clients/customers. The strategy we want to be in?
spans across the entire portfolio What are internal (for our
of businesses owned by the company) and external (for our
company and functions that customers/clients) synergies
enable and empower these between our businesses?
businesses.
 Here is an example of how various strategy levels may look in a
bank.
• An overall bank strategy is supported/aligned with business
strategies of every single business unit
• (e.g. Retail Banking,
• Wealth Management,
• Commercial Banking,
• Capital Markets).
• At the same time, functional strategies
• (e.g. HR strategy, 
• IT strategy, 
• Operations Strategy,
• Direct Channel Strategy,
• Innovation Strategy, etc.) must support both Business Units but also
the bank itself on the corporate level.
Different types of corporate strategy
• Corporate strategies can be classified into four
different groups:
• Growth strategy
• Stability strategy
• Retrenchment strategy
• Re-invention strategy
corporate strategy structure
 Growth Strategies
• Growth strategies aim to achieve considerable business
growth in the areas of revenue, market share, market
penetration, etc.
• This can be achieved either through;
• Concentration where the company is still focusing on
its core business and builds it out or
• Diversification where a company decides to diversify
based on the number of approaches that are
described
 Concentration
• If a company aspires to grow while remaining in the same
space it is currently operating, this is a concentration growth
strategy. Here it is important to distinguish between a few
options:
• • Vertical Integration (participating in more value-added
activities)
• • Horizontal Integration (same activities, different geography
or different products/services.
 1. Concentration:
• Concentration involves converging resources in one or more of a firm’s businesses in
terms of products, markets or functions in such a manner that it results in expansion.
Concentration strategies are variously known as intensification, focus or specialization.
• Concentration strategies, in other words, are the ‘stick to the knitting’ strategies.
Excellent firms tend to rely on doing what they know they are best at doing
Concentration strategies involve investment of resources in a product line for an
identified market with the help of proven technology.
• This may be done following through the below strategies:
• (i) Market penetration
• (ii) Market development
• (iii) Product development
• (i) Market Penetration 
 
• Market penetration as a deliberate strategy involves gaining market
share through improving quality or productivity, and increasing
marketing activity. This is true for the long-term desirability of
obtaining a dominant market share. However, the nature of the
market and the position of competitors determine the ease with
which a business can pursue a strategy of market penetration.
• In a growing market, it may be comparatively easy for companies
with a small share, or new competitors, to gain market share
because the absolute level of sales of the established companies
may still be increasing; and in some cases, those companies may be
unable or unwilling to meet the new demand.
• In static markets, market penetration can be much more difficult to
achieve. In mature markets the market penetration is still more
difficult due to the advantageous cost structure of market leader that
prevent the sudden entry of competitors with lower market share.
However, the complacency of market leaders may allow smaller-
share competitors to gain share or may build a reputation in a market
segment of little interest to the market leader, from which it
penetrates the wider market.
• Sometimes market penetration, particularly of mature markets, can
be achieved through collaboration with others. In declining markets,
the market penetration is possible to the extent other firms exit from
the market. If they do, it may be relatively easy for a company to
increase its share of that market.
 (iii) Product Development:
• Product development is the creation of new or improved
products to replace existing ones.
• The company maintains the security of its present markets
while changing products or developing new ones.
 (ii) Market Development:
• Market development refers to the attempts of an organization to maintain the
security of its present products while venturing into new market areas. It
includes- (a) entering new market segments, (b) exploiting new uses for the
product and (c) spreading into new geographical areas.
• In capital-intensive industries a company with specific assets may have its
distinctive competence with the product and not the market, and hence the
continued exploitation of the product by market development would be a
preferred strategy. Most capital goods companies have developed this way by
opening up more overseas markets as old markets have become saturated.
• Exporting is a method of market development. However, there are several
reasons why organizations might want to develop beyond exporting and
internationalize by locating some of their manufacturing, distribution or
marketing operations overseas.
 Vertical Integration

• Vertical Integration (i.e. executing on more value chain steps

than in the past e.g. by being involved in distribution
activities, supplier activities, etc.)
• An example of a vertical integration would be a travel agent
who gets licensed in order to not only sell travel packages
but also receive commission from travel insurance sales (a
product that is often sold in tandem with travel packages)
 Horizontal Integration
• Horizontal integration assumes expansion into other
geographies and/or the offering other products/services into
the same market where the company already operates.
• An example of horizontal integration would be the
expansion of BSSU into the Kenya or expansion into regions
within its existing Burundi market.
 Diversification
• Diversification is a very wide-spread type of strategy that
may include the aspiration of the company to grow based on
• changes in product/service offering,
• introducing new products & services,
• or even moving into entirely new spaces.
 Basis diversification
• Basis diversification means that a company
preserves its current offering, but is able to
differentiate its product/service from other
competitors by unique capabilities/features/
characteristics.
• In this case, a product/service value-added in
the eyes of a customer/client is higher.
• As a rule, it justifies a higher price.
Diversification
• Diversification is a much-used and talked about strategy.
Diversification means identifying directions of development
that take the organization away from both its current products
and markets at the same time.
• In reality, it is not a single strategy but a set of strategies that
involve all the dimensions of strategic alternatives such as
internal or external, related or unrelated, horizontal or vertical
and active or passive diversification.
 Cost leadership

• Cost leadership is a special type of concentration strategy

where a company is able to offer the same product/service
at a more attractive price (e.g. via superior, more 
cost-efficient Operations).
• For example, this strategy can be seen with Mazda offering
its more affordable vehicles that are competitive with other
players in a higher price bracket in terms of quality and
functionality, but at a lower price point.
 Adjacent growth
• Adjacent growth is an exciting strategy space for any organization.
• This strategy is often reliant on an organization feels that it has reached its
limits in its core business.
• In this case, a company explores opportunities to grow in a space related
to its core business – it can be an additional product/service, adjacent
industries, additional set of customers, etc.

• For adjacent strategies, it is important to identify the most promising

adjacent niches and “attack” them instead of boiling the ocean of potential
opportunities.
• If an online platform has been comparing banking products and then
decided to move into the comparison of insurance products, that would
be an adjacent growth strategy.
 Conglomerate growth
• Conglomerate growth is the opposite of basis diversification.
It means that an organization looks to expand into
businesses which are not (or are but very loosely) linked to
its core.
• There are fewer synergies across such businesses but
nevertheless, this strategy has shown to be feasible for many
companies.

• In some cases, it is a strong brand that allows a company to

propel the conglomerate business e.g. in the case of Virgin
Group.
 Stability Strategies
• Stability strategies do not have growth and new business
development in their focus but rather are geared towards
getting “more” out of the existing business (i.e.)
• profitability-driven-strategy)
• or “stay-as-it-is” (i.e. Status-quo strategy)
• because the current situation already works well for the
organization.
 Reasons for Adopting Stability Strategy
• The company is doing fairly well or perceives itself as successful
and expects the same in the future.
• The stability strategy is less risky. Frequent changes involving new
products or new ways of doing things may lead to failure of the
firm. The larger the firm and the more successful it has been, the
greater is the resistance to the risk.
• The stability strategy can evolve because the managers prefer
action to thought and do not tend to consider any other
alternatives. Many of the firms that follow stability strategy do this
unconsciously. Such companies react to the changes in the forces
in the environment.
Reasons for Adopting Stability Strategy cont
• 4. To follow a stability strategy, it is easier and more comfortable for all
concerned as activities take place in routines.
• 5. The management pursuing stability strategy does not have the mind-set of a
strategist to appraise the environmental opportunities and threats and take
advantage of the opportunities
• 6. The company that has core competence in the existing business does not
want to take the risk of diverting attention from the current business by opting
for diversification.
• 7. It is a frequently employed strategy.
• An organization adopts the stability strategy when it aims at an incremental
improvement of its functional performance but marginal changes to one or
more of its businesses in terms of their respective customer groups,
customer functions or alternative technologies are required.
• Its focus is confined to improving functional efficiencies in an increment way,
through better deployment and utilization of resources.
• The stability strategy does not mean an absence of concern about business
growth and improvement in profit. Firms adopting the stability route do seek
and plan for business growth and profit improvement with modest targets.
• Stability strategy is effective when the firm is doing well and the environment
is relatively stable. Stability strategy does not involve a redefinition of the
business of the corporation. Since products, markets and functions remain
the same, the business definition also does not change
  Status-quo strategies
• Status-quo strategies often focus on maintaining the existing
performance of a business.
• It can include such elements as acquisition of potential
companies that pose a threat to the existing business, work
with regulators to develop business entry barriers, etc.
• The reasons to choose a status-quo strategy can be varied
e.g. already being very successful, not having opportunities
for growth, regulatory regulations, etc.
 Profitability-driven strategy
• A profitability-driven is often linked to a desire to boost
company evaluation (e.g. prior to selling the business, before
an initial public offering) and has enterprise value in the
focus of the strategy.

• The variety of levers used for this strategy type spans across
portfolio optimization, cost-cutting, adjustment of pricing,
etc.
 Retrenchment Strategies
•  This set of strategies is almost the opposite of status-quo or growth
strategies.
• It is a defensive strategy where the main objective is to change the negative
trajectory and improve the company’s position either through aggressive
changes or “cutting off” the parts that pull it down
• Retrenchment is a short-run renewal strategy designed to overcome
organizational weaknesses that are contributing to declining performance.
• It is meant to refill and rejuvenate the organizational resources and
capabilities so that the organization can regain its competitiveness.
• Retrenchment may be thought as a minor surgery to correct a problem.
• Managers often try a minimal treatment first-cost cutting or a small layoff-
hoping that nothing more painful will be needed to turn the firm around.
Retrenchment
• When performance measures reveal a more
serious situation, more radical action is needed
to restore performance.
• Even sometimes organization also needs to exit
from businesses to cut down the losses and
improve performance.
 Turn around strategy
• A turnaround strategy is based on a dramatic change from
the previous course of action (e.g. due to a bad decision,
company mismanagement, loss of market share, shrinking
industry, etc.)
• It includes such measures as crisis management,
• financial restructuring of the company,
• revamping the company’s product and servicing,
• aggressive cost-saving initiatives e.g. via robotic process
automation, employee retention, etc.
• In most cases, implementing a turnaround strategy is a
heavy exercise for the entire organization that touches every
single part of a company.
 Turnaround strategy cont.
• Turnaround strategy is mainly appropriate when firm’s problems are pervasive but not
severely critical. It is a strategy adopted by firms to stop the decline and revive their
growth.
• A turnaround situation exists when a firm encounters several years of declining financial
performance subsequent to a period of prosperity. In simple words, turnaround situation is
nothing but absolute and relative-to-industry declining performance of a sufficient degree
to warrant explicit turnaround actions.
• Turnaround situations are caused by combinations of external and internal factors.

• But it has been largely observed that root cause of turnaround situation lies internally
only.
• Firms’ wrong decisions or delay in taking decisions or underestimation of external /
competitive threat or complacency may lead to turnaround situation.
 Turnaround strategy cont.
• The immediacy of the resulting threat to company continued
existence caused by the turnaround situation is known as turnaround
situation severity.
• Low levels of severity are indicated by declines in sales or income
margins, while extremely high severity would be indicated by
impending bankruptcy.
• The recognition of a relationship between cause and response is very
important for a turnaround process .
• Its very importance to properly assess the cause of the turnaround
situation so that it informs the focus of the appropriate recovery
response of the company.
 The response to turnaround situation.
• The response to turnaround situation can be broken down to two phases i.e.

1. Retrenchment (contraction) phase

2. Recovery (consolidation) phase.
• The retrenchment phase is focused on the firm’s survival and achievement of a
positive cash flow. The means to achieve this objective needs an emergency plan to
stop the firm’s financial bleeding. It involves the classic retrenchment activities such
as;
• Liquidation,
• Divestment,
• Product elimination,
• Downsizing the workforce.
 Retrenchment (contraction) phase
• Retrenchment strategies are also characterized by the revenue generating,
product/market refocusing or cost cutting and asset reduction activities.
• When severity is low, a firm has some financial buffer. Stability may be
achieved through cost reduction alone.
• When the turnaround situation severity is high, a firm must immediately
arrest the decline or bankruptcy is imminent.
• Cost reductions must be supplemented with more drastic asset reduction
measures.
• Assets targeted for reduction are those ones which are underproductive.
• In contrast, more productive resources are protected from cuts and further
reconfigured as critical elements of the future core business plan of the
company, recovery response.
 Recovery (consolidation) phase.
• After retrenchment phase, organization has to sink in these bitter steps and for that
purpose a stabilization plan is required to streamline and improve core operations.
• The second phase involves a return-to-growth or recovery stage and the turnaround
process shifts away from retrenchment and move towards growth and development.
• It is often seen that those firm declined due to external factors needs entrepreneurial
reconfiguration i.e. top management’s creative intervention. Recovery through
efficiency maintenance (maintaining leaner/efficient organization post retrenchment)
would be possible if turnaround causes are internal.
• Means such as acquisitions, new products, new markets, and increased market
penetration would fall under entrepreneurial reconfiguration. Recovery is said to
have been achieved when economic measures indicate that the firm has regained its
pre-downturn levels of performance.
 Recovery (consolidation) phase. Cont,
• Between these two stages, a clear strategy is needed for a firm. As the
financial decline stops, the firm must decide whether it will pursue recovery
in its retrenchment reduced form through a scaled-back version of its pre-
existing strategy, or whether it will move to a return-to-growth stage.
• It is at this point that the ultimate direction of the turnaround strategy
becomes clear. Essentially, the firm must choose either to continue to pursue
retrenchment as its dominant strategy or to couple the retrenchment stage
with a new recovery strategy that emphasizes growth. The degree and
duration of the retrenchment phase should be based on the firm’s financial
health.
 Divestiture strategy
• Divestiture strategy involves ‘getting rid’ of parts of a business for
a number of reasons such as a decision to focus on the core
businesses (e.g.
• when a business line does not fit into the overall business landscape),
• the poor performance of certain business lines,
• attractive sale opportunities, etc.
• Divestiture strategies typically lead to lower complexity of the rest
of the business and releasing a part of resources that can be
reinvested into the business lines a company decides to keep.
 Re-Invention Strategies
•  Re-invention strategies often include taking the existing
industries/businesses which have not changed for decades
and re-inventing them, often with the support of new
technologies.
• Here one can distinguish between evolutionary strategies
and revolutionary strategies.
 Evolutionary strategies
• Evolutionary strategies typically do not change the business
model but strongly evolve the way service is delivered;
• they can significantly change a company’s product/service
because they unlock a new dimension of value for
customers.
• An example of such a business would be Netflix where the
movies are delivered not as physical rentals (i.e. Blockbuster)
but through a digital subscription.
 Revolutionary strategies
• Revolutionary strategies often change the entire business
model unlocking value for existing and new stakeholders.
• That often leads to significant shifts in market dynamics.
• Some technologies such as blockchain and 
artificial intelligence are seen as enablers that will fuel many
reinventions and must be seen as a fundamental component
of any technology strategy plan.
• Uber can serve as an example of such a business where it
fully re-invented the way people provide and use rental car
services impacting both drivers (i.e. new drivers, existing taxi
drivers) and passengers.
b. Captive Company Strategy:
• Captive strategy means relinquishing independence in exchange for
security.
• Company with very weak position or company is operating in such
industry which is not sufficiently attractive or both may not initiate
full blown turnaround strategy.
• In this circumstances company’s management search an angel by
offering to be captive company to one of its larger customers in order
to guarantee company’s existence through long term contract.
• By this way company may reduce its cost and scope of some
functional activities.
 c. Sell out / Divestment Strategy:

• Divestment strategy involves the sale of a company or major

component of it.
• This option is suitable for those corporations operating with weak
competitive position in the industry. If turnaround and captive
strategies are not viable then this strategy is adopted.
• The sellout strategy makes sense if management can obtain a good
price for its shareholders and the employees can keep their jobs.
• For Example – Ford sold its ailing jaguar and Land Rover unit to Tata Motors in 2008 for $2 billion.
In year 2013-14 /aiprakash Associates sold some Cement manufacturing facilities.
 d. Liquidation / Bankruptcy Strategy:
 

• Liquidation is the termination of the company. This is the last resort to any
company when all other attempts of turnaround, captive company, sell out fails.
In case of liquidation firm has to go through tedious and complex legal
formalities. Sometimes firm’s management is given to courts in return for some
settlement of its obligations.
• This is referred as bankruptcy. While the terms bankruptcy and liquidation are
often used together, they technically mean two different things.
• Liquidation is part of bankruptcy, but it is not the entire process.
• Bankruptcy deals with a much more broad scope of events that lead to the
eventual discharge of firm’s debts.
 D. Combination Strategy:
• In reality all the directional strategies are simultaneously used. Rather, the
effectiveness of these strategies is more if corporation follows multi-pronged
approach towards organizational direction.
• In the word of late Sumantra Ghoshal of the London Business School “Winners
(winning companies) are like chefs, they must learn how to cook sweet
(growth strategies) and sour (retrenchment strategies)”
• Too much of emphasize on growth will make your company diabetic.
Companies should seek growth simultaneously with retrenchment (it is like
exercising to remain fitter, leaner and healthier)
• Under combination strategy corporate strategic planning is aimed at achieving
multiple goals through combination of retrenchment, growth, and stability
 Michael Porter’s four corporate strategy types

• Michael Porter’s four corporate strategy types are one of the

most widely recognized ways of distinguishing different
strategies.
• According to Porter, these are the two distinguishing factors
in strategies:
1.The breadth of the market a company wants to cover (also called
market focus)
2.A strategic advantage that can be either low cost or unique
product/service capabilities.
• That results in four different types of corporate strategy
types:
That results in four different types of corporate strategy
types:

Narrow market + Unique

Narrow market + Low cost product / service
capability = Focus strategy capability = Focus strategy

Broad market + Unique

 
Broad market + Low cost product / service
capability = Cost capability = Differentiation
leadership strategy strategy
Red ocean strategy vs Blue ocean strategy
Red ocean strategy vs Blue ocean strategy
• Two other terms that are often used in the strategy context are RED
OCEAN STRATEGY and BLUE OCEAN STRATEGY.
• These two again, represent a bit of a different view on the corporate
strategy types mentioned above.
• Red ocean strategy - sharks in the water Red ocean strategy means
that a company chooses to compete in a market with plenty of
competitors (RED = bloody fight for leadership).
• This strategy focuses on existing demand and requires a company to
have specific or niche capabilities to differentiate itself from its
competitors e.g. low-cost offering, unique product/service capabilities.
• The main potential for growth, when using this type of strategy, comes
from “re-distribution” and “winning/losing” market share and that can
be limited.
 Blue ocean strategy
• Blue ocean strategy means that a company chooses to
address a new market with unaddressed demand.
• This space does not have significant competition yet
and often offers vast opportunities for growth (BLUE =
deep, calm ocean).
• It can be very promising but also carries a significant
uncertainty since there are no other successful players
to look up to and learn from.
 Porsche’s corporate strategy example
• While one of the most renowned auto manufacturers in the world, in the early 1990s Porsche
found itself on the brink of bankruptcy due to inefficient production methods that focused on
engineering and design above consumer needs.
• The German auto manufacturer’s newly appointed CEO Wendelin Wiede king revamped the
company by employing a strategy focused on Japanese manufacturing concepts to improve
efficiency and launching new products to increase market appeal.
• Vehicles like the 911 (midsize premium sport vehicle), Boxster (compact, premium sport
vehicle), and Cayman (premium sport coupe) targeted a very specific upscale market, allowing
the company to focus its brand and value proposition on this segment of consumers.
Additionally, the company introduced new products like the Cayenne (one of the first luxury
sport SUVs) targeting wealthy consumers in the market for a luxurious four-door sport vehicle.
• This carefully designed and brilliantly executed strategy resulted in highest profit margins
across the industry (~15%), comparatively other players found themselves far behind in terms
of profitability (2016 numbers) e.g. Mercedes (~7%) or Hyundai (~4%)
• It is interesting to know that Porsche’s profitability is by far higher than that of its parent
company, Volkswagen
 Toyota’s corporate strategy example
• Toyota is another iconic name in the automotive world, but its story of success
is different from Porsche’s. Toyota did not focus sales on one particular
customer segment, instead, it embraced cost leadership and paired it with
high quality.
• In order to deliver on both core objectives, Toyota focused on operations
excellence introducing manufacturing and lean concepts that were widely
embraced later by other manufacturers in the automotive space and beyond.
Such terms as TPS (Toronto Production System), JIT (Just-in-time)
manufacturing and LEAN are known to originate in Toyota’s manufacturing.
• This has enabled the company to offer high-quality products (though in clearly
defined configurations) at very competitive prices quickly capturing a
significant share of the automotive market. Toyota’s profits per vehicle are not
comparable with those of Porsche but they are able to capture a much larger
market compensating for lower margins.
 Diversification
• Related versus unrelated
• Advantages of diversification strategy
• Market power
• Transfer of competencies, Leveraging competencies
• Economies of scope
• Managing rivalry through multipoint competition
• Exploiting organizational competencies
• Disadvantages of diversification strategy
• Bureaucratic costs (information overload
• Co-ordination costs
• Accountability issues
 Diversification
• How attractive is the industry to be entered?
• Can the firm establish a competitive advantage
within an industry?
• Motives for diversification
• Growth
• Risk reduction
• Profitability
 Mode of Market Entry
• Internal new venture (greenfield subsidiary)
• Acquisitions
• Joint ventures
 Internal New Ventures
• Firm possesses certain core competencies
• Entry into embryonic industry
• High failure rate
• Small scale of entry
• Poor commercialization
• Poor implementation
 Acquisitions
• To enter new businesses in which firm lacks core competencies
• Well established industry, significant barriers to entry
• Speed is important
• Lower risks
• Disadvantages
• Inspection can be fraudulent
• Integration is expensive and some times difficult.
• Requires big capital
 Joint Ventures
• Sharing of risks and costs of project
• Access to complementary resources
• Establish standards
• Disadvantages
• Profit sharing
• Leakage of core competencies
• Shared control
 Restructuring
• Reducing business scope
• Exit strategies
• Divestment (Spinoff, Management Buyout)
• Liquidation
 Corporate Level Strategy:
Creating Value through Diversification

•Increasing Profitability Through Diversification Transferring competencies

•Taking a distinctive competence developed in one industry and applying it to an
existing business in another industry
•The competencies transferred must involve activities that are important for
establishing competitive advantage (Phillip Morris tobacco beer)
•Leveraging competencies (Microsoft iPod clone)
•Taking a distinctive competency developed by a business in one industry and
using it to create a new business in a different industry
•Sharing resources economies of scope
•Cost reductions associated with sharing resources across businesses (Coles
Myer)
 Diversification
• The process of adding new businesses to the company that are
distinct from its established operations
• Vehicles for diversification
• Internal new venturing
• Starting a new business from scratch
• Acquisitions
• Joint ventures
• Restructuring
• Reducing the scope of diversified operations by
exiting from business areas
Expanding Beyond a Single Industry
• Advantages of staying in a single industry
• Focus resources and capabilities on competing
successfully in one area
• Focus on what the company knows and does best
• Disadvantages of being in a single industry
• Danger of the industry declining
• Missing the opportunity to leverage resources and
capabilities to other activities
• Resting on laurels and not continually learning
 End
Thank you For Your Attention