7 2 Learning Outcomes 1 Identify alternative directions for strategy including market penetration or consolidation product development market development and diversification Recognise when diversification is an effective strategy for growth ID: 1028978
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1. Strategic Decisions and Corporate-Level Strategy
2. 7-2Learning Outcomes (1)Identify alternative directions for strategy, including market penetration or consolidation, product development, market development, and diversificationRecognise when diversification is an effective strategy for growthDistinguish between different diversification strategies (related and unrelated) and identify conditions under which they work best
3. 7-3Learning Outcomes (2)Analyse the ways in which a corporate parent can add or destroy value for its portfolio of business unitsAnalyse portfolios of business units and judge which to invest in and which to divest
4. 7-4What is a Corporate Parent?The corporate parent refers to the levels of management above that of the business units, and therefore without direct interaction with buyers and competitors.Small business like a local builder……
5. 7-5Exhibit 7.1 Strategic Directions and Corporate-Level StrategyCorporateparentingPortfoliomanagementDiversificationPenetrationConsolidationDevelopmentValue creationScope decisions
6. 7-6
7. 7-7Exhibit 7.2 Strategic Directions (Ansoff Matrix)
8. 7-8What is Market Penetration?Market penetration refers to a strategy by which an organisation takes increased share of its existing markets with its existing product range.Cream Cracker biscuits……
9. 7-9Constraints of Market PenetrationRetaliation fromcompetitorsLegalconstraints
10. 7-10What is Consolidation?Consolidation refers to a strategy by which an organisation focuses defensively on their current markets with current products.
11. 7-11Forms of ConsolidationDefending market shareDownsizing or divestment
12. 7-12What is Product Development?Product development refers to a strategy by which an organisation delivers modified or new products to existing markets.Bourbon biscuits……
13. 7-13Risks of Product DevelopmentNew strategiccapabilitiesProject managementrisk
14. 7-14What is Market Development?Market development refers to a strategy by which an organisation offers existing products to new markets.Elephant House Ice cream Aturupasa Chaarithraya……
15. 7-15Forms of Market DevelopmentNew segmentsNew usersNew geographies
16. 7-16What is Diversification?Diversification refers to a strategy by which an organisation pursues new product offerings and new markets.Cam Beer by Lion brewery……
17. 7-17Reasons for Pursuing Diversification (1) Efficiency gainsStretching corporate parenting capabilitiesIncreasing market powerUniversity Resources……
18. 7-18Reasons for Pursuing Diversification (2) Responding to market declineSpreading riskExpectations of powerful stakeholdersKodak Film roll……Enron fate……
19. 7-19Exhibit 7.3 Related Diversification OptionsAsiri Health..www.doc.lk……SMAK water bottles……Cargills Bank……
20. 7-20Exhibit 7.4 Diversification and PerformanceLAUFGS HoldingsPower and energyRetail and consumerIndustrialLeisureLogisticsProperty and real estate
21. 7-21Value-Adding ActivitiesEnvisioningCoaching andfacilitatingProviding centralservices and resourcesIntervening
22. 7-22Value-Destroying ActivitiesAdding management costsAdding bureaucratic complexityObscuring financial performance
23. 7-23Exhibit 7.5 Portfolio and Synergy Managers and Parental Developers
24. 7-24Problems Achieving SynergyExcessive costsOvercoming self-interestIllusory synergies
25. 7-25Challenges for Parental DevelopersIdentifying parent capabilitiesParental focusThe ‘crown jewel’ problemSufficient ‘feel’
26. 7-26Portfolio MatricesGrowth/Share (BCG) MatrixDirectional Policy (GE-McKinsey) MatrixParenting Matrix
27. 7-27Exhibit 7.7 The Growth Share (BCG) Matrix
28. 7-28Exhibit 7.8 The Directional Policy (GE-McKinsey) Matrix
29. 7-29Exhibit 7.9 Strategy Guidelines Based on Directional Policy Matrix
30. 7-30Exhibit 7.10 The Parenting Matrix