S3 Corporate Level Strategies

8/11/2019 S3 Corporate Level Strategies

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CORPORATE LEVELSTRATEGIESStrategic Management Module 2 Session

3


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Family tree of strategies

Stability

Retrenchment

Agenda


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Corporate level

strategies

Corporatelevel

strategies

Stability Retrenchment Expansion


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Stability

strategies

Stability

No-change Profit

Proceed

with caution


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Retrenchment

strategies

Retrenchment

Turnaround Divestment Liquidation


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Expansion

strategies

Expansion

Concentration

Integration

Diversification

Internationalization

Cooperation

Digitalization


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Stability Strategy


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Stability

strategies

Stability

No-change Profit

Proceed

with caution

Stability strategy implies continuing the current

activities of the firm without any significant change in

direction.

Why do companies pursue a stability strategy?

The firm is doing well or perceives itself as successful

1) It is less risky

2) It is easier and more comfortable

3) The environment is relatively unstable

4) Too much expansion can lead to inefficiencies

Situations where a stability strategy is moreadvisable than the growth strategy:

1) If the external environment is highly dynamic and

unpredictable

2) Strategic managers may feel that the cost of

growth may be higher than the potential benefits

3) Excessive expansion may result in violation of antitrust laws


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Stability

strategies

Stability

No-change ProfitProceed

with caution

A no change strategy is

a decision to do nothingnew i.e continue current

operations and policies

for the foreseeable

future.

Some organizations

pursue stability strategyfor a temporary period of

time until the particular

environmental situation

changes, especially if

they have been growing

too fast in the previousperiod.

The profit strategy is an

attempt to artificiallymaintain profits by

reducing investments

and short-term

expenditures.


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Retrenchment Strategy


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Retrenchment

strategies

Retrenchment


A strategy used by corporations to

reduce the diversity or the overall size

of the operations of the company. This

strategy is often used in order tocut expenses with the goal of becoming

a more financial stable business.

Typically the strategy involves

withdrawing from certain markets or the

discontinuationof selling certain products or service in

order to make a beneficial turnaround.


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Retrenchment

strategies

Retrenchment


Conditions

Persistent negative cash flow

Negative profit Declining market share

Deterioration in physical facilities

Over manning, high turnover of employees and low morale

Uncompetitive products and services

Mismanagement

Turnaround strategy means to

convert, change or transform a

loss-making company into a profit-

making company.


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Retrenchment

strategies

Retrenchment


Conditions

Business is a mismatch and cannot be integrated within the

company Persistent negative flows

Severity of competition

Not possible to in technology upgradation

Selling off a part of business to survive

May be as part of a merger plan

Divestment is a form of

retrenchment strategy used by

businesses when they downsize

the scope of their businessactivities. Divestment usually

involves eliminating a portion of a

business


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Retrenchment

strategies

Retrenchment


Lead to serious consequences including loss of employment,

termination of opportunities etc

Compulsory winding-up by court order Voluntary winding- up

Voluntary winding- up under court supervision

Liquidation is the process by

which a company (or part of a

company) is brought to an end,

and the assets and property of thecompany redistributed.


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Documents

S3 Corporate Level Strategies