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Table of Contents
Corporate-Level Strategy .............................................................................................................................. 3
Diversification ............................................................................................................................................... 4
Related diverstifaction .................................................................................................................................. 4
Transaction cost and Vertical Integration ..................................................................................................... 5
Unrelated Diversification .............................................................................................................................. 6
Portfolio Management.................................................................................................................................. 6
Diverstification and risk Management.......................................................................................................... 7
Mergers and Acquisition ............................................................................................................................... 7
Motives and advantages ........................................................................................................................... 7
Strategic Alliances & Joint Ventures ............................................................................................................. 8
Limitation .................................................................................................................................................. 8
Internal development ................................................................................................................................... 8
Limitations ................................................................................................................................................ 9
Manager’s Motives and Value Erosion ......................................................................................................... 9
Antitakeover tactics ...................................................................................................................................... 9
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Corporate-Level Strategy
By defining the corporate level strategy, we define where our business wants to go, and in
this way, we choose to grow or stable our business. There was some form of diversification such
as acquisition and merger which could be chosen based on the internal weakness, strengths and
external opportunities and threats. In this regard, there were several examples of unsuccessful
acquisition which can explain by the information I learned in the strategic management class. I
found the reason why Cisco could not be successful in the different business segment. The new
acquired company was only responsible for one percent of Cisco revenue, and the company did
not provide a proper response towards changes in the environment. So, it is interestingly to know
that a vast majority of acquisitions will lead to value destruction rather than value creation.
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Diversification
There are several kinds of diversification (Figure 1) that can be done internally or
externally, which can be in related or unrelated business. in this way, it is essential to achieve
Internal Strategci
Development Alliances
Mergers and
Joint Ventures
acquisitions
Diverstification
Related diversification
Related diversification will help the business to expand its business to a similar business,
allowing our business unit to have access to the data in research and development
activities
For this purpose, we should consider that there should be a similarity between the new
business and the core competencies. These core competencies should also define in a way that is
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difficult to imitate and copied. For example, by having an econmoinc scale , we can have cost-
saving strategies. By sharing activities, we can increase our sales growth and revenue when we
combine two companies together. Interestingly by vertical integration (Figure 2), we can be the
supplier of our business or increase the chain toward customers who can increase our market power
and consequently we will have more negotiation power in making an agreement with other
business.
In this diversification, the benefits can be providing a source of inputs, protecting the
valuable resources, accessing new technologies, and simplifying the administration activities.
However, there were some risks such as increasing the overhead costs, decreasing the feasibility,
Based on this concept, every transaction will have a cost. For example, for buying an
input from another company, the process of searching will have a cost, which considered as a
transaction cost. Vertical integration will be suitable when the cost of the transaction will be
higher than the other cost. A good example can be the MacDonald that the cost of transaction is
lower than the administrative cost, which lead to not being a logical investment for the company.
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Unrelated Diversification
and this can brings new competencies and increase different products and markets. In this regard,
we should restructure the company in assets, capital and management. For example, in asset
restructing, we should remove the unproductive business and acquire those units that we need.
Portfolio Management
This method helps us to recognize the competitive position of the business units to
understand the best ways to priority’s identification and resources’ allocation in the portfolio. In
this way, we can use from Boston Consulting Group (figure 3), which divided the position to four
part of Star, Question Mark, Dogs, and Cash Cows. In Star we will have high market growth and
market shares, which can justify that business should invest heavily for its long-term plan. In
Question Mark, we have weak market share and highly growth market which can justify business
to invest in the market and product. In Cash Cows, we will dominate the market with our high
market share, but the industry’s growth is weak. However, this position can be a good source for
funding the investment in other businesses. In Dogs, it is better to shut down or sell the business
The diversification strategy can help the company to have a wide range of products in
different markets, which can help the company to reduce the risks over a long period of time. In
this way, by the help of economic cycles, the company can target different customers’ segments.
In Merger, two company make an agreement to merge in each other, and build a new
company with new legal entity. In acquisition one company purchase another one, and the
In strategic alliance, we can use from informal or formal way to build a alliance with an
strategic partner. In joint venture, we made a new legal entity by same contributing. Generally,
we use from this strategy when it is difficult to enter to a new market socially, politically or
Penetrating in a new market with the least investment and in the shortest period.
Limitation
In recognizing the partner, we should set some criteria to increase the chance of success
of this strategy. For example, it is important to recognize a unique partner that has a
complementary skills and capabilities. Also, we can trust to this partner, and we should be sure
that the synergy will be made easily and in a reasonable amount of time.
Internal development
In this strategy, business will invest on new facilities to rely on their internal resources.
Company do not have to divide the wealth that will be made through business
Company will not spend a vast amount od time and energy to match the cultures
There will be less conflicts and ambiguity to link the value chains of the new
businesses.
Limitations
in the market.
Mangers play an important role in diversification, sometimes they will erode the value of
the company instead of creating the value for the stakeholders. Especially for those who are
growth seeker, they will care more about their prestige, and they want to be seen as those who
did a big move in their professional life. For example, a well-known manager will accept a
Acquisition only because of the growth in the size of the company and its operations. Another
concept here is ‘egotism’, which is described as tendency of managers to consider their self-
interest and consequently shaping the companies’ strategy based on their self-interest. So the
Antitakeover tactics
The tactics that will be used to manage those investors who wants to buy the significant
share of a company (target company), and take the lead of that company. The target company by
using the concepts such as greenmail, golden parachute and poison pills can protects the top
managers and shareholders from the potential threats of new buyers. For example, in golden
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parachute, an contract will be signed by new buyer to make top managers sure about their salary
package even if they lost their job at the company. In poison pills, target company will contain
some certain and specific right for original shareholders in the contract with company’s buyers.