Transcript Organizational Renewal Strategies

Chapter 7
Corporate Strategies
Melissa Dunlop
Jose Medina
Mona Shafer
Alma Pena
Raul Guerrero
Laura Randall
Explain What Corporate
Strategy is
A strategy with choices of what business(es) to be
in and what to do with those businesses.
The corporate strategy for
Under Armour is Integration
Position
Single- and Multiple-Business
Organization
 Single-business organization is primary in one
industry.
 Ex. Under Armour
 Multiple-business organization is in more than
one industry
 Why is the distinction important?
 Because it influences an organization’s overall
strategic direction, what corporate strategy is
used, and how that strategy is implemented
and managed
Corporate, Competitive, and
Functional Strategy
 Is important to whether the organization does
what its in business to do and whether it
achieves its strategic goals
 Without resources, capabilities, and
competences being developed and used in the
competitive and functional strategy; the
corporate strategy can’t be implemented
 The competitive and functional strategies that
are implemented must support the overall
strategic direction and corporate strategy
What Are the Corporate Strategic
Directions
 1. Moving an Organization forward
 Means an organization’s strategic manager’s hope
to expand the organization's activities or
operations- that is to grow. Growth
 2. Keeping an Organization as is
 Means it’s not growing, but also isn’t falling behind.
Stability strategy
 3. Revering an Organization’s decline
 Describes situations in which an organization has
problems and may be seeing declines in one or
more performance areas. Renewal
Organizational Growth
Strategies
Types of Growth Strategies
 Concentration::focuses on main line of business and
tries to meet its goals by growth in its core business
 Adding products or opening new locations; Under Armour
choosing to start selling footwear
 Product-market exploitation::increase the sales in current
products in its current market; creating incentives for customers
 Product development::producing new products for a
company’s current market by adding new features or options
to the product
 Market development::selling current product in a new market
possibly in different geographic regions; Under Armour making
deal with Tottenham FC in EPL
 Advantage of concentration growth is that a company can
become very good at it
Types of Growth Strategies
 International::looking at global markets for new opportunities
 Vertical Integration: growth through control of a company’s
inputs(backward) or outputs(forward)


Backward VI::a company becomes its own supplier of the resources that it
needs
Forward VI::company becomes its own distributer ; Wal-mart with Great value
or outlet stores such as Apple
 Horizontal Integration::the combining of operations with its
competitors
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
Able to expand market share and strengthen market position
For horizontal integration to work it has to be found legal by the FTC in that it
will not decrease overall competition and not make the consumer worst off
 Diversification::movement into a different industry


Related::movement into a different industry but similar to the company’s
current business, trying to find a strategic fit
Unrelated::moving a completely different industry that has nothing to do with
the company’s current strategy or resources; done when there is a lack of
growth in an industry
Implementing The Growth
Strategies
 Mergers-Acquisitions
 Internal Development
 Strategic Partnering
Mergers-Acquisitions
 Merger
 A legal transaction in which two or more
organizations combine operations through an
exchange of stock and create a third entity
 Between organizations of similar size are usually
friendly
 Acquisition
 Outright purchase of an organization by another
 Between organizations of different sizes and can
be friendly or hostile
Mergers- Acquisitions
 Used when:
 Maturity stage of industry life cycle
 High barriers to entry
 New industry not closely related to existing
one
 Unwilling to accept time frame and
development costs of starting new
business
 Unwilling to accept risks of starting new
business
Internal Development
 Grows by creating and developing new
business activities itself
 Have the necessary resources, distinctive
capabilities, and core competencies
 Under Armour
Internal Development
 Used when:
 Embryonic or growth stage of industry life




cycle
Low barriers to entry
New industry closely related to existing one
Willing to accept time frame and
development costs of starting new business
Willing to accept risk of starting new business
Strategic Partnering
 Two or more organizations establish a
legitimate relationship by combining their
resources, distinctive capabilities, and core
competencies for some business purpose
 Examples
 Organization-suppliers/distributors
 Organization-competitor
 Organization-related industry organization
Strategic Partnering
 Joint Venture
 Two or more separate organizations form
a separate independent organization for
strategic purposes
 Both own equal shares
 Used when partners do not want to or
cannot legally join together permanently
 Ex: Clorox Company and Procter &
Gamble
Strategic Partnering
 Long-Term Contract
 Legal contract between organizations
covering a specific business purpose
 Used between organizations and suppliers
 Both partners understand the importance
of developing resources, capabilities, and
core competencies for a competitive
advantage
 Under Armour and Dick’s Sporting Goods
Strategic Partnering
 Strategic Alliance
 Two or more organizations share resources,
capabilities, or competencies to pursue some
business purpose
 No separate entity formed
 Used to:
 Encourage product innovation
 Bring stability to cyclical businesses
 Expand product line offerings
 Cement relationships with suppliers, distributors,
or competitors
 Ex: PepsiCo and Lipton
Organizational Stability Strategy
 Organizational Stability
 An organization might want to stay as it is
although there are times when its
resources, distinctive capabilities, and
core competencies are stretched to their
limits
 Growing might risk the organization’s
competitive advantage.
 Stability Strategy: is one in which an
organization maintains its current size and
current activities.
When is Stability an Appropriate
Strategic Choice?
 When an industry is in a period of rapid upheaval with several key industry
and general external forces drastically changing.
 If an industry is facing slow or no growth opportunities.
 Keep organizations working at current levels before any strategic
movements into new industries.
 If an organization has been growing rapidly and needs some “down” time
in order to build up its resources and capabilities again.
 i.e. Staples Inc.
 Large Firms in an industry that is in the maturity stage of the industry life
cycle.
 Small business owners may follow a stability strategy indefinitely.
 Feel their business is successful
 Accomplished personal goal
Under Armour is growing at a fast rate but is not looking to stability yet.
Implementing Stability Strategy
 Involves no growing but also not allowing
the organization to decline
 No new products
 No new programs
 No adding production capacity
 Gives an opportunity for the organization
to “take a breather” and prepare itself
for pursuing growth.
Stability As a Short-Run Strategy
 If an organization become too
complacent it is susceptible to losing its
competitive position.
 If significant organizational weaknesses
exist or performance is declining, then it
may be necessary to look at a different
strategy such as organizational renewal.
Organizational Renewal
Strategies
 Renewal Strategies- Used when an
organization’s situation is declining and
strategic managers want to reverse the
decline and put the organization back on a
more appropriate path to achieving its goals
Two Kinds
 Retrenchment
 Turnaround
What Leads to Performance
Declines?
 Strategic decisions taken by managers may
create conditions that may keep the
organization from developing or exploiting a
sustainable competitive advantage
 Primary cause of performance decline is Poor
Management
 If strategic managers are inept, incompetent, or
incapable of strategically managing all aspects
of the organization, then organizational
performance is likely to suffer
What Leads to Performance
Declines?
Inadequate
Financial
Controls
Overexpansion
or Too Rapid
Growth
Slow or No Response
to Significant External
or Internal Changes
Poor
Management
Uncontrollable
Costs or Too
High Costs
New
Competitors
Unpredicted Shifts
in Consumer
Chapter 3 in Strategic
Demand
Management and MKT 3350Porter’s Five Forces Model
What Leads to Performance
Declines?
 Signs of Declining Performance
 Excess Number of Personnel
 Unnecessary and cumbersome administrative




procedures
Fear of conflict or taking risks
Tolerating work incompetence at any level or in
any area of the organization
Lack of clear visions, mission, or goals
Ineffective or poor communication within various
units and between various units
Renewal Strategies
 Retrenchment Strategy- is a short-run strategy
designed to address organizational weaknesses
that are leading to performance declines
 Doesn’t necessarily have negative financial
returns
 Instead, organization hasn’t been able to meet
its strategic goals
 Turnaround Strategy- is a renewal strategy that’s
designed for situations in which the organization’s
performance problems are more serious
 Examples: Sears, Delta Airlines, Kmart, Chrysler,
General Motors, Ford Motor, Motorola, Mitsubishi,
Intuit, Apple, and others
Implementing Renewal Strategies
 COST CUTTING
 Cost cutting alone has little to do with developing a sustainable
competitive advantage.
 Instead, the need to cut costs is approached as a way to bring
the organization’s performance results back in line with
expectations.
 How to cut costs?
 Redundancies
 Inefficiencies
 Waste in work activities
 Ex. UPS-Light bulbs
 ACCT 5305- “Chainsaw” Al Dunlop
Implementing Renewal
Strategies
 RESTRUCTURING
 Divestment-
selling a business to another organization
where it will continue as an ongoing business
 Sell to investors, companies, or anyone
 Under Armour and new cotton products
 Spin-off- setting up a business as a separate,
independent business by distributing its shares of stock
 Liquidation- shutting down a business completely
 Business will no longer continue as business
 Often strategic action of last resort
Implementing Renewal Strategies
 Downsizing- individuals are laid off from their jobs
 Dangerous
 Can increase shareholder wealth when done for
strategic purposes
 Bankruptcy- is the failure of a business in which it’s
dissolved or reorganized under the protection of
bankruptcy legislation
 Reorganize-Chapter 11 bankruptcy
 Liquidate their assets-Chapter 7 bankruptcy
 Companies can use a combination of any of these
strategic actions. What is important though, is that the
organization’s competitive advantages are enhanced
and strengthen by these actions
How is Corporate Strategy
Evaluated?
 Evaluation is a crucial part of the strategic
management process
 Corporate Goals
 Efficiency, Effectiveness, and Production
 Benchmarking
 Portfolio Analysis
Corporate Goals
 Goals become the standard the standards
against which actual performance is
measured
 Goals are
 Quantitative
 Qualitative
Efficiency, Effectiveness, and
Productivity Measures
 Overall output of goods and services/by the
inputs used in generating the output
 Represent corporation's ability to use limited
resources strategically in achieving high
levels of corporate performance
Benchmarking
 Search for best practices inside or outside
the organization
 The Benchmark is the Standard
Portfolio Analysis
 Two-dimensional matrices that summarize
internal and external factors through various
business units
 BCG Matrix
 McKinsey-GE Stoplight Matrix
 Product Market Evolution Matrix
Four Takeaways
 Corporate strategy is a strategy that’s concerned with the
choices of what business(es) to be in and what to do with
those businesses.
 A growth strategy is one that expands the products
offered or markets served by an organization or expands its
activities or operations either through current business(es)
or through new business(es).
 A stability strategy is one in which an organization
maintains its current size and activities.
 Renewal Strategies are used when an organization’s
situation is declining and strategic managers want to
reverse the decline and put the organization back on a
better path to achieving its goals.
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