Unit 3: Corporate & business-level strategy

Stability strategies

• Pause/proceed with caution: temporary halt to consolidate.
• No-change: continue as before in a predictable environment.
• Profit strategy: maintain profits by cutting costs in a temporary downturn.

Expansion strategies

• Integration: vertical — backward (acquire suppliers) or forward (acquire distributors); horizontal — acquire competitors.
• Diversification: concentric/related (Bajaj Auto into motorcycles of different segments) or conglomerate/unrelated (ITC — cigarettes to hotels, FMCG, paperboards).
• Cooperation: mergers, acquisitions, joint ventures, strategic alliances.
• Internationalisation: exporting, licensing, franchising, FDI.

Retrenchment strategies

• Turnaround: reverse declining performance — cost cutting, restructuring, new leadership.
• Divestment: sell or close a business unit (Tata Steel divesting parts of its European operations).
• Liquidation: sell assets and close the firm — last resort.
• Captive company: become a dedicated supplier to one major buyer.

Combination strategy

Different strategies in different businesses at the same time — expand in one, divest another (Reliance expanding retail and telecom while restructuring other units).

• Cost leadership through economies of scale, efficient processes, low overheads; risk — technology change, price wars.
• Differentiation through quality, design, brand, service, innovation; allows a premium price; risk — imitation, customers unwilling to pay.
• Focus serves a specific segment better than broad competitors; risk — segment shrinks, broad rivals enter.
• Stuck in the middle: a firm without a clear generic strategy earns below-average returns (Porter). Critics point to hybrid / best-cost strategies (Toyota, IKEA) that combine low cost and differentiation.

Strategic choice is selecting the best strategy from the alternatives to achieve objectives.

Factors affecting strategic choice

• Objective factors: environment, resources, competitive position (portfolio analysis).
• Subjective factors: past strategies, attitude to risk, managerial values, internal politics, timing, competitor reaction, pressure from stakeholders.

Tools for strategic choice

• Portfolio analysis (BCG, GE matrix), SWOT/TOWS, SPACE matrix, Hofer's product-market evolution matrix, life-cycle analysis, scenario planning.

The Boston Consulting Group growth-share matrix (1970) classifies SBUs by market growth rate (vertical) and relative market share (horizontal).

• Relative market share = Firm's market share ÷ Share of the largest competitor (a value above 1.0 means market leader).
• Ideal flow: cash from cash cows funds question marks to become stars, which become cash cows as the market matures.

Limitations

• Only two variables; market share and growth are not the only drivers of profit.
• Defining the "market" is difficult.
• Dogs may still be profitable or strategically useful.
• Assumes all SBUs are independent.

Developed by General Electric with McKinsey; uses two composite dimensions: industry attractiveness (market size, growth, profitability, competition, technology, regulation) and business strength / competitive position (market share, brand, cost, quality, distribution, management).

• Green zone (top-left three cells): invest and grow.
• Yellow zone (diagonal three cells): selectivity — hold, manage for earnings.
• Red zone (bottom-right three cells): harvest or divest.
• Each SBU is shown as a circle; size = industry size; shaded slice = the firm's market share.