Unit 3: Corporate-level strategies

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).

• Strategic outsourcing: contracting non-core value chain activities to specialists so the firm can focus on its core competencies.
• Benefits: lower cost, access to expertise and scale, flexibility, faster innovation. Risks: loss of control and capabilities, dependence, hidden costs, confidentiality.
• Examples: IT and back-office to service providers; manufacturing to contract manufacturers (smartphone brands); logistics to 3PLs.

• Restructuring: changing a firm's business portfolio, financial structure or organisation to improve performance.
• Forms: portfolio (divestments, spin-offs, demergers, acquisitions), financial (debt restructuring, buy-backs, leveraged buy-outs), organisational (delayering, downsizing, re-engineering).

• Synergy: the combined value is greater than the sum of the parts (2 + 2 = 5).

• Mergers and acquisitions: horizontal, vertical, concentric and conglomerate; motives — growth, market share, capabilities, diversification; risks — overpayment, integration and culture clash.

• Stability: maintain the current scope — pause and proceed with caution, no change, profit strategy.
• Harvesting: reduce investment in a business to maximise short-term cash flow before exit — suits cash cows or dogs in declining markets.
• Retrenchment: turnaround, divestment, captive company, liquidation.
• Signals for turnaround: falling share and margins, cash shortages, high employee turnover, declining quality.

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.

• Hofer's product–market evolution matrix (15 cells): plots businesses by stage of product–market evolution (development, growth, shake-out, maturity–saturation, decline) against competitive position (strong, average, weak); circle size shows industry size and the shaded wedge the firm's share.
• Arthur D. Little (ADL) matrix: industry maturity (embryonic, growth, mature, ageing) against competitive position (dominant, strong, favourable, tenable, weak) — suggests natural development, selective development, prove viability or withdrawal.
• Use: shows which businesses need investment, which generate cash and which should be harvested or divested, complementing BCG and GE.