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Corporate Strategy: o Examples of Strategies

Corporate strategy refers to a company's overall goals and plans for achieving them through its business operations. There are two main components: diversification, expanding into new markets or industries, and vertical integration, expanding into areas previously handled by suppliers. Examples include Ford manufacturing its own parts rather than purchasing them. Today, outsourcing has replaced vertical integration for many companies. Diversification remains common through acquisitions in different industries. Corporate strategies must be revisited regularly to improve performance and deliver customer value.

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103 views3 pages

Corporate Strategy: o Examples of Strategies

Corporate strategy refers to a company's overall goals and plans for achieving them through its business operations. There are two main components: diversification, expanding into new markets or industries, and vertical integration, expanding into areas previously handled by suppliers. Examples include Ford manufacturing its own parts rather than purchasing them. Today, outsourcing has replaced vertical integration for many companies. Diversification remains common through acquisitions in different industries. Corporate strategies must be revisited regularly to improve performance and deliver customer value.

Uploaded by

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CORPORATE STRATEGY

 The overall scope and direction of a corporation and the way in which its various business
operations work together to achieve particular goals.

 Corporate strategy is a companywide plan to choose and develop particular markets in


which to compete while improving the various divisions or units of the business. There
are two major components of corporate strategy:

o Diversification means expanding the market area or moving into new industries.
o Vertical integration refers to when a company expands into areas previously
covered by suppliers.

o Examples of Strategies
o An example of vertical integration is when a company manufactures
products it previously purchased from suppliers. Professor Scott Gallagher of
James Madison University cites the Ford Motor Company as a prime
example of a company that carried out vertical integration as corporate
strategy. Gallagher writes that not only did Ford manufacture its own parts,
but the company also mined the raw materials from its own mines and
processed these in its own steel mills.
o In today’s business world, outsourcing has replaced vertical integration in
many companies' corporate strategies. Diversification remains common
and is implemented in various internal forms, depending on the company.
Wal-Mart offering one-hour photo services, Microsoft developing operating
systems and applications for competitors, and Johnson & Johnson acquiring
dozens of companies in other industries are all examples of employing
diversification as corporate strategy.
o Changing Direction
o Not all corporate strategies are successful, even those from otherwise
profitable companies. For example, McDonald's, the largest fast-food chain
in the world, hit some bumps in the road to increasing profits by attempting
a menu expansion. During CEO Don Thompson's 31 months at the helm, the
company went 13 consecutive months without growth in domestic sales, and
its stock gained a mere 0.3 percent. During that same period, the stock of
Chipotle Mexican Grill, a fast-food chain competitor, gained approximately
90 percent.
o McDonald's Chief Brand Officer Steve Easterbrook was chosen in 2015 to
replace Thompson as CEO. Easterbrook plans to implement a strategy of
streamlining. The company removed eight items from what Bloomberg
Business called its "overly crowded menu" after Thompson's departure in an
effort to "speed up service."
o Failure Followed by Huge Success
o Sometimes corporate strategies considered failures can lead to future
successes. Consider Apple's first attempt at a hand-held computer, called
the Newton. The company worked on this product from 1987 until 1998 and
spent $500 million on its development. It was a flop. Compare that with the
phenomenal success of the more recent iPhone, the world's best-selling
smartphone in 2014. Apple reported the largest ever quarterly profits by a
public company -- $18 billion, in 2014.

 Corporate strategy means a company’s vision and tactics to outperform its competition.

 A corporate strategy entails a clearly defined, long-term vision that organizations set,
seeking to create corporate value and motivate the workforce to implement the proper
actions to achieve customer satisfaction. In addition, corporate strategy is a continuous
process that requires a constant effort to engage investors in trusting the company with
their money, thereby increasing the company’s equity. Organizations that manage to
deliver customer value unfailingly are those that revisit their corporate strategy regularly
to improve areas that may not deliver the aimed results.

Example

Corporate strategies may pertain to different aspects of a firm, yet the strategies that most
organizations use are cost leadership and product differentiation.

Cost leadership is a strategy that organizations implement by providing their products and
services as low as consumers are willing to pay, thereby being competitive and realizing a
volume of sales that allows them to be the leaders in the industry. Typical examples of cost
leaders are Wal-Mart in the retail industry, McDonalds in the restaurant industry, and Ikea, the
furniture retailer that offers low-priced, yet good quality home equipment by sourcing its
products in emerging markets, thereby having a high-profit margin.

Product differentiation refers to the effort of organizations to offer a unique value proposition to
consumers. Typically, companies that manage to differentiate their products from the
competition are gaining a competitive edge, thereby realizing higher profits. Often, competitors
employ cost leadership to directly compete with these companies; yet, customer satisfaction and
customer loyalty are the factors that eventually make or break a strategy.
Other examples of corporate strategies include the horizontal integration, the vertical integration,
and the global product strategy, i.e. when multinational companies sell a homogenous product
around the globe.

Corporate strategies are always growth-oriented, seeking to retain a company’s existing customer
base while attracting new customers.

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