CHAPTER 5
CORPORATE
STRATEGIES
Prepared by: Mr. Raul S. Acapulco, Ph.d.
INTEGRATIVE GROWTH
STRATEGIES
Internal Growth Strategies , which are essentially external growth strategies,
involving investing the resources of the organization in another company or
business to achieve growth goals . Integrative growth strategies are essentially
acquisition strategies . Types of integrative growth strategies include horizon
integration and vertical integration. The two types of vertical integration are
backward integration and forward integration.
Vertical Integration
Horizon Organization • Backward Integration
Integration • Forward Integration
Horizontal Integration
Is a strategy where the organization acquires another competing business. There are varied reasons for
undertaking horizontal integration. First ,Organization may be employ horizontal integration to eliminate
real or potential competitor because some competitors can present themselves as deadly threats to an
organization .
For example , Jollibee purchased Mang Inasal for fear of losing their market share in the fast-food
industry.
Vertical Integration
Is a process of consolidating into an organization other companies involved in all aspects
of a product’s or a service’s process form raw materials to distribution. It is an integrated
growth strategy adopted by an organization to gain control over its suppliers and
distributors , increase the company’s market share , minimize transaction and inventory
costs, and ensure adequate stocks in the retail stores. Vertical integration can either be
backward or forward .
Backward Integration
Is another integrative acquisition growth strategy where the organization buys one of its suppliers.
Forward Integration
Is carried out when the organization buys distribution companies that are part of its distribution
chain .
THE BOSTON CONSULTING GROUP MODEL
The Boston Consulting Group Growth – Share Paradigm started to make its impact on
corporate strategy in the early 1970’s . The BCG model was developed by Bruce Henderson of
the Boston Consulting Group. This model classifies the products or business un its of an
organization in terms of two parameters, namely, market share and market growth ,in relation to
the marketing leader.
Market Share
Is the relative sales percentage of a company in relation to the total sales percentage of the market in consideration. This
metric value gives a general idea of how the company stands with respect to the market and its competitors . Thus, company
X can have a low market share (5%) or a high market share (80%) of hamburger sales in relation to tis competitors.
Market Growth
Refers to an increase in demand over time . It may be high or low. The BCG Model illustrates 4 broad categories in relation
to market share ( low,high) and market growth ( low,high) .Thus,we have the following :
⮚ A high market share in a high market growth defines stars. They are the market leaders and if the market continues to
grow, they likely to become cash cows.
⮚ A high market share in a low market growth defines cash cows . Since they are the market leaders in a mature growth ,
establishing a competitive advantage can generate a lot of cash flow and bring about high profit margins.
⮚ A low market share in a high market growth defines question marks. These essentially new products need promotional
strategies .
⮚ A low market share in a low market growth defines dogs. They should essentially be minimized , if not avoided. They can
be expensive to the company.
THE GENERAL ELECTRIC MODEL
Mckinsey conceptualized the General Electric (GE) Model for the company . This model is an
improvement of the BCG Model. Its is used to assess the strength of a strategic business unit
(SBU) of an organization. The parameters are market attractiveness and business strength.
High Attractiveness High Attractiveness High Attractiveness
Strong Competitive Position Average Competition Position Weak Competitive Position
The strategy advice for this cell is to invest The strategy advice for this cell is to invest for The strategy advice for this cell is to opportunity
for growth . Consider the following strategies: growth . Consider the following strategies: invest for earnings. However, if you cannot
▪ Provide maximum Investment ▪ Build selective on strength strengthen your enterprise you should exit the
▪ Diversify ▪ Define the implications of challenging for market market . Consider the following strategies :
▪ Consolidate your position to focus your leadership ▪ Ride with the market growth
resources ▪ Fill weaknesses to avoid vulnerability ▪ Seek niches or specialization
▪ Accept moderate near-term profits to build share ▪ Seek an opportunity to increase strength through
acquisition
Medium Attractiveness Medium Attractiveness Medium Attractiveness
Strong Competitive Position Average Competitive Position Weak Competitive Position
The strategy advice for this cell is to selectively The strategy advice for this cell is to selectively The strategy advice for this cells is to preserve for
invest for growth. invest for earnings. harvest . Consider the following strategies :
Consider the following Strategies : Consider the following Strategies : • Act to preserve or boost cash flow as you exit
• Invest heavily in selected segments • Segment the market to find more attractive the business
• Establish a ceiling for the market share you wish to position • Seek an opportunistic sale
achieve • Make contingency plans to protect your
• Seek attractive new segments to apply segments
• Seek a way to increase your strength
vulnerable position
Low Attractiveness Low Attractiveness Low Attractiveness
Strong Competitive Position Average Competitive Position Weak Competitive Position
The strategy advice for this cells is to selectively The strategy advice for this cells is to • The advice for this cells is to harvest and
invest for earning. restructure ,harvest ,or divest. divest. You should exit the market or prune
Consider the following Categories : • Make only essential commitments the product line.
• Defend strengths • Prepare to divest
• Shift resources to attractive segments • Shift resources to a more attractive segment
• Examine ways to revitalize the industry
• Time your exit by monitoring for harvest or
divestment timing
GLOBAL STRATEGIES
In some instances, organizations pursue global strategies for external business expansion.
Global Strategies cover three main areas:
International
Multinational
Global
Companies who might want to sell their excess products outside their home markets pursue international strategies. A company
said to be doing international business although its focus is the home market. On the other hand , a company can engage in
multinational strategies when it is involved in a number of market outside the home country. The challenge in undertaking
multinational strategies is to sell competitive and distinct products and services that are suited to the customer demands of different
countries. Thus , the strategy in one country may vary in another ,depending on customer expectations. In global strategies ,the
company treats or consider the world as a whole ,one market and one source of supply with slight local variations.
BENEFITS OF GLOBAL STRATEGIES
Pursuing global strategies can be beneficial to companies. Given a larger for its products , companies can enjoy larger sales and
earnings. They can benefits from the global branding of their products and services, not to mention, the earning from economies of
scale. Higher production volume with efficiency increase savings and creates greater advantage for companies. Sourcing of labor
can be studied to optimize labor costs.
THE END
THANK YOU
