Essay about Strategic Management and Corporate Level Strategy

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Words: 515
Pages: 3
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Outline
• News?
• Any questions?

• Corporate Level Strategy
• Team exercise

Business Policy and Strategy – Feb. 23, 2015

Corporate Level Strategy
• Business Level Strategy: How to compete in a single product market
• Corporate Level Strategy: Where to compete alongside three dimensions:
– Industry value chain: In which stage(s) of the value chain should the firm be active in
– Range of products and services: What are the products and services to offer
– Where to compete: geography

Business Policy and Strategy – Feb. 23, 2015

Corporate Level Strategy – Transaction
Costs
• According to Coase and Williamson (both Nobel Laureates) firms exist to economize on transaction costs
• All activities have costs: internal and external
• Transaction costs form the boundaries of the firm

Business Policy and Strategy – Feb. 23, 2015

Corporate Level Strategy – Transaction
Costs
• If the costs of “making” is less than the costs of
“buying” then vertically integrate • Principal Agent Problem:
A manager may pursue his or her own interests such as job security and managerial perks in lieu of principal’s interests

Business Policy and Strategy – Feb. 23, 2015

Corporate Level Strategy – Transaction
Costs
• Alternatives to Make or Buy

Business Policy and Strategy – Feb. 23, 2015

Corporate Level Strategy – Vertical
Integration
• In what stages of the industry value chain should the firm participate? • Vertical integration
– Ownership of its inputs, production, & outputs in the value chain – Not all industry value chain stages are

equally profitable.

Business Policy and Strategy – Feb. 23, 2015

Corporate Level Strategy – Vertical
Integration of HTC

Business Policy and Strategy – Feb. 23, 2015

Corporate Level Strategy – Vertical
Integration
Benefits:
• Securing critical supplies
• Lowering costs & improving quality
• Facilitating investments in specialized assets
Risks:
• Increasing costs & reducing quality
• Reducing flexibility
• Increasing the potential for legal repercussions

Business Policy and Strategy – Feb. 23, 2015

Corporate Level Strategy – Vertical
Integration
Alternatives:
• Taper integration – Relying on both internal and external parties for supply (backward) or distributions (forward)
• Strategic outsourcing – Value added activities that are done outside of the firm

Business Policy and Strategy – Feb. 23, 2015

Corporate Level Strategy – Diversification
The range of
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