Business Policy

Published: 2021-09-10 17:45:09
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Category: Business

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* Vertical integration
Expanding operations backward into an industry that produces inputs for the company or forward into an industry that distributes the company's products
* Strategic outsourcing
Letting some value creation activities within a business be performed by an independent entity

Levels of Strategy
Business Strategy (competitive strategy) is concerned with how a firm competes within a particular market. Corporate strategy is concerned with where a firm competes
* Business-Level Strategy (competitive strategy)
How to create competitive advantage in each business in which the company competes:
low cost leadership
focus low cost/ focus differentiation
Business (or Competitive) Strategy is concerned with the use of resources and capabilities to create competitive advantages in each of businesses in which a company competes
* Corporate-Level Strategy (companywide strategy)
Corporate (or Company-wide) Strategy is the overall plan for a multi-business unit company.
Corporate strategy is what makes the corporate whole add up to more than the sum of its business unit parts

Defining Corporate Strategy
Corporate Strategy is the way a company adds value through the configuration and organization of its multi-market activities
The definition has three important aspects:
- Value Addition - the generation of superior financial performance from multi-market activities that create corporate advantage
- Configuration - the multi-market scope of the corporation (product/market diversification, geographic focus, and vertical boundaries)
- Organization - the management of the inter-linkages between businesses and the head office
Goal of Corporate Strategy: Corporate Advantage
The goal of corporate strategy is to build corporate advantage so as to earn above normal returns
* Analogous to a competitive advantage in a business unit
Three tests of the existence of corporate advantage:
* Does ownership of the business create benefit somewhere in the corporation? (Does parentage matter?)
* Are those benefits greater than the cost of corporate overhead?
* Does the corporation create more value with the business than any other possible corporate parent or alternative governance structure?
Corporate Strategy:
Three Fundamental Issues
1. Can the corporation create economic value by changing its scope?

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