Corporate level strategy: justifying entry into different business and industries- It is used to identify: o Businesses/industries in which the company should competeo Value creation activities that the company should perform in those businesses/industrieso Modes to enter or exit businesses/industries in order to maximize the long-run profitability Internal new venturing Merger & acquisition Strategic alliance Joint ventureCompanies must adopt a long-term perspective in formulating a corporate-level strategyBusiness level strategy: model for each business unit/division in every industry it competes in- Key is to drive the wedge between price & costo Differentiation strategy = focus on price (price premium from unique product)o Cost strategy = focus on costs (similar product at a lower cost)- Differentiation and low cost historically treated as mutually exclusive- Generic business-level strategies are based on:o Differentiation vs. costo Broad vs. narrow target marketDifferentiation: o Create products and/or services that are unique and valued by customerso Non-price attributes for which customers will pay a premium (like Apple)o Strive to increase customers’ willingness to pay by creating value for customerso Firms may differentiate along several dimensions at once (customer service, product quality, and design)o Successful differentiation requires integration will all parts of a firm’s value chaino Speed or quick response is importanto Improve competitive position by creating higher barriers to entry and less substitutes due to customer loyalty and provider higher margins that enable the firm to deal with powerful buyers/supplierso Must provide unique products/services that customers value highly and are willing to payo Too much differentiation may be higher than what customers desire and there may be too high of a price premiumo The firm may erode their quality brand image by adding a product that has lower prices and less qualityo Beauty is in the eye of the beholder and perception varies between buyers and sellersSegmentationHorizontal integration: acquire competitor or company with similar businessVertical integration: acquisition of suppliers and buyerso Forward: into an industry that uses, distributes, or sells the company’s productso Backward: into an industry that produces inputs for the companyDiversification: the process of adding new businesses or value chainso Related: a firm entering a different business in which it can benefit from leveraging core competencies, sharing activities, or building market powero Can gain economies of scopeo Unrelated: entry into industries that have no obvious connect to any of a company’s valuechain activities in its present industrieso This is an effective way to reduce riskso May have quick growtho Firms can pursue related and unrelated diversification at the same timeo Geographical: diversify into other states/countries/international expansionEconomies of scale: the more a company produces, the lower the price (standardized products)o Produce only one productEconomies of scope: produce more than one product at a lower costOutsourcing: using other firms to perform value-creating activities that were previously performed-in houseOffshoring: shifting an activity that the company was previously performing in a domestic location to a foreign locationPrincipal-agency relationship: relationship between principals (shareholders) and agents (management)Corporate governance: relationship among various participants in determining the directionand performance of corporationsLocation economics: trying to locate company activities where it is most efficient into lowercost areasInformational control: focus on constantly changing strategically important informationo Demand frequent and regular attention from all levels of the organizationo Discuss in face-to-face meetingso see if you do things correctly, see what you doBehavioral control: focused on implementation, doing the right thing, how you do thingso build and sustain a strong and effective cultureo motivate with rewards and incentiveso setting boundaries and constraintsBoundary-less organization: barrier-free organization: member companies like Walmart, FedEx, PepsiCo share best practices in sustainable developmentPorter’s 3 Generic Strategies:1. Overall cost leadership:a. Low cost position relative to a firm’s peersb. Manage relationships throughout the entire value chainc. Walmart, McDonald’s2. Differentiation:a. Create products and/or services that are unique and valued by customers3. Focus strategy:a. Narrow product lines, buyer segments, or target geographical marketsb. Attain advantages either through differentiation or cost leadershipBCG portfolio matrix:High market share, high industry growth rate: starsHigh market share, low industry growth rate: cash cowsLow market share, high industry growth rate: question marksLow market share, low industry growth rate: dogsStars:o Long-term growth potential and should continue investingCash cow:o Limited long-run potential but represent a source of cash flows to invest in stars and question marksQuestion marks:o Resources should be invested in to enhance competitive positionsDogs:o Recommend divestment4 generic global competitive strategies:1. Global strategy:a. Products standardized across marketsb. Concentrate on manufacturing, research and development, and marketing in global scale in only a few favorable locationsc. Leads to economies of scale, ultimately lower costs2. Transnational strategy:a. Strives to optimize the trade-offs associated with efficiency, local adaptation, and learningb. Challenges in determining locations of activities to ensure cost and quality3. International strategy:a. Centralize functions related to core competenciesb. Emphasize transferring core competences from headquarters to subsidiariesc. Lower costs because of less need to tailor products and servicesd. Limited ability to adapt to local marketse. Inability to take advantage of new ideas and innovations occurring in local markets4. Multi-domestic strategy:a. Extensively customize both product offerings and marketing strategy to match national differences and focus on competition in each marketb. Decentralized: establish a complete set of value creation activities in each major national market in which the firm does businessc. May lead to over adaptation as conditions changed. Decreased ability to realize cost savings through scale