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Chapter 6: Grand Strategies

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Title: Chapter 6: Grand Strategies


1
Chapter 6 Grand Strategies
  • By Daniel Adkins

2
The Man, The Myth, The Legend
3
Why diversify?
  • Increase the firms stock value
  • Increase the growth rate of the firm
  • Diversify the product line
  • When the life cycle of current products have
    peaked
  • Increase efficiency and profitability, especially
    if there is synergy between the acquiring firm
    and the acquired firm

4
The two types of Diversification
  • Concentric Diversification
  • Involves the acquisition of businesses that are
    related in the acquiring firm in terms of
    technology, markets, or products.
  • Conglomerate Diversification
  • Unlike Concentric Diversification, Conglomerate
    Diversification gives little concern to creating
    product-market synergy, but seeks financial
    synergy.

5
Turnaround
  • The Turnaround Strategy should be used when a
    firm is getting declining profits from production
    inefficiencies or by competitive breakthroughs.
  • This Strategy is used to help the firm fix their
    problems of being inefficient and turnaround
    their company into becoming stable and profitable
    again.

6
The two types of Retrenchment used in the
Turnaround Strategy
  • Cost reduction
  • Asset reduction

7
A Model of the Turnaround Process
This model is listed on the top of page 213 in
our Textbook Formulation, Implementation, and
Control of Competitive Strategy.
8
Divestiture Strategy
  • This Strategy involves the sale of a firm or a
    major component of a firm.

9
The Sara Lee Brand
10
The Bankruptcy Strategy
  • Liquidation (Chapter 7)
  • Owners and managers are admitting failure. By
    liquidating the assets of the company, the
    creditors are paid a fraction of what they have
    claim to.
  • Reorganization (Chapter 11)
  • Creditors agree to freeze their claims to the
    company. The company is allowed to reorganize in
    efforts of becoming profitable and then paying
    back the creditors the amount owed to them.

11
7/11 Chapter 7 and Chapter 11 Bankruptcy
12
Corporate Combinations
  • Joint Ventures
  • When working by yourself is not feasible, or not
    as efficient as working together with someone
    else.
  • The companies (children) operate together to
    benefit the co-owners (parents).
  • Pros New opportunities for both companies
    involved and the risks can be shared by both
    companies
  • Cons There is less control and administration
    over operations

13
Strategic Alliances
  • This strategy is different from Joint Ventures
    because the companies do not take an equity
    position in one another.
  • Each company will try to steal skills and
    expertise from each other.
  • Outsourcing.

14
Reasons to Outsource
This model is listed on the bottom of page 220 in
our Textbook Formulation, Implementation, and
Control of Competitive Strategy.
15
Consortia, Keiretsus, and Chaebols
  • A consortia is a large interlocking relationship
    between businesses of an industry.
  • Japan calls this a keiretsus and South Korea
    calls this a chaebol.

16
Summary and Conclusion
  • All the main topics in the chapter are required
    to establish solid objectives and great long-term
    strategies.
  • The next chapter will show us how these
    strategies are selected and which types of firms
    to create.
  • In Conclusion, we appreciate you not falling
    asleep on us. Thank You.
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