Summary chapter 6 advanced management
Corporate strategy
How broad should an organisation be, in other words the scope of an organisation. The scope is
central to corporate strategy.
The scope: concerned with how far an organisation should be diversified in terms of products and
markets.
The scope raises two key items:
1. Corporate parenting: what should be
the role of the corporate level/head
office?
2. Portfolio matrices: what specific
business units should be included in
the corporate portfolio?
This chapter is not just about large commercial businesses. Even small businesses may consist of a
number of business units. (business strategy is about one single business, so one SBU, corporate
strategy about more SBU’s) For example, a local building company may be undertaking contract work
for local government, work for industrial buyers and for local home owners. Not only are these different
market segments, but the mode of operation and capabilities required for competitive success are also
likely to be different.
6.2 Strategy directions
The Ansoff product/market growth matrix (figure) is a
corporate strategy framework for generating four basic
directions for organisational growth. A company starts
in zone A and has from here three choices:
(1) Penetrating further within its existing sphere
(2) Increasing novelty of products
(3) Increasing novelty of markets
The process of increasing the diversity of the range of
markets/products (last two points) is known as
‘diversification’
Diversification: involves increasing the range of products or markets served by an organisation
Related diversification: involves expanding into product or services with relationships to the existing
business.
> moving to zone B: developing new products for existing markets
> moving to zone C: bringing existing products into new markets
Conglomerate (unrelated) diversification: involves diversifying into products or services with no
relationship to existing business. (new markets and new products, moving to zone D)
Corporate strategy
How broad should an organisation be, in other words the scope of an organisation. The scope is
central to corporate strategy.
The scope: concerned with how far an organisation should be diversified in terms of products and
markets.
The scope raises two key items:
1. Corporate parenting: what should be
the role of the corporate level/head
office?
2. Portfolio matrices: what specific
business units should be included in
the corporate portfolio?
This chapter is not just about large commercial businesses. Even small businesses may consist of a
number of business units. (business strategy is about one single business, so one SBU, corporate
strategy about more SBU’s) For example, a local building company may be undertaking contract work
for local government, work for industrial buyers and for local home owners. Not only are these different
market segments, but the mode of operation and capabilities required for competitive success are also
likely to be different.
6.2 Strategy directions
The Ansoff product/market growth matrix (figure) is a
corporate strategy framework for generating four basic
directions for organisational growth. A company starts
in zone A and has from here three choices:
(1) Penetrating further within its existing sphere
(2) Increasing novelty of products
(3) Increasing novelty of markets
The process of increasing the diversity of the range of
markets/products (last two points) is known as
‘diversification’
Diversification: involves increasing the range of products or markets served by an organisation
Related diversification: involves expanding into product or services with relationships to the existing
business.
> moving to zone B: developing new products for existing markets
> moving to zone C: bringing existing products into new markets
Conglomerate (unrelated) diversification: involves diversifying into products or services with no
relationship to existing business. (new markets and new products, moving to zone D)
