Corporate Strategic Management - Assignment Example

?Strategic Management Corporate strategic management refers to issues that are addressed in addresses the following basic questions: In what businesses will the business compete? - The management of a company can seek to identify the special niche markets the company should concentrate its efforts on. How can the company add value to its different subsidiaries? - The corporation’s management might consider streamlining its synergies. It can also gather market intelligence through the retail outlets that deal in its products. Market intelligence will provide information about the brands that are popular among consumers; some of which the company can decide to trade in. Corporate strategy is basically about finding ways to generate value when different lines of business under the same company pool their resources. How can diversifying the corporate operations or launching into a new line of business assist the company in competing with other businesses? Diversification Strategy Diversification strategies are employed to develop a company’s operations by adding products, markets, production stages or services to the existing business. The aim of corporate diversification is to permit the business to participate in lines of business that are not the same as those in their current operations. Concentric diversification is descriptive of when the new business is strategically connected to the present lines of business. Conglomerate diversification, on the other hand, is descriptive of the situation when there is no familiarity or link between the old and new lines of business. Development strategies usually result in a considerable increase in market share or sales objectives past previous levels of organizational performance (Gerami 2010). Many business establishments pursue different growth strategies on a regular basis. One of the main reasons for this is the fact that most business executives consider that greater investment will result in even bigger results. Increases in sales are frequently used as a measure for organizational performance. Even if the business profits stay constant or start to decrease, sales increases usually satisfy many organizational representatives. The presumption is usually made among corporate executives that increases in sales sooner or later result in large profits. Vertical diversification Diversification strategies are usually categorized according to the direction that the diversification takes (Cameron and Quinn 2011). Vertical integration is descriptive of when corporations take on new business functions at diverse stages of the manufacturing process. Participation in the different levels of production can be initiated by procuring a different company (external diversification), or within the corporation (internal diversification). In the horizontal variety of diversification, or integration, the corporation basically moves into new corporate operations at the same level of manufacture. Vertical integration is normally associated with existing business functions and is perceived as being a form of concentric diversification. Horizontal integration, on the other hand, is presumed to be a conglomerate or concentric variety of diversification. Vertical Integration The steps that a manufactured commodity passes through in the process of being changed from being a raw material to being a finished product ready for use by the consumer make up the assorted stages of manufacture (Lumby and Jones 2004). When a corporation diversifies when on a level where it is closer to the level where raw materials are handled in the production stages, it is said to be taking the route of the strategy of backward vertical integration. Avon is an example of a company that deals in cosmetics. It's main line of business has been in presenting its products to customers on a door-to-door basis (Robertson and Caldart 2009). Some years ago, Avon decided to change its strategy. It basically followed a backward type of vertical integration when it started experimenting with different substances and then producing some of its own cosmetics. Forward diversification takes place when corporations move nearer to the customer in terms of the manufacturing stages. Levi Strauss & Co. is a company that traditionally specialized in making clothes. It would diversify forward by launching retail stores to trade in its textile goods instead of producing them and then giving a different company the task of selling them for retail purposes. Portfolio Management The portfolio matrix is one of the most significant instruments for strategic marketing planning, particularly in the level of strategy selection. The business’s position in the portfolio matrix and its related marketing strategy is reliant on the aggregation of the pertinent strategic factor values (Grant 2010). The established approach to the assessment of the portfolio matrix makes use of the averaging role as an aggregation determiner. This approach is quite restricted in terms of the practical business environment that is distinguished by complicated connections among strategic factors (Bolman and Deal 2008). An new approach to the assessment of the portfolio matrix can be used to identify and comprehend the multifaceted connections between strategic factors. Portfolio management is basically concerned with return as well as risk strategies. It also comprises of the generation and administration of investment assets (Marlin, Lamont and Geiger 2004). There are two main portfolio management schools: the active and passive schools of portfolio management. The active or passive term is used to describe the process through which the assets are chosen for inclusion in the organization’s portfolio (Whitacre, Abbass, Sarker, Bender and Baker 2009). A passive organizational portfolio is comprised of a particular number of stocks, or shares in all the businesses that are mentioned on the stock exchange. It therefore does not endeavor to research into each stock in order to make the decision if it ought to be excluded or included from the portfolio. There is no methodological or elementary examination performed to determine the market portfolio. Conversely, active portfolio management employs technical as well as fundamental research assessments. In this type of portfolio management, it is felt that the stocks are underrated and are capable of surpassing the market portfolio in future. Planning: In the planning phase of portfolio management, a statement detailing the investment policy is documented. A well-defined investment strategy is one that contains the preferred management method. It also clearly states the objectives of the portfolio, and level of proceeds. The planning stage also includes rebalancing strategies, and the consideration of efficient external as well as internal ways of communicating about those objectives. Asset Analysis: Apart from inside knowledge, asset analysis is based on two main kinds of investment assessment. These are fundamental and technical assessment. Technical analysis is the result of the examination of past developments in share prices. This kind of analysis is based on the fact that patterns can be detected in their movements which will then be employed to calculate the possibility of future movements. This method of analysis makes use of graphs of past share price variants (Creelman, Lawler III and Worley 2011). Conversely, fundamental analysis is based on the examination of the principal position of the corporation. Details such as corporate weaknesses and strengths as well as future threats and opportunities are also used in the process of ratio analysis when assessing a particular stock. Asset Selection and Combination: Stock selection is also considered to be a part of an active portfolio management. Due to the efficiency of stock markets, asset selection has limited effect on return investors. The effectual markets hypothesis (EMH) maintains that a stock market is proficient if the market price of an organization’s share accurately shows all its significant information as soon as it is available (Lumby and Jones 2004). In the process of asset selection, investors choose their portfolios through consideration of the mean. Asset combination can sometimes lead to an increase in portfolio returns. Moreover, this is dependent on how investments are combined and distributed in the existing asset classes. Evaluation of Performance: Portfolio performance assessment involves measuring returns over an extended period of time. Style analysis defines a portfolio by assessing the performance of its returns instead of using a basic understanding of what is included in the portfolio. Its aim is also to give a mean of stock performance measurement, as well as the abilities of the fund manager (Mintzberg, Ahlstrand and Lampel 2008). Re Balancing: Rebalancing the portfolio is important for the fiscal future. Rebalancing basically comprises of the operations of selling high and buying low. This procedure makes sure that the portfolio is in line with the plan that was originally created for it. As market conditions alter various assets in the portfolio will appreciate more swiftly than others. This means that the portfolio weighting will be altered from that which was in the original allocation plan. This leads to an out of balance portfolio. Such a situation can be corrected through trading high performing stock and purchasing low performing ones. The top-down strategic planning model In the formal model of top-down strategic planning, a corporation’s top executives will generate the basic strategies to be used in the organization and then communicate it to their junior executives who then pass it to their workers. Where large corporations are concerned, business strategies at the corporate level mainly have to do with managing the business portfolios. For instance, corporate level strategies usually include decisions delineating the business units to develop, the allocation of corporate resources among the different divisions, and capitalizing on synergies among the business divisions as well as in acquisitions. In such strategy, the term ‘organization’ will be used to describe a single-business company or a division in a diversified corporation. Transformations in the external environment usually afford new ways for corporations to attain their objectives. An environmental examination ought to be carried out in order to establish their existing opportunities. The business that is seeking to initiate operations must also be conscious of its weaknesses as well as strengths to be able to determine the opportunities that may afford it a greater chance of success. The situation analysis thus should include an evaluation of both the internal and external environment. The examination carried out on the external environment has to include an analysis of the micro and macro-environments. A micro-environment includes aspects that influence only the corporations of a particular field. The macro-environmental assessment, though, includes an appraisal of economic, political, technological, and social aspects. An important characteristic of the micro-environmental assessment is the industry in which the organization is considering launching operations into or in which it already operates. Michael Porter creates a model of five forces that is still used for the purposes of industrial analysis (Morgan 2006). Porter's model of 5 forces includes consumers, barriers to entry, substitute products, contractors, and business rivalry (Morgan 2006). Formulation Once the organization has acquired a clear picture of the environment in which it will be operating, it can develop definite strategic alternatives. While different companies have diverse options to choose from depending on their circumstances, generic strategies can be used by most organizations. Michael Porter states that differentiation, cost leadership, and focus are the three generic strategies that can be used by any type of organization when determining its corporate strategic alternatives (Morgan 2006). Porter warned against employing more than one of these strategies for a particular product. Instead, he asserted that each product should be assigned only one of the generic strategy options. Implementation The corporate strategy is likely to be articulated in high-level theoretical. For the purposes of practical implementation, corporate strategy has to be translated into more comprehensive ideas and concepts which can be appreciated at the organization’s functional level. This declassification will also assist in emphasizing the presence of any practical concerns that were indiscernible at a higher level. Corporate strategy can be divided into definite policies that cater to procurement, marketing, production, research and development, information systems and human resources. Along with generating functional policies, the strategy implementation stage includes effecting organizational changes and the identification of the necessary resources. Methodology Research is useful if the information gathered is analyzed and explained in simple, clear business and organizational development terms and quickly becomes part of the management team's action plan. Research Questions: (1) What factors should affect an organization’s decision to diversify?   (2) What is the correct portfolio of businesses for the company?   (3) How can diverse businesses be incorporated into a strategic whole for the firm?   Primary Research This research will use surveys as well as the information provided by secondary researches to acquire information concerning a particular target market. While the survey method is direct and provides more specific results than the secondary avenues of obtaining data, it is time consuming and not cost effective. Secondary Research The research will use past researches and journals as well to gather information on the research subject. Secondary data is easily accessible, and rather inexpensive to acquire when compared to primary data. Moreover, secondary data is usually not as accurate, direct, or practical as primary data. In addition, there may be problems if the market subject does not have sufficient research sources in secondary sources. However, due to time constraints, most of the information gathered in this research will be from secondary sources such as the webpage of the industry in question, text books, published annual reports, academic periodicals, and the Internet. For this marketing research, the dependability and validity of the secondary data is fairly high due to the easy availability of the updated facts regarding the firm on the Internet. Ethical issues The first part of the research, which is the primary survey, will be distributed among 30 workers of different firms. This survey will only be administered after the participants are instructed on their rights, as participants, to stop at any time during the research or neglect to answer questions that they are unsure of or uncomfortable with. The respondents will also be invited to sign a document that denotes their willingness to participate in the research. The collection of data will not comprise the breeching of any copyright laws because the secondary data will be gathered from legal secondary publications. The use of other people’s reviews or reports will be acknowledged in the list of references. References Bolman, L. & Deal, T. (2008) Reframing organisations: artistry, choice, and leadership, Jossey-Bass, San Francisco. Cameron, K. & Quinn, R. (2011) Diagnosing and changing organisational culture: based on the competing values framework, Jossey-Bass, San Francisco. Creelman, D., Lawler III, E. & Worley, C. (2011) Management reset: organising for sustainable effectiveness, Jossey-Bass, San Francisco. Gerami, M. (2010) ‘Knowledge management’, International Journal of Computer Science and Information Security, vol. 7, no. 2, pp. 234 - 238 Grant, R. (2010) Contemporary strategy analysis, John Wiley & Sons, Hoboken. Lumby, S. & Jones, C. (2004) Corporate finance – theory and practice, Thomson, New York. Marlin, D., Lamont, B. & Geiger, S. (2004) ‘Diversification strategy and top management team fit’, Journal of Managerial Issues, vol. 16, p. 361. Mintzberg, H., Ahlstrand, B. & Lampel, J.B. (2008) Strategy safari, Prentice Hall, New York. Morgan, G. (2006) Images of organisation, Sage Publications, Thousand Oaks. Robertson, D.A. & Caldart, A.A. (2009) The dynamics of strategy, Oxford University Press, Oxford. Whitacre, J., Abbass, H., Sarker, R., Bender, A., & Baker, S. (2009) Strategic positioning in tactical scenario planning, Genetic and Evolutionary Computation Conference, pp. 1081-1088. 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