Page 119 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Unit 7: Corporate Level Strategies

2. Coordinated Strategies: Alligning the business strategies of two or more business Notes
units may provide a company with synergy by reducing competition, and developing
a coordinated response to common competitors.
3. Shared Tangible Resources: Combined units can sometimes save money by sharing
resources, such as a common manufacturing facility or R&D lab.

4. Economies of Scale or Scope: Coordinating the flow of products or services of one
unit with that of another unit can reduce inventory, increase capacity utilization and
improve market access.
5. Pooled Negotiating Power: Combined units can combine their purchasing to gain
bargaining power over common suppliers to reduce costs and improve quality. The
same can be done with common distributors.
6. New Business Creation: Exchanging knowledge and skills can facilitate new products
or services by combining the separate activities in a new unit or by establishing
joint ventures among internal business units.

7.1 Expansion Strategies

Growth strategies are the most widely pursued corporate strategies. Companies that do business
in expanding industries must grow to survive. A company can grow internally by expanding its
operations or it can grow externally through mergers, acquisitions, joint ventures or strategic
alliances.

Reasons for Pursuing Growth Strategies

Firms generally pursue growth strategies for the following reasons:
1. To obtain economies of scale: Growth helps firms to achieve large-scale operations,
whereby fixed costs can be spread over a large volume of production.
2. To attract merit: Talented people prefer to work in firms with growth.
3. To increase profits: In the long run, growth is necessary for increasing profits of the
organisation, especially in the turbulent and hyper–competitive environment.
4. To become a market leader: Growth allows firms to reach leadership positions in the
market. Companies such as Reliance Industries, TISCO etc. reached commanding heights
due to growth strategies.
5. To fulfill natural urge: A healthy firm normally has a natural urge for growth. Growth
opportunities provide great stimulus to such urge. Further, in a dynamic world characterized
by the growth of many firms around it, a firm would have a natural urge for growth.

6. To ensure survival: Sometimes, growth is essential for survival. In some cases, a firm may
not be able to survive unless it has critical minimum level of business. Further, if a firm
does not grow when competitors are growing, it may undermine its competitiveness.

Categories of Growth Strategies

Growth strategies can be divided into three broad categories:

1. Intensive Strategies
2. Integration Strategies
3. Diversification Strategies

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