Options for Revising a Corporate Strategy

Read the overview below and complete the activities that follow.

Figure 8.6 shown below describes the strategic options that a diversified company can follow to improve their overall performance. They can,

1. Stick closely with the existing business lineup and pursue the opportunities these businesses present.

2. Broaden the companys business scope by making new acquisitions in new industries.

3. Divest certain businesses and retrench to a narrower base of business operations.

4. Restructure the companys business lineup and put a whole new face on the companys business makeup.

The goal of this exercise is for you to understand the four main corporate strategy options a diversified company can employ to improve company performance.

Which strategy would a diversified company pursue when top management concludes that its diversification has gotten out of control and market conditions in those industries have deteriorated?

Multiple Choice A) Acquire more businesses and build positions in new related industries. B) Acquire more businesses and build positions in new unrelated industries. C) Restructure the companys business lineup through a mix of divestitures and new acquisitions. D) Stick close with the existing business lineup and add more management attention and resources. E) Sell off or spin off businesses that lack adequate strategic or resource fit.

FIGURE 8.6 A Company's Four Main Strategic Alternatives after It Diversifies Stick Closely with the Existing Business Lineup Makes sense when the current business lineup offers attractive growth opportunities and can generate added economic value for shareholders. Broaden the Diversification Base Acquire more businesses and bulld positions in new related or unrelated Industries. Add businesses that will complement and strengthen the market position and competitive capabilities of business In Industries where the company already has a stake. Strategy Options for a Company That Is Already Diversified Dlvest Some Businesses and Retrench to a Narrower Diversification Base Get out of businesses that are competitively weak, that are in unattractive Industries, or that lack adequate strategic and resource fit. Focus corporate resources on businesses in a few, carefully selected Industry arenas. Restructure the Company's Business Lineup through a Mix of Divestitures and New Acquisitions Sell off competitively weak businesses in unattractive Industries, businesses with little strategic or resource fit, and noncore businesses. Use cash from divestitures plus unused debt capacity to make acquisitions in other, more promising Industries