Corporate Growth & Stability Strategies

Corporate External Growth Strategies

Economic Conditions

Labor shortages

Lack of market growth

Vertical Growth

Achieved by taking over a function previously provided by a supplier or distributor.

Horizontal Integration

The degree to which a firm operates in multiple geographic locations at the same point in an industry’s value chain.

Vertical Integration

The degree to which a firm operates vertically in multiple locations on an industry’s value chain, from extracting raw materials to manufacturing to retailing.

Forward Integration

Assuming a function previously provided by a distributor.

Backward Integration

Assuming a function previously provided by a supplier.

Horizontal Growth

Expansion of operations into other geographic locations and/or increasing the range of products and services offered to current markets.

Conglomerate Diversification

Diversifying into an industry unrelated to its current one.

• Management realizes that the current industry is unattractive.
• The firm lacks outstanding abilities or skills that it could easily transfer to related products or services in other industries.

Concentric Diversification

Growth into a related industry when a firm has a strong competitive position, but industry attractiveness is low.

Reasons for Acquisition Failures

Stability Strategies

Make no change to the company’s current activities.

Pause/Proceed With Caution Strategy

An opportunity to rest before continuing a growth or retrenchment strategy.

No-Change Strategy

A decision to do nothing new—a choice to continue current operations and policies for the foreseeable future.

Profit Strategy

A decision to do nothing new in a worsening situation but instead to act as though the company’s problems are only temporary.

Competitive Strategies

Cooperative Strategies

Used to gain a competitive advantage within an industry by working with other firms.

• Collusion
• Strategic alliances

Liquidation

Management terminates the firm.

Bankruptcy

A company gives up management of the firm to the courts in return for some settlement of the corporation’s obligations.

Turnaround Strategy

Emphasizes the improvement of operational efficiency when the corporation’s problems are pervasive but not critical.

Function Strategy

The approach a functional area takes to achieve corporate and business unit objectives and strategies by maximizing resource productivity.