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Corporate Strategy
Corporate strategy is mostly concerned in the question where our firm is going to
operate and how to coordinate the different businesses of our firm.
Business strategy on the other side was more concerned on how a firm should
gain competitive advantage
When we start tolking about corporate strategy the company is going to grow.
Why the company want to grow?
Maybe for entering in more profitable industries
Also taking advantage of economy of scope and scale (by expanding the
production) to reduce the costs
Chances are that we also be able to attract better employees, becasue they
are attracted form firms that are growing, that are good and give them stability
and potential to grow, so we will be able to peroform better alo in the future
and gain competitive advantage over other industries
Reducing the risks (but shareholders can hold diversified portfolios of
securities. So shareholders can already reduce the risk by themselfs) - there is
no need to diversify too much your business because shareholders can
already diversify their investments
But firms might pursue growth for the wrong reasons
The Top Managnment firm might want to grow just for their personal profit. So
they want to grow to increase salaries
The paper in the slied is showing that this happens also when the acquisition was
unsaccessfull
Corporate Strategy 1
, We don’t want this to happen so we want to allign the CEO and the Shareholders
interest. In order to do that we might give them more shares
Firms can grow across 3 dimensions
1. Vertical integration: along the value chain. In what stages of the industry value
chain should the firm participate. (Ex: in the business of phone production
there are firms that study the creation of phone, firms tat sell them, firms that
produce them, firms that finds the matirials. For example apple is partecipating
in just 2 stages)
2. Product diversification: offering new product/service (Virgin is an example of
an higher diversified firm)
3. Geographic diversification: LVMH
is an example
Corporate Strategy 2
Corporate Strategy
Corporate strategy is mostly concerned in the question where our firm is going to
operate and how to coordinate the different businesses of our firm.
Business strategy on the other side was more concerned on how a firm should
gain competitive advantage
When we start tolking about corporate strategy the company is going to grow.
Why the company want to grow?
Maybe for entering in more profitable industries
Also taking advantage of economy of scope and scale (by expanding the
production) to reduce the costs
Chances are that we also be able to attract better employees, becasue they
are attracted form firms that are growing, that are good and give them stability
and potential to grow, so we will be able to peroform better alo in the future
and gain competitive advantage over other industries
Reducing the risks (but shareholders can hold diversified portfolios of
securities. So shareholders can already reduce the risk by themselfs) - there is
no need to diversify too much your business because shareholders can
already diversify their investments
But firms might pursue growth for the wrong reasons
The Top Managnment firm might want to grow just for their personal profit. So
they want to grow to increase salaries
The paper in the slied is showing that this happens also when the acquisition was
unsaccessfull
Corporate Strategy 1
, We don’t want this to happen so we want to allign the CEO and the Shareholders
interest. In order to do that we might give them more shares
Firms can grow across 3 dimensions
1. Vertical integration: along the value chain. In what stages of the industry value
chain should the firm participate. (Ex: in the business of phone production
there are firms that study the creation of phone, firms tat sell them, firms that
produce them, firms that finds the matirials. For example apple is partecipating
in just 2 stages)
2. Product diversification: offering new product/service (Virgin is an example of
an higher diversified firm)
3. Geographic diversification: LVMH
is an example
Corporate Strategy 2
