Strategic management Assignment Example | Topics and Well Written Essays - 2000 words

Strategic management - Assignment Example 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 ma rket 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 lev els 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