Chapter 6
Corporate-Level Strategy
Studying this chapter should provide you with
the strategic management knowledge needed to:
1. Define corporate-level strategy and discuss its purpose.
2. Describe different levels of diversification achieved using different
corporate-level strategies.
3. Explain three primary reasons firms diversify.
4. Describe how firms can create value by using a related diversification
strategy.
5. Explain the two ways value can be created with an unrelated
diversification strategy.
6. Discuss the incentives and resources that encourage diversification.
7. Describe motives that can encourage managers to over diversify
a firm.
Learning Objectives
The Role of Diversification
•Diversification strategies play a major role in the
behavior of large firms.
Two Strategy Levels
•Business-level Strategy (Competitive)
Corporate-Level Strategy:
Key Questions
•Corporate-level Strategy’s Value
©2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 6–5
Levels of Diversification: Low Level
©2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 6–6
Related Constrained
Related Linked (mixed
Levels of Diversification: Moderate to High
Levels of Diversification:
Very High Levels
•Unrelated Diversification
©2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 6–8
CB
Levels of Diversification
Reasons for Diversification
Value-Creating Strategies
of Diversification
©2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 6–11
High Low
Operational and Corporate Relatedness
Corporate Relatedness: Transferring Skills into
Businesses through Corporate Headquarters
High
Related Constrained
Diversification
Both Operational
diseconomies of scope)
Value Creating Strategies: Operational
and Corporate
Related Diversification
Related Diversification:
Economies of Scope
•Value is created from economies of scope
through:
Sharing Activities
•Operational Relatedness
Transferring Corporate Competencies
•Corporate Relatedness