Bsg Strategy Paper

1. What is corporate-level strategy and why is it important?

Corporate-level strategies are strategies that detail actions taken to gain a competitive advantage through the selection and management of a mix of businesses competing in different product markets. They are concerned with what businesses the firm should be in and how the corporate office should manage its group of businesses.

Corporate-level strategies are important to the diversified firm because developing and implementing multi-business strategies is necessary for effective utilization of resources, capabilities, and core competencies across multiple businesses to create value. In the final analysis, a corporate-level strategy's value is ultimately determined by the degree to which the businesses in the portfolio are worth more under the management of the company than they would be under any other ownership.

2. What are the levels of diversification firms can pursue by using different corporate-level strategies?

Low levels of diversification. Single- and dominant-business firms represent those for which at least 95 percent and 70 percent of total sales, respectively, come from a single business. Several advantages accrue to these firms. For example, managers of single- and dominant-business firms may be more capable of understanding the competitive dynamics of the smaller number of industries in which their business(es) compete. Furthermore, managers in these firms can develop more specialized skills, concentrating on formulating and implementing a narrower range of business-level strategies and managing synergies between businesses that may be easier to identify and master. However, these firms must also overcome a number of disadvantages. For example, single- and dominant-business firms are affected more negatively by an economic downturn that affects their single or dominant industry. Also, by focusing their operations, these firms cannot enjoy the advantages that are realized only by diversified firms

Moderate to high levels of diversification. A firm generating more than 30 percent of its revenue outside a dominant business and whose businesses are related to each other in some manner uses a related diversification corporate-level strategy. When the links between the diversified firm's businesses are rather direct, a related constrained diversification strategy is being used.

The diversified company with a portfolio of businesses with only a few links between them is called a mixed related and unrelated firm and is using the related linked diversification strategy. Compared with related constrained firms, related linked firms share fewer resources and assets between their businesses, concentrating instead on transferring knowledge and core competencies between the businesses. As with firms using each type of diversification strategy, companies implementing the related

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