Corporate Level Strategy Analysis - Example

Corporate level strategy analysis Table of Contents Table of Contents 2 Corporate level strategies and international diversification 3 Types of International diversification strategies 4 Google’s corporate strategies 4 Business of Google 5 External environment 5 Core strategies 5 Benefits of international corporate level strategies 6 Increased market size 6 Return on investment 6 Economies of scale 6 Location advantages 6 Determinants of national advantages 7 Factor conditions 7 Demand conditions 7 Related support industries 7 Strategy, structure and rivalry 7 Government’s role 7 Chance 8 Multi-domestic, Global and transnational strategies 8 Reference List 9 Corporate level strategies and international diversification Strategies are basically plans that guide a firm’s action. A company’s strategies can be classified based upon the level at which they are formulated. Corporate level, business level and functional level are three essential types of strategies formulated by firms based upon hierarchy. Corporate level strategies are mainly those decisions and planning processes undertaken by a firm’s administrators and top managers. Such strategies influence a firm’s long-term operations and determine the business’s nature, scope and objectives. Corporate strategies are based upon the goals and mission of an organization. Decisions relating to mergers and acquisitions are some of the types of corporate level strategies. Corporate level strategies affect the manner in which most departments in an organization function. Based upon corporate level strategies, the business level and functional level strategies are framed. Resource allocation is considered to be one of the primary aspects of corporate level strategies. Corporate level strategies are directed at increasing net profitably of business by taking crucial investment, expansion, collaboration and allocation decisions, that influence a firm’s operations. Corporate level decisions generally have a considerably long or permanent effect upon organization’s operations. These strategies are usually formulated in presence of the shareholders and other important stakeholders. Corporate level decisions cannot be easily taken when market conditions are unstable. Most of the time, managers and administrators find it extremely difficult to understand the strategy that is most effective for an organization’s long-term goals (Tihanyi, Griffith and Russell, 2005). Diversifying business activities is an integral part of the corporate level decision making. It is essential for organizations to reduce business risks by diversifying activities in different nations. International diversification of business organizations has helped organizations to increase their market span, which enables them to reach out to consumers all over the world. This has helped in the creation of a global platform for all types of goods and services. Technological growth has played a very important role in growth of international business. International diversification allows organizations to improve supply chain management. Economy on a global scale is in a state of constant changes. When a business is concentrated at one place, it becomes hugely dependent upon economy of that nation. This might be highly risky. Hence, diversifying business helps a firm to balance economic losses incurred in one nation with the economic gains from another (Hitt, Tihanyi, Miller and Connelly, 2006). Types of International diversification strategies There are essentially four different types of diversification strategies adopted at the corporate level. They are discussed as follows. Value creating strategies are essentially those types of strategies, which help a firm to acquire greater competitive advantage in market. These strategies help in adding value to the firm. They include planning and taking decisions in such a manner that overall revenue earned by an organization gets enhanced. It also helps a firm to attain maximum efficiency and reduce cost of operations to a large extent. Diversification of products is one of the most common ways whereby most firms can increase their overall value. Certain strategies that are adopted by an organization are negligent towards allocation of resources or increasing the net worth. Such strategies are known as value neutral strategies. These international strategies are related to managing different business aspects. They are largely related to proper management of the firm’s different functions so that its set objectives can be achieved. These strategies also aim at reducing risk aspects in business and ensuring a steady flow of income. In order to maintain managerial stability and improve financial position of an organization, it often becomes essential for an organization to reduce net worth or value, which makes it more manageable. The value reducing strategy prevents harmful or unnecessary growth. This strategy is generally adopted at a time when the management faces difficulties to manage organizational system and checks the same by reducing firm’s size, market share or net worth (Hitt, Tihanyi, Miller and Connelly, 2006). Google’s corporate strategies Google is one of the largest multinational companies, which specializes in internet related services and products. It is also considered as one of the best places to work for. The company has been successful at managing its resources. Google believes that in order to succeed, it is essential for a company to acquire the right talent. Having highly skilled personnel is extremely important for the organization. Google also believes in the simple concept that innovation is essential for a long-term success of a business. This is one of the reasons why the company is consistently developing new types of technologies for rendering internet surfing easier and simpler. The corporate strategies of Google have been discussed as follows from different viewpoints. Business of Google The primary business of Google is web based advertising. The advertising process includes monetizing search traffic. Company’s revenues increase with number of times that the advertisement is viewed. Google’s search engine is also an important part of its business. The company provides the world’s best internet browser. The advertising program of Google ranges from rich media advertisements to simple texts. Through such advertisements, organizations are able to easily locate customers. The company also provides adequate cloud computing tools for various types of business firms. The corporate strategies of Google, from business point of view, aim to innovate and to devise better technologies so as to make the internet operations easier, safer and more efficient. For this, the company employs only highly talented and skilled individuals (Taylor, 2005). External environment Political policies of different nations often pose as a hindrance for Google. Consequently, the company needs to follow guidelines imposed by different regulatory bodies. Hence, organizing world information becomes a challenging task. The company is seen to be less affected by poor economic conditions externally. People continue to use the net, even if the economy is not stable. However, many companies refrain from online advertisements and online trading when economic conditions are weak in order to minimize costs. This may affect net revenues of the firm. Globalized economy and transformation of the world into a global village have increased number of internet users across the globe. Technological growth and popularity of computers and mobile phones play a crucial role in Google’s success (Taylor, 2005). Core strategies Google gives tremendous importance to proper allocation of resources. All the company’s strategic decisions are taken keeping in mind the objectives and mission. Corporate decisions of the company are majorly taken keeping in mind the aspect of organizing information and that of its easy accessibility and usefulness for all. The company faces tough competition from other firms such as, Yahoo, but superior technological and financial strength of the company helps to dominate the industry. The company considers innovative and advanced technologies collaborated with skilled force are its primary resources. The company’s management believes in simple business operations and most of their corporate strategies revolve around allowing greater number of people to use the internet. As more people indulge in online search activities and view more advertisements, the company is able to generate higher revenue. Google puts tremendous efforts upon increasing internet speed and access by investing hugely upon technology. The technologies launched by Google support setting trends in internet browsing systems (Taylor, 2005). Benefits of international corporate level strategies Increased market size One of the prime reasons for most organizations such as, Google, to operate in more than one nation is because this helps to increase global market share. When a firm is operating globally, it can sell products and services in different nations, thereby expanding the target customer size and generating higher revenues (Bowman and Ambrosini, 2003). Return on investment Google and other such big companies invest highly in advanced technology and infrastructure. It therefore becomes essential for such firms to generate high revenues. It is not possible for giant companies to earn very high revenues by concentrating its activities solely at one place. They, therefore, expand their activities across domestic borders. Multinational firms are seen to earn higher revenues than those firms, which operate in a single nation (Harzing and Sorge, 2003). Economies of scale One of the main reasons behind Google’s international expansion was to gain economies of scale. When a firm offers its services in many nations, productions capabilities are required to be improved. When production occurs at a mass-scale, it leads towards the attainment of economies of scale. Reaching the economies of scale helps a firm to reduce cost of operations significantly. Location advantages Organizations expand to different nations considering specific locational advantages possessed by the region. For instance, a firm may consider expanding its operation into India and China due to availability of cheap labour and low cost of production. Similarly, a firm may expand into western nations such as, US and UK, considering the technological superiority existing in these regions. Thus, different resources and strengths of various countries may attract firms to extend their operations therein (Wan and Hoskisson, 2003). Determinants of national advantages National advantages are essentially those attributes, which ensures competitive advantages over other nations, thereby rendering them successful. By taking such national advantages into account, multinational firms desire to expand their activities to other nations (Johnson, Scholes and Whittington, 2008). Factor conditions These refer to factors of production such as, land, labour, capital, infrastructure and raw materials. Such factors may exist naturally or be created. Existing resources include natural resources such as, oil. Created resources may be capital and skilled labour. Demand conditions One of the prime reasons behind the global expansion of Google was increase in the demand of internet access across the globe. Most firms expand into other nation seeing the potential existence of demand for its products and services. Related support industries Support industries play a significant role in attracting multinational firms. The availability of local suppliers not only reduces the cost of acquiring materials from a foreign nation, but also helps in better management of inventory. As a result, firms are seen to expand their operations into countries, where there is abundance of raw materials (Aguilera and Jackson, 2003). Strategy, structure and rivalry Competition drives many firms to expand on a global scale or into specific nations. Considering the manner in which organizations are managed, government policies and nature of domestic rivalry may act as competitive advantages, which in turn attract many global firms. Government’s role One of the significant aspects that should be considered in international expansion is policies and regulations imposed by the government. Government authorities should provide necessary support to organizations for growth and development. However, it is essential to ensure that multinational firms do not violate the law of a nation (Furman, Porter and Stern, 2002). Chance Chance refers to different unforeseen scenarios that arise, causing radical changes in business policies. A sudden fall of prices or a breakthrough invention may lead an organization to develop new corporate strategies or change existing ones. Multi-domestic, Global and transnational strategies Multi-domestic strategies require considering the dissimilar local requirements. This type of strategy demands multinational firms to operate in a manner, which suits local needs of a particular nation. One of the best examples of a company following this type of strategy is McDonald’s. McDonald’s has differentiated menu in different nations, developed in a manner so as to suit the local tastes and preferences. Global strategies are opposite to the multi-domestic strategies. Firms following this type of strategies do not diversify their products to match local needs. Instead, their products and services remains the same. Google largely follows this type of strategy. It offers the same type of technological services across the globe with slight modifications, such as, that in language. Transnational strategies involve striking a balance between multi-domestic and global strategies. This type of strategy diversifies products and services on a minor scale in order to comply with local needs (Rugman and Verbeke, 2001). Reference List Aguilera, R. V. and Jackson, G., 2003. The cross-national diversity of corporate governance: Dimensions and determinants. Academy of management review, 28(3), pp. 447-465. Bowman, C. and Ambrosini, V., 2003. How the Resource‐based and the Dynamic Capability Views of the Firm Inform Corporate‐level Strategy. British Journal of Management, 14(4), pp. 289-303. Furman, J. L., Porter, M. E. and Stern, S., 2002. The determinants of national innovative capacity. Research policy, 31(6), pp. 899-933. Harzing, A. W. and Sorge, A., 2003. The relative impact of country of origin and universal contingencies on internationalization strategies and corporate control in multinational enterprises: worldwide and European perspectives. Organization Studies, 24(2), pp. 187-214. Hitt, M. A., Tihanyi, L., Miller, T. and Connelly, B., 2006. International diversification: Antecedents, outcomes, and moderators. Journal of Management, 32(6), pp. 831-867. Johnson, G., Scholes, K. and Whittington, R., 2008. Exploring corporate strategy: text & cases. New Jersey: Pearson Education. Rugman, A. M. and Verbeke, A., 2001. Subsidiary‐specific advantages in multinational enterprises. Strategic Management Journal, 22(3), pp. 237-250. Taylor, N., 2005. Search Me: The Surprising Success of Google. Singapore: Cyan Communications. Tihanyi, L., Griffith, D. A. and Russell, C. J., 2005. The effect of cultural distance on entry mode choice, international diversification, and MNE performance: a meta-analysis. Journal of International Business Studies, 36(3), pp. 270-283. Wan, W. P. and Hoskisson, R. E., 2003. Home country environments, corporate diversification strategies, and firm performance. Academy of Management Journal, 46(1), pp. 27-45. Read More