MGCR 423 Lecture Notes - Lecture 5: Market Power, Vertical Integration
Chapter 5 – Corporate Level Strategy
Corporate Level Strategy: specifies actions a firm take to gain a competitive advantage by selecting and managing
a group of different businesses competing in different product markets.
The value of corporate-level strategy is 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.
A firm can create a corporate advantage when its businesses work together in a synergistic way.
Synergy exists when the value created by business units working together exceeds the value that those same units
create working independently.
• CLS is expected to the help the firm earn above average return by creating value:
o Effetie strateg reates aross all fir’s usiesses aggregate retur > hat those returs
would be the strategy.
o Cotriute to the fir’s strategi opetitieess.
▪ Value creating Diversification = irease the fir’s oerall alue iproig its perforae.
▪ Value neutral/reducing Diversification ( effets or redue fir’s alue) = ath/redue opetitor
market power.
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Document Summary
Corporate level strategy: specifies actions a firm take to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets. The value of corporate-level strategy is 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. A firm can create a corporate advantage when its businesses work together in a synergistic way. Synergy exists when the value created by business units working together exceeds the value that those same units create working independently. The company using related diversification strategy want to dev and exploit economies of scope b/n its businesses. Seek economies of scope through 2 operational economies. Firm can create operational relatedness by sharing either their primary activities or support activities: risky bc ties among businesses create links b/n outcome, requires careful coordination.