Introduction to Corporate Level Strategies
Corporate Level Strategies
In changing environment of businesses, the scope and direction through which organisation configures its competence and resources to meet stakeholder’s expectation is called strategies (Toluwalope, 2016). Basic characteristics of strategy are that they are long term in temperament i.e. planning can be short timed but its affect has long term impression on organisations. Elements of uncertainty along with dynamic constituent are contained in strategies while directing organisations towards meeting goals of company. There are two basic levels of strategic formulations, corporate level strategy and business level strategy. In this assessment corporate level strategies will be described while identifying the same in three renowned organisations.
Corporate level strategy is considered as delicate part in strategic planning procedures and is highly responsible for affecting organisations. It involves critical analysis of company while considering probable questions arising about business to participate in. Corporate strategies can also be defined as set of plan and actions made in order to assist organisations achieving desired goals and objectives. Corporate level strategies can be further divided into four parts; Integration strategies, Intensive strategies, Diversification strategies and Defensive strategies. Integration strategies, also known and vertical integration strategy deals in involving horizontal, forward or backward controlling of operations in organisations. Intensive strategies are used to gain competitive advantage in business by making intense decisions and efforts on corporate level. Diversification strategies refers to such activities in which organisations involves its businesses in diversified areas and to those places which may or may not relate to centre commotion of organisation. Defensive strategies refer to those activities that are utilised by organisations to defend it from declining its position. While corporate strategies are determined, the managers need to take strategic decisions to increase and maintain overall activity of business and thus it becomes significant for corporate managers to select the decision according to the requirements in obtaining core objectives of organisation.
PepsiCo is the second largest company in the world dealing in food and beverage. The headquarters of the company is situated in New York in USA. The company was established in the year 1965 with merger of Frito Lay and Pepsi-Cola Company. The mission and vision statement are aligned with the current operations of the business. The diversification strategy company follows, is highlighted in terms of market and product mix while leading the company to develop products and fulfil the demand of customers. PepsiCo’s corporate mission declaration establishes actions that help in achieving vision of the company. It also indicates organisation the direction for attaining long term sustainability and pushing the company towards the top in global food market. The firm’s generic strategy is made according to market pressure coming from its competitors and in order to maintain competitive advantage, PepsiCo uses corporate strategies to evolve in food and beverage market worldwide (PepsiCo, 2014).
Corporate Level Strategies in PepsiCo
Intensive strategies used by PepsiCo makes the company penetrate in markets with primary growth intensive strategy. The intensive strategy allows increase in sales through sharing big portion of market globally. With forceful marketing strategy it follows, PepsiCo has been successful in attracting large amount of customers. The main reason behind company’s intensive growth strategy is to reduce expenditure in order to attract more people in spite of saturation in market. The cost leadership quality also supports generic competition while supporting integrative strategies. The second corporate level strategy implemented by PepsiCo is product development. This intensive strategy helps company promote newer products and develops existing products to capture more consumers. Board differentiation and generic competitive strategies followed by PepsiCo offers uniqueness and novelty in products and growth in business. Market development is also supported by intensive growth strategy of PepsiCo as it supports entering new market segments and continues in expanding business through distribution network in developing regions. Although PepsiCo has got significant market presence, still the strategic objectives of business supports intensive growth strategies by expanding in more diversified areas (Ferguson, 2017).
Over the years PepsiCo has been utilising its integrative strategies in corporate levels to formulate systematic strategies required for growth of the company. Forward integration system is majorly utilised by PepsiCo under which functions relating supply chain takes shape. Distributors, manufacturers and retailers are controlled by the company before making final transact of finished products (Dodovisky, 2016). The distribution and bottling rights have been undertaken by Pepsi America and Pepsi bottling group. In terms of profiteering, these strategies have been a huge success and according to annual report presented by company most of its beverages like Gatorade, Pepsi, Tropicana, etc. have increased its profit for more than 1% annually. Horizontal growth strategies of PepsiCo has enabled company expand its existing products in more diversified regions or market segments. The company has made many strategic alliances which has made easier for the company to increase its economic scale by increasing its operations. Earlier PepsiCo has started its business from American regions but now it operates in more than 200 countries including Asia and MENA regions.
PepsiCo follows concentric diversification strategy that means the company expands its business in related industry only and adopts synergies that align existing business (PepsiCo, 2012). Situation that are chosen for new business gains advantages from common similarities of existing business in forms of technology, distribution, product, manufacturing or customer aspects. Therefore this strategy helps in avoiding controversial reasons for carbonated drinks as PepsiCo poses for healthier variety in food products. PepsiCo has also made many acquisitions and mergers in order to create more efficient and agile brand while enabling innovative and competent brand in beverage and food system. Presently the CEO of the company, Indra Krishnamurthy Nooyi has been increasing PepsiCo’s associations with other recognised brands and increasing company value by promoting the initiative of ‘One PepsiCo’ to facilitate sharing infrastructure and supply chain management.
Integrative Strategies in PepsiCo
PepsiCo has undoubtedly risen strikingly from defensive to offensive stage by making decisions strategically in corporate level (Accenture, 2015). Company’s has been successful in understanding its consumers and monitored trends by regular accessing day to day business operations. The company had been able to protect the core objective by evaluating consumer’s categories and measuring the market and its competitors. Cost cutting strategies followed by PepsiCo has made the company save its synergies for product development while enabling technology and innovations in its industrial sites. The corporate strategy of the company also enables CSR in its functions thereby satisfying governmental requirements and business ethics.
Ford motor is currently fifth largest company dealing in automobile manufacturing whose headquarters is situated in USA. The company operates in more than six continents operating in 70 plants globally and has nearly 159000 employees. The company has been able to perform well in UK also by making mergers with Jaguar, Volvo and Aston Martin (Ford, 2017). The vision of company states one plan one goal which shows their integrated thinking toward distributors, suppliers and global work force to make the company lead consumer vehicle marketplace. The corporate strategy relating purchasing, maintaining and financing shows their progressive thinking in making their brand as one stop shop in vehicle related field. The mission statement of Ford motors defines the action plan to achieve organisational goal of exceeding its market position and performance level.
Ford motors is been highly supported with intensive growth strategy it follows which aligns its generic strategies with competitive market. Ford is depended on market penetration and development of product. The company entails in making increased sales of products to its existing customers in order to grow its business and for this reason Ford has been increasing the dealerships and sale volumes. The company’s strategic objectives are linked with its intensive growth formula which is achieved by the company through increased retention among customers and selling more to existing customers. The generic competitive strategy followed by the company enables company to reduce its costs and gain bigger market split. The company keeps developing its products and keep offering new products to get increased ratio in sales. The intensive strategy for product development is improvised in the company through implementing technology and innovation in its productions and supply areas. Market development strategy allows the company to work in more diversified locations. This strategy involves company to provide new products in new market segments. Since Ford operations are spread in global market, the company does not needs to work more on market developing areas as compared to initial years (Meyer, 2017).
Intensive Strategies in PepsiCo
Ford motors follows backward vertical integration strategy which makes the company moving reverse along chain value and emerging supplier’s trade. These strategies are normally followed by those companies who believe that their suppliers have got more power over them (Mahlburg, 2000). During early stages of automobile industries, Ford had created many subsidiaries that provide the company with major inputs like glass, rubber and metal. Thus chances of getting neglected by suppliers are reduced. Also providing inferior materials or highly priced material is avoided by the company through their enhanced relationship. Backward vertical integrated strategies are usually followed by manufacturing and automobile industries although few entertainment industries also follow same strategy in their corporate planning (Creative Common Attribution).
Ford motors approach towards corporate level strategy shows that the company follows concentric diversification as the company is geared towards providing its customers with special requirement in automobile vehicles. The companies operation are spread in global market which is the reason company gains much attention by its dealers and customers. The designing team in the company is focussed in making products of Ford according to consumer’s preferences and while considering issues related to any of its products, Ford is always ready to make changes to it. Since the customer’s of the company are situated in diversified regions, the company has to make adjustments in marketing strategies and communication while exploring offers and features that target active lifestyle of customers(E-Coach, 2017).
The global standard of production had made Ford sustain the automobile industry with prominence and has made the company come out through defensive stage to offensive stage. However the company had to face many challenges from government and country laws, still by modifying production standards and strategic moves, the company had surpassed all major challenges. Global businesses have to follow global corporate strategies; therefore, the strategic choices for companies like Ford have become limited and shall be taken with much care. Ford, with its strategic corporate principles has been able to survive the auto industry and fulfil its objectives.
Another America based MNC is Google who has been one of the most influential technology companies ruling the world. Internet based services and creations had been vastly introduced by the company which had changed the people’s way of using web. Promotion of information and knowledge through its content has been influencing people since the formation of the company in the year 1998. The vision and mission statement of the company reflects its powerful ideas and what the company desires to achieve. Goggle’s mission defines its strategies like development of its products and services along with achieving new heights through innovation and technology (Google, 2017). The effort of the company and its employees is the reason behind success of Google.
Diversification Strategies in PepsiCo
Google is also recognised as most valuable brand worldwide through its intensive growth strategies which had been satisfying the needs of the firm through continuous growth and leadership. Market penetration for Google in and outside home country through internet and cable connections had been easier as not much competition is seen in market. Google also shares a large share in global marketing advertisement, made online. Development in market is also one of the corporate level strategies followed by Google and the company already has become leader in many countries. However in few countries like China who has their own online web company does not allow penetrating easily for other brands. Google strategy for product development is accomplished through developing its product with innovation and techniques. Google has also developed many mobile apps and phones which shows its diversified nature for market penetration. Business development is necessary for companies to survive which has been realised by the company as it makes continuous efforts in developing its products and websites (Thompson, 2017).
Google sets a good example for forward integration strategy used by company. The company uses this strategy for managing demand and eliminate risks (Ward, 2011). The company got frustrated with incumbent telecom industries and was successful in launching its own product with its own mobile network. The company tries to establish better services in internet and networking which automatically increase demand of more operators by customers. Increase in internet traffic increases search engines and hence scope for increment in business is viable. Apple is one another important company which follows the same principle and has been successful in opening its own retail stores worldwide. Big companies like Apple and Google can easily afford forward integration but at the same time can prove risky if their current operations seem dwindling (Favaro, 2015).
After analysing Google’s corporate level strategy it is seen that Google has made its online searching as main service or. But, with changing times the company has begun developing horizontal diversification strategy by developing inter related products and services. Products like Gmail, Google search appliance, Google drive and online publishing services were developed by the company along with many other products in the last decade. All the products introduced by the company add complimentary services to existing ones and thus users are becoming more depended on Google. Google has also created mobile phones and apps which had provided company to retain existing users in diversified manner and thus Google is positioned as one stop placed for internet users (Pineda, 2016).
Defensive Strategies in PepsiCo
Porter’s Five Force Model
This tool was created by Michael Porter in the year 1979 and is seen as an effective business tool by organisations. Porter identified key forces that could lead an impact on business environment (Grant). The main forces defined in its model are shown in the diagram below.
Figure: Porter’s five Forces Model( Mind Tools, 2017)
Five force analysis of Proton, Malaysia
Perusahan Otomobil Nasional Berhad(PROTON) is a national automobile company which was established in the year 1983 by Mahathir Mohamed and headquarters being situated in Shah Alam, Selangor. Its facilities are situated in Proton City of Perak in Malaysia. Originally the company was a manufacturer of parts of Mitsubishi but from the year 1985; the company started producing its own cars under the name Proton Saga. Proton cars are sold in more than 15 countries in which Asia covers the largest part(PROTON Holdings Berhad, 2017). Porters five force analysis made of Proton shows the structure of the industry and its forces as shown in above figure.
- Threats of new entry: This force describes the force required by new entrants to enter in the competing market. The major barriers for new entrants are higher investment and capital required to enter the industry. The long players of manufacturing industry generally possess high quality maintenance and latest technologies which makes difficult for any new entrant to enter the market. Availability of distribution channel is also difficult to seek for connecting customers. Since Protons has a good reputation in Malaysian market, this force seems to be week. Although government always support entrance of new companies with its friendly policies but for Proton there are other favourable factors also (Pang, 2017).
- Threat of substitution: This factor shows the ability of customers to switch to other products that may be cheaper or accessible like motorcycles and bikes. Consumers seems to favour substitutes of two wheelers mainly because of increasing in prices of gasoline and due to concern regarding environment as two wheelers produces less harmful gasses. There are other brands also which provides high quality product in lesser rates. Thus the quality and rate of other substitute product and willingness of buyers make threat of substitution force to be strong for car companies. On the other hand if comfort level is considered, customers always prefer for cars only and thus threat of substitution seems moderate for Proton ( The DataGroup).
- Buyer power: Many similar car companies are present in Malaysian market that competes with each other. Bargaining power of customers also seems to be strong due to other products presence. The amount of sales is divided among all car manufacturers and distributors. Since Malaysian car markets are fragmented where demand for cars is high, Protons can maintain its market due to the economic development seen in the country and its buyers. Protons maintain quality in its product which is the reason behind its firm presence in global car market (Pang, 2017).
- Supplier’s power: This force seems to be neutral for the industry as few dominant industries rule the supply sector of car manufacturing parts. They have got reputation for good quality which makes strong reason for them to bargain. The role of quality and service in car manufacturing industry is directly related to customer’s safety and requirements to travel in faster way. Once any supplier is fixed, it becomes difficult to replace as customer may demand for same quality, unless up gradation is seen. On the other hand, switching cost is also high which makes the car companies fixed to few suppliers only. Since government is highly pushing for industrialisation in Malaysia, more than 350 companies supplying vehicle components were seen that indicates that supplier power is satisfactory regarding availability of substitute products. Proton is self manufacturing plant and is country owned and thus it has fewer chances of forward integrated threats from suppliers that show that supplier bargaining power is medium for Protons (Stategic Management of Proton, Malaysia, 2015).
- Competitive rivalry: This force describes the amount of competition present and its intensity for rivalry in the industry. Almost every competitor of car manufactures present in the world tries to improve their product by giving in extensive effort to become unique and posse’s strong position in global market. This is one of the strongest reasons why the companies have to struggle in its home country even as emerging of foreign companies makes the competition more difficult(Pang, 2017). Car manufacturers from Korea, China and Japan had made Malaysian car market more competitive and Proton has been trying greatly to adjust the diverse culture and organisational behaviours of its rival companies. Lesser to no switching costs also creates a threat for the company for getting its customers switch to other brands. Therefore competitive rivalry force can be said to be strong for Proton and to sustain the car market the company has to improve its products along with minimising car rates (Stategic Management of Proton, Malaysia, 2015).
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