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When a business identifies opportunities outside its original industry, it might contemplate diversification. When additional businesses become part of the company, the small business owner must consider corporate-level strategy. To be effective, the umbrella company must contribute to the efficiency, profitability and competitive advantage to each business unit. The gourmet candy maker may decide to enter the dried-fruit business, for example. This corporate decision is sound only if the parent company can extend and develop a competitive advantage – say economy of scope, integrated management or procurement – over both businesses. For example, the owner may determine that her mail-order candy distribution system is perfectly suited for the dried-fruit business and that customer research indicates existing customers will purchase items from both companies. Or she may be able to negotiate volume discounts for raisins, dried cranberries and dried cherries she will use in both businesses.” Small Business Chronicle
Scenario: You have been appointed as a consultant to a small business which is interested in developing a strategic management process for their particular business. This small business would like to discover how larger companies in their industry have successfully developed corporate-level and business-level strategies, so that they can learn from this success.
You are required to develop a report for your chosen small business, which can be entirely fictional, and can operate in any industry of your choosing.
Based on a multi-national company you have researched and will illustrate as an example of best practice:
1. Assess their corporate-level strategy. How have they diversified in recent years? Why have they implemented a diversification strategy and what capabilities and core competencies have enabled them to turn this strategy into a successful reality.
2. Look at one of their products or services. What business-level strategies have they followed in relation to this one product or service? Critically analyse and evaluate how effective this business-level strategy has been for the
3. In relation to the small business you are consulting to, briefly outline what you
consider to be the key stages involved in a strategic management process.
4. Explain to your chosen small business how the strategic management process can present considerable challenges; and outline, through relevant examples, how your small business can best militate against the potential for human error
in the management process.
When a business identifies opportunities outside its original industry, it might contemplate diversification. When additional businesses become part of the company, the small business owner must consider corporate-level strategy. To be effective, the umbrella company must contribute to the efficiency, profitability and competitive advantage to each business unit.