Corporate Strategies and Product Life Cycle

A set of flashcards covering corporate strategies, product life cycle stages, and diversification types and strategies.

What are the three main generic strategies by Michael Porter?

1. Differentiation: Be unique in product or service quality. 2. Cost leadership: Be the lowest-cost producer. 3. Focus: Serve one special group or region.

What are the four stages of the product life cycle?

Introduction, Growth, Maturity, and Decline.

What is the main focus in the Introduction stage of the product life cycle?

Meeting high demand and getting products to market quickly.

What happens in the Growth stage of the product life cycle?

More competitors appear; companies protect their advantage.

What happens in the Maturity stage of the product life cycle?

Demand growth slows, so firms focus on differentiation and finding new products.

What happens in the Decline stage of the product life cycle?

Demand and sales drop; only efficient firms survive by lowering costs.

What is corporate-level strategy?

Deciding what industries and markets to enter and how to manage them together.

What is diversification in business strategy?

Operating in more than one business to spread risk and improve performance.

What are the three types of diversification?

1. Single-product strategy 2. Related diversification 3. Unrelated diversification

What is a single-product strategy?

The firm makes and sells only one product in one market.

What is the main strength of a single-product strategy?

Focus — the firm becomes very skilled at that one product.

What is the main weakness of a single-product strategy?

High risk — if the product fails, the whole business suffers.

What is related diversification?

The company operates in several businesses that are connected in some way.

What are the advantages of related diversification?

Lower risk, shared strengths, cost savings, and synergy between businesses.

What is unrelated diversification?

Operating businesses that are not linked at all.

What are the advantages of unrelated diversification?

Stable performance, use of resources where returns are best.

What are the disadvantages of unrelated diversification?

Managers may not understand each business well and can’t create synergy.

What are portfolio management techniques?

Tools used by diversified firms to decide which businesses to keep or grow.

Name two portfolio management tools.

The BCG Matrix and the GE Business Screen.

What are the four categories in the BCG Matrix?

1. Stars: High growth, high market share. 2. Cash cows: Low growth, high share. 3. Question marks: High growth, low share. 4. Dogs: Low growth, low share.

What are the two dimensions in the GE Business Screen?

Industry attractiveness and competitive position.

What does the GE Business Screen suggest?

Invest more in businesses with attractive industries and strong positions.