Question

Company to be used for this exercise is 3M.

• The 3M Company is an American multinational conglomerate corporation operating in the fields of industry, worker safety, US health care, and consumer goods

1.    Corporate Level Strategy (Chapters 9 & 10)

1.1.    What is the organization’s corporate-level strategy? Related vs. Unrelated

1.2.    If it operates in more than one business, do the businesses share or trade resources?

1.3.    What are the connections among the different businesses?

1.4.    What has been the primary mode of diversification: acquisition, joint-venture, or internal growth?

1.5.    What is your assessment of its growth mode?

1.6.    If the organization operates in one business, could it gain value through diversification?

1.7.    If so, which businesses would you recommend and how can it create value?

What mode of diversification and growth would you recommend?

Answer 1

1. Corporate level strategies are the actions taken by the companies to gain advantages for the business activity in the competing market or industry. It also helps to create better profit and value to the shareholders.

1.1. A multinational conglomerate corporations are companies which are involved in doing multiple business operating in entirely different industries under a single corporate group. They mainly do have a single parent company and many subsidiaries. They mainly focus on diversification of their business activities. Such organisation's can have either related or unrelated corporate level strategies. In related corporate level strategy the company tries to add or expand their market or product lines. For example, a juice bar starting a bakery along with to expand and provide new products to their customer. They provide similar products or services to new customers or clients. In unrelated corporate level strategy the company expands by adding new and unrelated products and services. For instance, an furniture store starts a new shop in another city which provide courier service to new clients.  The 3M company is a multinational conglomerate corporation whose field of work are different; health care consumer goods and worker safety. Therefore, it follows a unrelated corporate level strategy.

1.2 The company can share their resources. If the company follows a related corporate level strategies for diversification they can definitely share their resources since, their products or services belong to the same product or market line. While, if the company do have a unrelated corporate level strategies for diversification it will be uneasy for sharing their resources due to the difference in their business activity. Trading of resources will be more convenient for such companies.

1.3 There the 3m company follows an unrelated corporate level strategy. The company is concentrated on three different activities like, workers safety, US health care and consumer goods. These three business is controlled by a single parent company.

1.4 Acquisition is when a company purchases another companies share and gains control over the other company. More than 50% stock and assets of the target company will be acquired.It can be either voluntary or by force.  A joint venture is an agreement made between two or more companies, where they share their resources for the purpose of accomplishing a specific objective. The venture will stay as a separate entity and preform its task as per the agreement. It features for a short duration, since it is formed to obtain a specific objective. The profit and losses are shared in the agreed ratio. Internal growth is where the company expands by using its own resources. The growth generated are reinvested in the business to gain more profit. Internal growth can be considered as the safest mode of growth with less risk, since the resources belongs to the company itself. Lower the risk lower the return and it takes time for such companies to attain more profit. Similarly diversification will be difficult for such companies. Joint venture can be considered as the best method since, here the partners involved in business come to an agreement to share their resources to attain a certain objective. Profit and losses are shared as per the agreement which is already made. In Acquisition, the purchasing firm gets more benefit than the other firm which get acquired. Therefore,joint venture can be considered as the primary mode of diversification.

1.5 The growth of the company depends on its organisational strategies. Here, the company is diversified into unrelated business they could not share their resources much and therefore, more investments should be done on different companies, and their growth mode varies and it will depend upon various internal and external environment.

1.6 Yes, the company can diversify by concentrating in one business. Either it can adopt a related corporate level strategies, where it can introduce new products or services belonging to the same product or market line. They can also enter into joint venture, acquisition or merger (voluntary fusion of companies into a single large company).

1.7 I recommend the consumer goods industry. Because, the industry provides a wider marketing strategy for the company and thus it can be easy for the company to diversify by focusing on products belonging to the same product or market line. Internal growth can be achieved faster by maintaining good quality and standard.The other two business options provided belong more to the service sector. Gaining goodwill is faster in product sector rather than service sector. Because, in service sector higher the direct interaction between the company and client when compared to the products sector. By achieving enough profit through internal growth they can then enter into joint venture, mergers and acquisition. Joint venture is considered as one of the best method to enter into a new market.