Corporate-Level Strategy Options
Corporate-level strategy answers the question “What businesses should we be in?” — distinct from business-level (competitive) strategy (“How do we win in this market?”) and functional strategy (“How does each department contribute?”). See StrategicManagement for the three-level hierarchy.
This page consolidates the five families of corporate-level strategy options that appear in Ch6 LO6.4. Each option is exam-targetable on its own.
graph TD CS["Corporate-Level Strategy<br/>What businesses to be in?"] CS --> C["Concentration<br/>One product line"] CS --> G["Growth Strategies"] CS --> I["Integration Strategies"] CS --> D["Diversification"] CS --> R["Investment Reduction"] G --> G1["Market Penetration<br/>More aggressive selling<br/>of present products"] G --> G2["Geographic Expansion<br/>Same products,<br/>new geography"] G --> G3["Product Development<br/>Improved/new products<br/>for current markets"] I --> I1["Horizontal Integration<br/>Acquire competitors"] I --> I2["Vertical Integration<br/>Own inputs or<br/>distribution channels"] D --> D1["Related Diversification<br/>New but related products"] D --> D2["Conglomerate Diversification<br/>Unrelated products"] R --> R1["Retrenchment<br/>Reduce activity"] R --> R2["Divestment<br/>Sell off business"]
How It Appears Per Course
ADMN 201
LO6.4 introduces the three levels of strategy (corporate / business / functional) and presents the corporate level as the most consequential. The five options below are the exam-testable taxonomy of what a firm can choose to do with its portfolio.
1. Concentration Strategy
Concentration = focus the entire company on one product or product line that it knows extremely well.
- Logic: deep expertise + scale efficiency in a niche
- Risk: if the market for that product declines, the company has no fallback
- Examples: McDonald’s (hamburgers), Canadian National Railway
Exam trigger: A firm “stays in its lane” or “doubles down on its core business” — that’s concentration.
2. Growth Strategies
A firm can grow in three ways:
| Strategy | What it is | Example |
|---|---|---|
| Market Penetration | Sell more of present products to existing markets through aggressive selling/promotion | A coffee chain doing more aggressive advertising in cities where it already operates |
| Geographic Expansion | Take existing products into new geographic areas | Tim Hortons opening in China |
| Product Development | Develop improved or new products for current markets | Apple releasing the next iPhone generation |
Exam trap: All three are growth strategies. Don’t confuse Geographic Expansion (same product, new place) with Product Development (new product, same place).
3. Integration Strategies
The firm grows by acquiring control of other parts of its industry.
Horizontal Integration
Acquiring control of competitors in the same or similar markets with same or similar products.
- Goal: build scale, eliminate competition, reduce costs
- Risk: regulatory scrutiny if the acquisition reduces market competition too much
- Example: Hudson’s Bay acquired Home Outfitters
Vertical Integration
Owning or controlling the inputs or the distribution channels of the firm.
- Goal: secure supply, capture margins along the chain, control distribution
- Risk: capital intensive, reduces flexibility
- Example: Oil companies owning refineries (input control) and filling stations (distribution control)
Exam trigger: Horizontal = sideways (buy a rival). Vertical = up/down the supply chain (buy a supplier or a distributor).
4. Diversification
Spread risk across multiple products or markets.
| Type | What it is | Logic |
|---|---|---|
| Related Diversification | Add new products related to the existing business | Synergies — shared resources, customers, or expertise |
| Conglomerate Diversification | Add unrelated products in unrelated markets | Pure risk-spreading; no operational synergy |
- Risk: conglomerates often trade at a discount — markets generally prefer focused companies
- Example (related): Nike adding athletic apparel to its athletic-shoe business
- Example (conglomerate): Berkshire Hathaway holding insurance, railroads, candy, and utilities
Exam trap: Don’t confuse diversification (corporate strategy — what businesses the firm operates in) with portfolio diversification (investor diversification — what securities are in your portfolio). Same word, different scale.
5. Investment Reduction
Sometimes the right move is to contract — reducing investment in one or more lines of business.
| Form | What it is |
|---|---|
| Retrenchment | Reduce activity within the business (cut budgets, close some facilities, reduce staff) |
| Divestment | Sell off the business entirely |
- Example: Target exited Canada in 2015 after a failed expansion — full divestment
- Example: A struggling division shrinking from 10 product lines to 3 — retrenchment
Exam trap: Retrenchment ≠ divestment. Retrenchment shrinks; divestment sells.
How Corporate Strategy Connects to the Other Levels
graph TD CL["Corporate-Level<br/>What businesses?"] --> BL["Business-Level<br/>How to win?"] BL --> FL["Functional-Level<br/>How does each<br/>department support?"] CL -->|"Choose: Concentration, Growth,<br/>Integration, Diversification,<br/>or Investment Reduction"| BL BL -->|"Choose: Cost Leadership,<br/>Differentiation, or Focus<br/>(Porter's generic strategies)"| FL
For business-level (competitive) strategies, see CompetitiveStrategies.
Cross-Course Connections
StrategicManagement — the three-level strategy hierarchy and SMART/SWOT toolkit CompetitiveStrategies — the next layer down: Cost Leadership, Differentiation, Focus CorporateRestructuring — divestment and retrenchment in execution InternationalEntryMethods — geographic expansion overlaps with international entry choices Entrepreneurship — small firms typically start with concentration before diversifying
Key Points for Exam/Study
- 5 corporate-level options: Concentration · Growth · Integration · Diversification · Investment Reduction
- Concentration = one product line; deep but vulnerable
- Growth has 3 sub-types: Market Penetration (more selling), Geographic Expansion (new place), Product Development (new product)
- Horizontal Integration = buy competitors; Vertical Integration = buy suppliers or distributors
- Related Diversification = synergies; Conglomerate Diversification = pure risk-spreading
- Retrenchment = shrink; Divestment = sell off
- Target’s 2015 Canadian exit = canonical divestment example
- Hudson’s Bay buying Home Outfitters = horizontal integration example
Open Questions
- At what point does a successful concentration firm need to start diversifying?
- Why do conglomerate stocks trade at a discount — and is this always justified?