StrategicManagement:TheCaseofSOEElectric

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Corporate Strategy

The principal concern of corporate strategy is identifying the business areas in which

a company should participate in order to maximize its long-run profitability. Moreover a

company’s corporate strategy should help in the process of establishing a distinctive

competency and competitive advantage at the business level. There are three kinds of

corporate strategy and they are vertical integration, diversification and strategic alliances.

From the point of vertical integration, SEM used only the forward integration because

SEM directly buy the raw materials, components and accessories which are utilized in the

manufacturing distribution and power transformers from Germany, Switzerland, Italy, Japan

and Korea. For the forward integration, SEM do the distribution and marketing by

themselves by opening the showrooms at Yangon, Mandalay and Nay Pyi Taw and setting

the marketing team as a form of taper integration.

For creating value through vertical integration, SEM use building barriers to entry,

protecting product quality and improved scheduling. Because of the forward integration,

they can establish the effective and efficient distribution and marketing system. Therefore

SEM gain control over distribution and marketing and that can build barriers to new entry

into its industry. Moreover SEM can provide the required standards of after-sale service for

complex products are to be maintained. Then they can respond better to sudden changes

in demand or to get its products into the marketplace faster.

Moreover because of the integration, they got the cost advantages over raw

materials, distribution and marketing and they can prevent the cause of technological

changes. SEM do marketing and distribution and therefore they can easily the demand

status and prevent the uncertainty. Moreover SEM make the long-term cooperative

relationships with Khin Maung Nyunt Co., Ltd in the manufacturing the package type

transformer. In this relationship, for the product SEM provide the required transformer and

KMN will provide the other products such as the breaker or the capacitor bank.

There are two types of diversification: related diversification and unrelated

diversification. SEM makes an investment in Hotel industry and then they will build the hotel

at Nay Pyi Taw Hotel Zone 2 as a unrelated diversification. SEM get a chance to use their

superior internal governance at the hotel industry and they also get more economies of

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StrategicManagement:TheCaseofSOEElectric

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scope. And then by using economies of scope, they can outweigh the coordination costs.

And it can create values in high asset utilization and lower operating costs.

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