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Business Strategy 1
STRATEGIC CHOICES
STRATEGIC CHOICES
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CORPORATE LEVEL STRATEGY
• WHAT IS MEANT BY A CORPORATE PARENT IN A MULTI-BUSINESS
ORGANISATION
• THE ARGUMENTS FOR AND AGAINST THE VALUE ADDING CAPABILITIES OF
CORPORATE PARENTS
• DIFFERENT RATIONALES OF CORPORATE PARENTS, INCLUDING THE
PORTFOLIO MANAGER, THE RESTRUCTURER, THE SYNERGY MANAGER AND
THE PARENTAL DEVELOPER
• DIFFERENT BASES FOR EXPLAINING THE PORTFOLIO LOGIC OF
CORPORATIONS; FOR EXAMPLE IN TERMS OF BALANCE, BUSINESS
ATTRACTIVENESS AND ‘FIT’; AND DIFFERENT FRAMEWORKS FOR THINKING
ABOUT THESE
• THE DIFFERENCES BETWEEN RELATED AND UNRELATED
DIVERSIFICATIONS, AND THE LINKS BETWEEN DIVERSIFICATION AND
CORPORATE PERFORMANCE
• THE IMPORTANCE OF COMPATIBILITY OF THE CORPORATE PARENTING
RATIONALE THE LOGIC OF THE CORPORATE PORTFOLIO, THE NATURE AND
EXTENT OF DIVERSIFICATION AND THE NATURE OF CORPORATE CONTROL
EXERCISED BY THE PARENT
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FOUR KEY QUESTIONS OF CORPORATE STRATEGY
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CORPORATE PARENT: VALUE ADDING OR VALUE
DESTROYING?
VALUE CREATING OR DESTROYING
• Beneficial control on businesses and • Businesses would be better off on
better resource allocation through their own subject to ‘market’
• Ready access to internal mechanisms
information
• Co-operation of business
executives
• Real-time (not lagged) decision
making
• Efficiency/Leverage
• Expertise
• Investment and Competence Building
• Fostering Innovation – coaching/Learning
• Mitigating Risk
• Image/Networks
• Collaboration/Co-ordination/Brokerage
• Standards/Performance Assessment
• Intervention (e.g. acquisition, disposal, change
agency)
• Acting in a visionary capacity
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Corporate Rationale
• Portfolio manager
• Restructurer
• Synergy manager
• Parental developer
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Portfolio Managers
Logic • ‘Agent’ for financial
markets
Strategic • Identifying and acquiring
Requirements under valued assets
• Divesting low performing
SBUs quickly and good
performers at a premium
Organisatonal • Autonomous SBUs
Requirements • Small, low-cost corporate
staff
• Incentive based on SBU
results
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Restructures
Logic • Value Creation at SBU level;
limited role to create SBU ‘fitness’
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Synergy Managers
Logic • The achievement of synergistic
benefits
Strategic Requirements • Sharing activities/resources or
transferring skills/competencies to
enhance competitive advantage of
SBUs
• Identification of appropriate bases
for sharing or transferring
• Identification of benefits which
outweigh costs
Organisatonal Requirements • Collaborative SBUs
• Corporate staff as integrators
• Overcoming SBU resistance to
sharing or transferring
• Incentive affected by corporate
results
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Parental Developers
Logic • Central competencies can be
used to create value in SBUs
Strategic Requirements • SBUs not fulfilling their potential (a
parenting opportunity)
• The Centre has clear and relevant
resources or capabilities to enhance
SBU potential
• The portfolio is suited to Centre’s
expertise
Organisatonal Requirements • Centre manages understand SBUs
(‘sufficient feel’)
• Effective structural and control
linkages from Centre to SBUs
• SBUs may be autonomous unless
collaboration is required
• Incentives based on SBUI performance
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