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Business Strategy Corporate-Level Strategy 7
Business Strategy Corporate-Level Strategy 7
John Birchall
Adapted from Harrison (2003: 37) and De Wit & Meyer (2005: 5)
Business Definition
What is our business?
Answer must be clear and firm yet open to change (Harrison 2003: 124)
As it grows, should a business Concentrate: Expand market share for existing product, selling to existing customer segment, possibly buying up competitors? Integrate vertically: buying up suppliers and/or distributors? Expand: Seek new markets for existing products and services, maybe overseas? Diversify horizontally:
Develop related products and services, using existing skills and relationships? Develop new unrelated product lines, possibly selling to new customers?
Boston Consulting Group (BCG) Matrix General Electric (GE) Business Screen Assume that each business unit already has a clear product/market position Helpful for decisions on whether to:
include a business unit in a corporate portfolio invest or take cash from it
20%
Stars
Question marks
10% (NB: Johnson, Scholes & Whittington (2005) pp. 315-7 use MARKET growth rate 0% here)
Cash Cows
Dogs
High
Exceptional success: most 1980s conglomerates spent the 1990s restructuring (Harrison 2003: 237-249)
With synergy, the whole is more than the sum of the parts Examples: Philip Greens Arcadia, Conrad Blacks Hollinger International Business units linked within the corporation are more profitable than they would be if they were outside it, standing alone Resources and costs may be shared Core competences may be leveraged or stretched: skills, knowledge and understanding are transferred via the centre to all the business units Can develop an outside in dimension through increased bargaining power: merged businesses stop being rivals and join forces
Corporate-Level Strategy
Should add value to business units All too often, destroys value instead
Survey by Michael Porter of 33 large US firms over 37 years (Harrison 2003: 234-235)
Shareholders ask: why not build our own portfolios, buying shares in numerous stand-alone businesses? Corporate executives answer this question by developing core competencies which can stretch across business-unit boundaries:
Top management skills Research and development Marketing, finance, public relations and labour relations