Professional Documents
Culture Documents
Managing
linkages —Sharing and transferring resources and
between capabilities
businesses
TATA GROUP
Tata- Corporate Strategy
Questions are :
whether it should enter any more industries?
Whether it should exit some ?
How far it should integrate the businesses it retains
Strategic directions and
corporate-level strategy
Scope
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Corporate Parenting
Corporate parents need to demonstrate that they create more value than they
cost.
Also create more value than any other rival corporate parent can create.
Rivals can bid for the company’s shares, on the expectation of either running the
businesses better or selling assets.
Corporate parents must show that they have parenting advantage like business
units must demonstrate competitive advantage.
The Parenting Strategy Approach
According to BCG, corporate parents add value through five types of levers:
1. Corporate functions and resources
2. Strategy development
3. Financing advantages
4. Business synergies
5. Operational engagement
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Value-adding activities
Facilitating
Envisioning Coaching
synergies
Providing
central services Intervening
and resources
Value-adding activities
Adding Adding
management bureaucratic
costs complexity
Obscuring
financial
performance
Value-destroying activities
Source: Adapted from M. Goold, A. Campbell and M. Alexander, Corporate Level Strategy, Wiley, 1994.
Corporate Parenting Roles.
Visualizing the different needs and potential of all the diverse businesses
within the corporate portfolio.
Highlights the financial demands of what - a desirable portfolio of high-growth
businesses.
Reminds corporate parents that stars are likely eventually become dim.
Underlining fact- corporate parent ultimately owns the surplus resources they
generate and can allocate them for overall corporate needs.
Cash cows should not hoard their profits.
Reallocate business unit managers who are not fully utilised by low-growth cash
cows or dogs.
Problems with the BCG matrix:
1. Heartland – the parent understands these well and can add value.
The core of future strategy.
2. Ballast– the parent understands these well but can do little for
them. They could be just as successful as independent companies. If
not divested need to avoid corporate bureaucracy.
3. Value trap business units are dangerous. There are attractive
opportunities to add value but the parent’s lack of feel will result in
more harm than good.
4. Alien business units are misfits. They offer little or no opportunity to
add value and the parent does not understand them. Exit is the best
strategy.
Limitations of Portfolio Approaches
1. Does not show how value is being created across business units- only
cash relationship.
2. Accurate measurement for matrix calculation not easy-assumptions
made
3. Flow of resources converted to Strategic options
4. Companies assumed to be self sufficient in capital.
5. Corporate capabilities and skills not captured