STRATEGY CHOICE

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Class of 2009 Business Strategy 1

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STRATEGIC CHOICES
STRATEGIC CHOICES

CORPORATE STRATEGY

BUSINESS OR COMPETITIVE STRATEGY

DIRECTIONS AND METHODS OF DEVELOPMENT

11/24/09

Class of 2009 Business Strategy 1

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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

11/24/09

Class of 2009 Business Strategy 1

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FOUR KEY QUESTIONS OF CORPORATE STRATEGY

What is the strategic role of the corporate centre? (How does it seek to add value to the business?)

What is the logic of the portfolio?

What is the nature and extent of diversification

Is the corporate control style appropriate

11/24/09

Class of 2009 Business Strategy 1

5

VALUE CREATING

CORPORATE PARENT: VALUE ADDING OR VALUE DESTROYING?
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 • Enhanced potential for exploitation of • The centre slack synergies, transferences and • Adds cost • Creates ‘bureaucratic fog’ learning between businesses • Delays decisions and market responsiveness • Buffers businesses from investment realities • Provides a focus for managerial ambition • Intervention in managerial appointments and development
11/24/09

Class of 2009 Business Strategy 1

Managerial ambition and empire building is a better explanation of corporate growth and development 6

Potential added value roles of the corporate parent
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

11/24/09

Class of 2009 Business Strategy 1

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Portfolio Managers
Logic Strategic Requirements • ‘Agent’ for financial markets • Identifying and acquiring under valued assets • Divesting low performing SBUs quickly and good performers at a premium • Autonomous SBUs • Small, low-cost corporate staff • Incentive based on SBU results
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Organisatonal Requirements

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Restructures
Logic • Value Creation at SBU level; limited role to create SBU ‘fitness’ Identifying restructuring opportunities Intervention in SBU to transform performance Sale of SBU when restructuring complete or unfeasible or market conditions favourable Autonomous SBUs Small specialist Centre Turnaround skills of corporate staff Incentive based on acquired SBU results Strategic Requirements • • •

Organisatonal Requirements • • • •

11/24/09

Class of 2009 Business Strategy 1

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Synergy Managers
Logic Strategic Requirements • • The achievement of synergistic benefits 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 Collaborative SBUs Corporate staff as integrators Overcoming SBU resistance to sharing or transferring Incentive affected by corporate results
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• • Organisatonal Requirements • • • •

11/24/09

Class of 2009 Business Strategy 1

Parental Developers
Logic Strategic Requirements • • • • Organisatonal Requirements • • • • Central competencies can be used to create value in SBUs 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 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

11/24/09

Class of 2009 Business Strategy 1

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