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CH 9 Interrelationships among business units.

Objectives:
Growing importance of horizontal strategy Interrelationships among business units Tangible, intangible & competitor interrelationships.

Horizontal strategy:
Horizontal strategy is a concept of group, sector & corporate strategy based on competitive advantage Wider term as compared to financial strategies 2 main types:
Existing business units Diversification strategy to enter into new business.

Importance of horizontal strategy:


Diversification philosophy is changing Emphasis is shifting from growth to performance The strength of potential interrelationships within the group. Portfolio & resource management.

Interrelationships among business units:


Tangible interrelationships Intangible interrelationships Technological changes Multipoint competition

Sharing & cost:


Material impact Greater complexity Learning sensitivity Pattern of capacity utilization Competitors interrelationships.

Sharing & competitive advantage:


Increases uniqueness: e.g.: IBM & Intel Automation: manual to online. E.g.: banking Sharing order processes of related product lines.

Sharing & differentiation:


Leads to product development Enhances compatibility Lowers the cost of uniqueness Affects product designing

Costs of sharing:
Costs of coordination: e.g.: scheduling, setting priorities Cost of compromise: e.g.: consistent performance for optimum utilization Cost of inflexibility:
Potential difficulty Exit barriers

Difficulty of matching:
Duplication of interrelationships Adopting & other means of matching: realize & search for other ways of improving position.

Identifying tangible interrelationships


Market interrelationships Production interrelationships Procurement interrelationships Technological interrelationships Infrastructure interrelationships

Intangible interrelationships:
Same generic strategy Same type of buyer Similar configuration of value chain Similar important value activities.

Competitors interrelationships:
Functional differences Potential multipoint competitor Single point competitors with different patterns of interrelationships

Multipoint competitors in unrelated industries:


Forecast possible retaliation in all jointly contested industries Beware of smaller positions Opportunities to exploit Establish blocking positions for defensive purposes.

Competitors with different patterns of interrelationships:


Both an opportunity & a threat Ability of firm to achieve interrelationships Different forms of interrelationships

Forecasting potential competitors:


Identifying all possible interrelationships Logical analysis & identification of related industries Suggestion of possible interrelationships