STRATEGY CHOICE

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 STRATEGIC CHOICES

STRATEGIC CHOICES

BUSINESS OR DIRECTIONS AND

CORPORATE
COMPETITIVE METHODS OF
STRATEGY
STRATEGY DEVELOPMENT

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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

What is the strategic role of the corporate centre?

(How does it seek to add value to the business?)

What is the logic What is the nature

of the portfolio? and extent of diversification

Is the corporate control

style appropriate

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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

• Enhanced potential for exploitation of • The centre

slack synergies, transferences and • Adds cost
learning between businesses • Creates ‘bureaucratic fog’
• Delays decisions and market
responsiveness
• Buffers businesses from
investment realities
• Provides a focus for managerial
ambition
• Intervention in managerial • Managerial ambition and empire
appointments and development building is a better explanation of
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 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

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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’

Strategic Requirements • Identifying restructuring opportunities

• Intervention in SBU to transform
performance
• Sale of SBU when restructuring
complete or unfeasible or market
conditions favourable
Organisatonal Requirements • Autonomous SBUs
• Small specialist Centre
• Turnaround skills of corporate staff
• Incentive based on acquired SBU
results

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 Synergy Managers
Logic
Strategic Requirements
Organisatonal Requirements
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• 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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 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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