Corporate Level Strategy. Value adding activities Establishing a clear strategic intent Focus Clarity to external stakeholders Clarity to BUs

Corporate Level Strategy

Value adding activities

Establishing a clear strategic intent

• Focus

• Clarity to external stakeholders

• Clarity to BUs


Intervening within Business Units

• Regular monitoring of performance

• Action taken to improve business unit

• Challenge and develop the strategic ambitions of the BU.

• Coaching and training

• Synergies


Central Services and resources

• Investment

• Transferable managerial capabilities

• Providing expertise and services

• Knowledge creation and sharing

Value Destroying Activities

• Bureaucratic fog

• Financial safety net

Portfolio Managers

• Agent for financial markets

• Identifying and acquiring undervalued assets

• Divesting low performing SBUs quickly and good performers at a premium

• Small, low cost corporate staff

Synergy Managers

• Sharing activities/ resources to enhance competitive advantage of SBUs

• Identification of appropriate bases and benefits which outweigh costs

• Collaborative SBUs

• Corporate staff as Integrators

Parental Developers

• Central competences can be used to create value in SBUs

• SBUs not fulfilling their potential

• Portfolio is suited to parent’s expertise

• Effective structural & control linkage from parents to SBUs

• Incentives based on SBU performance

Managing the corporate Portfolio

• Balance of the portfolio eg in relation to its markets and the needs of the corporation

• The attractiveness of the Bus

• Degree of ‘ fit’ each BU has with each other

Portfolio Managers Synergy Managers and parental developers

Portfolio Managers

Synergy Managers

Parental Developers

Logic Agent for financial markets

Achieve synergistic

benefits

Central competences used in SBUs

Logic Value creation limited


Portfolio Managers

Synergy Managers

Parental Developers

Strategic requirement

Identifying undervalued assets

Sharing activities / resources

SBU not fulfilling potential


Divesting low performers

Identification of bases

Parent can supplant SBU


Low level role

Benefits Portfolio suited


Portfolio Managers

Synergy Managers

Parental Developers

Organization requirements

Autonomous SBUs

Collaborative SBUs

Corporate managers understand SBUs-feel


Low cost staff

SBU sharing

Effective linkages


Incentives on SBU

Incentives corporate

Incentives on SBU

Value adding potential of corporate rationales

Value adding activity

Portfolio Managers

Synergy Managers

Parental Developers

Envisioning

Strategic Intent

Yes Yes

External Image

Yes Yes

Setting expectation

Yes


Value adding act

Portfolio Managers

Synergy Managers

Parental developers

Intervening

Monitoring performance

Yes

Coaching and training

Yes Yes

Challenging SBU

Yes Yes


Value adding act

Portfolio Managers

Synergy Managers

Parental developers

Central Services

Investment Yes Yes Yes

Scale advantage

Yes

Transferring

capabilities

Yes


Value adding act

Portfolio Managers

Synergy Managers

Parental developers

Expertise

Specialist expertise

Yes

Knowledge sharing

Yes

Leverage Yes

Brokering Yes

BCG Matrix

• Star – Hi Market Share , hi market growth

• Question Mark – Low Market share but hi market growth

• Cash Cow – Hi Market share but low market growth

• Dog – Lo Market share and lo market growth

Caution in the use of the BCG

• Exact meaning of ‘ Hi ‘ and ‘ Lo’

• Analysis applicable to SBUs not products

• Question marks and stars are very demanding of creative resources

• Position of dogs often misunderstood

• Behavioral implications .

Directional policy matrix

The directional policy matrix positions SBUs according to (a) how attractive the relevant markets is in which they are operating and (b) the competitive strength of the SBU in that market

Indicators of SBU Strength

• Market Share• Sales force• Marketing• R&D• Manufacturing • Managerial competence• Competitive position in terms image

breadth of product line, customer service

Indicators of market attractiveness

• Market size

• Market growth rate

• Cyclicality

• Competitive structure

• Barriers to entry

• Technology

• Environmental issues

The parenting matrix

• Corporations should seek to build portfolios that fit well in their corporate centre parenting skills that are appropriate for its portfolio.

• Extent to which corporate parent has sufficient ‘ feel’ for it’s busineses

• Fit between the parenting opportunities of BUs and the capabilities of the parent

The parenting matrix ( contd )

• Heartland business units are the ones where parent can add value without doing harm

• Ballast BUs are the ones where parent understands but can do little

• Value trap BUs are deceptive

• Alien Bus are clear misfits

Challenges

• Value or cost of the corporate parent

• Understanding value creation at BU Level

• Understanding value creation at the corporate level

• Sufficient feel

• Reviewing the portfolio

Roles in international portfolio

• Strategic Leaders – valuable resources located in countries crucial for competitive success

• Contributors – valuable resources in lesser significant countries but in a key role

• Implementers – help generate financial resources

• Black Hole- subsidiaries located in countries of crucial significance but with low level resources or capabilities

Documents

Corporate Level Strategy. Value adding activities Establishing a clear strategic intent Focus Clarity to external stakeholders Clarity to BUs