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Strategic Directions and Corporate-Level Strategy

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Lukas Wengel

on 7 November 2013

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Transcript of Strategic Directions and Corporate-Level Strategy

Strategy directions
Value creation and the corporate parent
Growth and Corporate Strategy
Portfolio Matrices
Market Penetration
Low risks
No new capabilities
No uncharted territory

Possible constraints:
Retaliation from competitors

Only focused defensively

Forms of consolidation:
Defending market share
Downsizing or divestment
Market Development
Limited extension of scope

Higher risks:
Investment in new market

New segments
New users
New geographies
Large extension of scope

Very high risks

Ansoff Matrix
Existing Markets X Existing Product
Existing Markets X Existing Product
Existing Market X New Product
New Market X Current Product
New Product X New Market
Related Diversification
beyond current products / markets, but within organization's capabilities or value network

vertical integration
backward integration
development into company's inputs
forward integration
development into company's outputs

horizontal integration
activities which are complementary

focus on their own business
Reasons for Diversification
Efficiency gains

Economics of scope
Synergy = 2 + 2 = 5

Stretching corporate parenting capabilities

Transfer of corporate parenting capabilities into new businesses

Increasing market power

Transport surpluses earned by a business unit into another business unit
Unrelated Diversification
beyond the current capabilities and value network = conglomerate strategy

exploiting dominant logics
countries with underdeveloped markets can be fertile for conglomerates

conglomerate discount
general: some diversification is useful

on average: related diversification pays better than unrelated
Limited extension of scope

Higher risks:
Investment in new technology

Product Development
Value-adding Activities

Coaching and Facilitating

Providing Central Services and Resources

The Parental Developer
Faces Two Main Challenges

Parental Focus
The 'Crown Jewel' Problem
Value-destroying Activities
Adding Management Costs

Adding Bureaucratic Costs

Obscuring Financial Performance
The Portfolio Manager
The Synergy Manager
Contains Three Main Issues

Excessive Costs
Overcoming Self Interest
Illusory Synergies
Directional Policy
Parenting Matrix
Is the portfolio well balanced?
JW&S Chapter 7
Do the SBU's fit to each other and the parent?
Full transcript