corporate-level and international strategy. introduction corporate level issues
TRANSCRIPT
Corporate parent
The corporate parent refers to the levels of management above that of the business units and therefore without direct interaction with buyers and competitors
PRODUCT/MARKET DIVERSITY
Diversification is a strategy that takes the organisation into both new markets and products or services
Reasons for diversification Efficiency gains from resources
(by-products) Gains from corporate managerial
capabilities Increase market power Response to environmental change Risk diversification Powerful stockholder's pressure
Related diversificationRelated diversification can be
defined as strategy development beyond current products and markets, but within the capabilities or value network of the organisation
Related diversification is often seen as superior to unrelated diversification
Time and cost saving
The difficulty for business-unit managers in sharing resources with other business units
Unrelated diversificationUnrelated diversification is the
development of products or services beyond the current capabilities or value network.
Unrelated diversification is described as a ‘conglomerate strategy’
Exploiting dominant logic (focusing major business)
Effective in underdeveloped markets
International diversity and international strategy
Reasons for international diversity Globalization of markets Following customers while internationalizing Bypass home market limitations Exploit differences between countries and
geographical regions * Difference in culture * Administrative difference * Geographical specific differences * Specific economic factor (labor) Economic benefits * Reap economies of scale * Stabilization of earning across markets
To broaden the size of the market to exploit strategic capabilities
Internationalization of value adding activities
To enhance their knowledge base
Market selection and entry
Macro economic condition Political environment Infrastructure Transport and communication Availability of local resources Tariff and non-tariff barrier Similarity of cultural norms Extent of political and legal risks
Entry modes Exporting, contractual arrangements, joint
ventures, foreign direct investment
International value framework
Global sourcing: Purchasing services and components from the most appropriate suppliers around the world regardless of their location
Locational advantagesCost advantage Existence of unique capabilities
as competitive advantage
International strategies Global-local dilemma
(standardization) Concentration of assets and capabilities
in limitedlocation (mostly home)Generic strategies Multi-domestic strategyValue adding in individual national
market to unique local requirements Global strategy Standardized products
Value Creation and The Corporate Parent Value-adding and value-
destroying activities of corporate parents
The value-adding activitiesFocusClarity to external stakeholders:Clarity to business units:Providing expertise and servicesKnowledge creation and sharing
processes
Value-destroying activitiesCorporate parents can add cost with
systems and hierarchies that delay decisions, create a ‘bureaucratic fog’ and hinder market responsiveness.
Executives are not truly answerable for the performance of their businesses.
Diversity and size of some corporations make it very difficult to see what they are about.
VALUE CREATION AND THE CORPORATE PARENTThe value-adding activities1. EnvisioningFocus:Clarity to external stakeholders:Clarity to business units:2. Intervening monitoring the performance improve business-unit level
performance coaching and training
Value-destroying activitiesBureaucratic fog’ hinder market
responsivenessExecutives are not truly
answerable for the performance of their businesses.
Diversity and size of some corporations make it very difficult to see what they are about
MANAGING THE CORPORATE PORTFOLIOThe growth share (or BCG) matrixA star is a business unit which has a
high market share in a growing marketA question mark (or problem child) is
a business unit in a growing market, but without a high market share
A cash cow is a business unit with a high market share in a mature market
Dogs are business units with a low share in static or declining markets