7/27/2019 Premises Corporate Strategy

1/18

Premises Of Corporate Strategy

Competition Occurs Only at the Business

Unit Level

7/27/2019 Premises Corporate Strategy

2/18

Premises Of Corporate Strategy

Competition Occurs Only at the Business

Unit Level

Diversification Inevitably Adds Costs and

Constraints to Business Units

7/27/2019 Premises Corporate Strategy

3/18

Premises Of Corporate Strategy

Competition Occurs Only at the Business

Unit Level

Diversification Inevitably Adds Costs and

Constraints to Business Units

Shareholders Can Readily Diversify

Themselves

7/27/2019 Premises Corporate Strategy

4/18

7/27/2019 Premises Corporate Strategy

5/18

Passing the Essential Tests

The Attractiveness Test

The Cost-of-Entry Test

7/27/2019 Premises Corporate Strategy

6/18

Passing the Essential Tests

The Attractiveness Test

The Cost-of-Entry Test

The Better-off Test

7/27/2019 Premises Corporate Strategy

7/18

Concepts of Corporate Strategy

Portfolio Management

--Acquire sound, attractive companies

with competent mangers who stay--Companies are autonomous

--Requires good but undervaluedcompanies

--Essentially an LBO concept with aconglomerate discount for publiccompanies

7/27/2019 Premises Corporate Strategy

8/18

Concepts of Corporate Strategy

Restructuring

--Underdeveloped, sick, or threatened

organizations or industries on thethreshold of significant change

--Parent intervenes frequently changingthe management team, shifting strategy, or

infusing the company with new technology--Business is sold when parent is no longer

adding value

7/27/2019 Premises Corporate Strategy

9/18

Concepts of Corporate Strategy

Transferring skills

--Knowledge about how to perform

activities is transferred among the units--Characterized by units with similar

buyers, channels, value activities

and/or the same strategic concept

--Expertise must be a meaningful source of

competitive advantage

7/27/2019 Premises Corporate Strategy

10/18

Concepts of Corporate Strategy

Sharing activities

--Leads to lowering costs or raising

differentiation--Must involve activities that are

significant to competitive advantage

and costs outweighed by benefits--Business unit collaboration is

encouraged and reinforced

7/27/2019 Premises Corporate Strategy

11/18

Concepts of Corporate Strategy

Portfolio Management

Restructuring

Transferring Skills

Sharing Activities

7/27/2019 Premises Corporate Strategy

12/18

An Action Program

1. Identify Interrelationships Among Units

7/27/2019 Premises Corporate Strategy

13/18

An Action Program

1. Identify Interrelationships Among Units

2. Select Core Business

7/27/2019 Premises Corporate Strategy

14/18

7/27/2019 Premises Corporate Strategy

15/18

An Action Program

1. Identify Interrelationships Among Units

2. Select Core Business

3. Facilitate Interrelationships

4. Diversify Via Shared Activities

7/27/2019 Premises Corporate Strategy

16/18

An Action Program

1. Identify Interrelationships Among Units

2. Select Core Business

3. Facilitate Interrelationships

4. Diversify Via Shared Activities

5. Diversify Via Transfer of Skills

7/27/2019 Premises Corporate Strategy

17/18

An Action Program

1. Identify Interrelationships Among Units

2. Select Core Business

3. Facilitate Interrelationships

4. Diversify Via Shared Activities

5. Diversify Via Transfer of Skills6. Diversify Via Restructuring

7/27/2019 Premises Corporate Strategy

18/18