Premises Of Corporate Strategy Competition Occurs Only at

Premises Of Corporate Strategy • Competition Occurs Only at the Business Unit Level

Premises Of Corporate Strategy • Competition Occurs Only at the Business Unit Level • Diversification Inevitably Adds Costs and Constraints to Business Units

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

Passing the Essential Tests • The Attractiveness Test

Passing the Essential Tests • The Attractiveness Test • The Cost-of-Entry Test

Passing the Essential Tests • The Attractiveness Test • The Cost-of-Entry Test • The Better-off Test

Concepts of Corporate Strategy • Portfolio Management --Acquire sound, attractive companies with competent mangers who stay --Companies are autonomous --Requires good but undervalued companies --Essentially an LBO concept with a “conglomerate discount” for public companies

Concepts of Corporate Strategy • Restructuring --Underdeveloped, sick, or threatened organizations or industries on the threshold of significant change --Parent intervenes frequently changing the management team, shifting strategy, or infusing the company with new technology --Business is sold when parent is no longer adding value

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

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

Concepts of Corporate Strategy • • Portfolio Management Restructuring Transferring Skills Sharing Activities

An Action Program 1. Identify Interrelationships Among Units

An Action Program 1. Identify Interrelationships Among Units 2. Select Core Business

An Action Program 1. Identify Interrelationships Among Units 2. Select Core Business 3. Facilitate Interrelationships

An Action Program 1. 2. 3. 4. Identify Interrelationships Among Units Select Core Business Facilitate Interrelationships Diversify Via Shared Activities

An Action Program 1. 2. 3. 4. 5. Identify Interrelationships Among Units Select Core Business Facilitate Interrelationships Diversify Via Shared Activities Diversify Via Transfer of Skills

An Action Program 1. 2. 3. 4. 5. 6. Identify Interrelationships Among Units Select Core Business Facilitate Interrelationships Diversify Via Shared Activities Diversify Via Transfer of Skills Diversify Via Restructuring

An Action Program 1. 2. 3. 4. 5. 6. 7. Identify Interrelationships Among Units Select Core Business Facilitate Interrelationships Diversify Via Shared Activities Diversify Via Transfer of Skills Diversify Via Restructuring Pay Dividends Instead