Corporate Strategy
Introduction
Lecture 1:
Read: SCL, Chapter 1, 2, 11
- Mission:- The ‘raison d’être’ of the enterprise
- Vision: How do we see ourselves in the future
- Strategic objectives: Top priorities based on the mission statement: What
do we want to achieve in the long term
- Strategic Plan:The map that describes the route to the strategic objectives:
How do we achieve our long- term strategic objectives?
- Critical success Factors: -The “ultimate do-wells” of business success (realisation of
strategic objectives).In what do we have to excel compared to our competitors to achieve our
strategic object
Difference between business strategy and corporate strategy:
Business strategy’s goal is to create a competitive advantage in each business. For
example low costs, differentiation etc.
Corporate level strategy deals with how to create value for the corporation as a whole.
More about the portfolio.
Corporate strategy = The way a company creates value through the configuration and
coordination of its multimarket activities.
Keywords are value creation (as a final goal), configuration and coordination.
advantages and disadvantages of a single business firm – a Classical Work
Advantages
•The entire company focuses on the same objectives
•Greater control of business activities
•Greater agility in responding to industry changes
•Optimization of company resources
Disadvantages
•Putting all the eggs in one basket
•If industry stagnates, growth rate hard to sustain, margins and profits decline
•High risk when change in customer needs, emergence of technological innovation
•Risk of appearance of a substitute
,There exist 3 types of logic:
- business logic: attractiveness of the market and competitive advantage
- Added value logic/ Parenting logic: Adding value to the business via HQ
- Capital markets logic: State of the capital markets/ NPV as goal.
Tracey and Wiersema: Competitive advantage
Chapter 1. Strategy for the corporate level: summary of the main messages
Corporate level strategy; Business and management level strategy; The 3 logics.
Two important questions that can only be addressed at the corporate level:
What business or market should a company invest in?
o Diversifying into adjacent activities.
o Selling businesses.
o Entering new geographies or markets.
o How much money to commit to each area of business?
How should the group of businesses be managed?
o Structure into divisions, units or subsidiaries?
o How to guide each division?
o How to manage the links and synergies between divisions?
o What activities to centralise/decentralise?
o How to select and guide the managers?
Corporate level strategy:
1. Business/portfolio strategy
2. Management/parenting strategy
1. Portfolio (or business) strategy
Business logic
o Uses the Business attractiveness matrix
o Market attractive? Competitive advantage? → 5 forces model can be useful
Added value logic
o Use the Heartland matrix
, o Able to improve? Create synergy with other subsidiaries?
o OR may it be misjudged & damaged
Capital markets logic
o Uses the Fair Value Matrix
o Market value > NPV → Buy & Don’t sell
o Market value < NPV → Sell & Don’t buy
2. Management (or parenting) strategy → AFTER the portfolio decisions
“Having a management strategy that adds a significant amount of value is a central aim of any company
ambitious to own multiple business units.” & “Companies should aim to have a parenting advantage”.
Management of the resulting portfolios
o How to structure into business divisions?
o What functions/decisions to centralise (corporate level)?
o Who to appoint to the top jobs?
o What guidance to give these managers (strategic targets & controls)?
Corporate added value (e.g.)
o Appoint marketing people to look after brand
o Experts in lean manufacturing
o Managers with years of headquarter experience
o Etc.
Chapter 2. Some history: From Boston box to three logics that drive corporate action
The 4 schools throughout history
There are 4 schools of thought created throughout the years
Professional management school
Portfolio planning school
Synergy school
Capital markets school
1. According to the professional management school, corporate level strategy is
about (Around 1950):
1. Ensuring that the top team has the latest management techniques which can
help expand into attractive sectors
b. According to the portfolio planning school, corporate level strategy is about
(Around 1980’s):
1. Buying and selling businesses to maintain an optimal and attractive mix.
3. According to the synergy school, corporate level strategy is about:
, (Around 1990’s)
1. Identifying businesses where there are opportunities for synergy
2. Developing skills at making the linkage between the business work to get: e.g.
Economies of scale (EOS) or Economies of scope (EOSC)
4. According to the capital market school, corporate level strategy is about:
(mid 1980)
1. Buying and selling businesses or stakes in businesses at the right time. (Buy
low; Sell high)
Professional management school is about development of corporate actions through:
I. Management techniques
II. Strategic planning
Portfolio management school uses tools to determine the attractiveness of a company in
order to make a strategic decision on e.g. resource allocation.
I. Tools to be successful
II. Aim to be the market leader to be successful (EOS)
III. Patents (brand strength; scale of individual plants; focus on limited products)
*Tools for the portfolio management school:
a. BCG growth share matrix (star; cashcow; dog; ?)
b. Competitive environment matrix (fragmented; stalemate; volume; niche)
c. GE or Mckinsey matrix (industry attractiveness matrix with all businesses (see
above))
Synergy school worked well as it usually remains within the core competence of the
organisation
Capital market school, no additional notes.
Introduction
Lecture 1:
Read: SCL, Chapter 1, 2, 11
- Mission:- The ‘raison d’être’ of the enterprise
- Vision: How do we see ourselves in the future
- Strategic objectives: Top priorities based on the mission statement: What
do we want to achieve in the long term
- Strategic Plan:The map that describes the route to the strategic objectives:
How do we achieve our long- term strategic objectives?
- Critical success Factors: -The “ultimate do-wells” of business success (realisation of
strategic objectives).In what do we have to excel compared to our competitors to achieve our
strategic object
Difference between business strategy and corporate strategy:
Business strategy’s goal is to create a competitive advantage in each business. For
example low costs, differentiation etc.
Corporate level strategy deals with how to create value for the corporation as a whole.
More about the portfolio.
Corporate strategy = The way a company creates value through the configuration and
coordination of its multimarket activities.
Keywords are value creation (as a final goal), configuration and coordination.
advantages and disadvantages of a single business firm – a Classical Work
Advantages
•The entire company focuses on the same objectives
•Greater control of business activities
•Greater agility in responding to industry changes
•Optimization of company resources
Disadvantages
•Putting all the eggs in one basket
•If industry stagnates, growth rate hard to sustain, margins and profits decline
•High risk when change in customer needs, emergence of technological innovation
•Risk of appearance of a substitute
,There exist 3 types of logic:
- business logic: attractiveness of the market and competitive advantage
- Added value logic/ Parenting logic: Adding value to the business via HQ
- Capital markets logic: State of the capital markets/ NPV as goal.
Tracey and Wiersema: Competitive advantage
Chapter 1. Strategy for the corporate level: summary of the main messages
Corporate level strategy; Business and management level strategy; The 3 logics.
Two important questions that can only be addressed at the corporate level:
What business or market should a company invest in?
o Diversifying into adjacent activities.
o Selling businesses.
o Entering new geographies or markets.
o How much money to commit to each area of business?
How should the group of businesses be managed?
o Structure into divisions, units or subsidiaries?
o How to guide each division?
o How to manage the links and synergies between divisions?
o What activities to centralise/decentralise?
o How to select and guide the managers?
Corporate level strategy:
1. Business/portfolio strategy
2. Management/parenting strategy
1. Portfolio (or business) strategy
Business logic
o Uses the Business attractiveness matrix
o Market attractive? Competitive advantage? → 5 forces model can be useful
Added value logic
o Use the Heartland matrix
, o Able to improve? Create synergy with other subsidiaries?
o OR may it be misjudged & damaged
Capital markets logic
o Uses the Fair Value Matrix
o Market value > NPV → Buy & Don’t sell
o Market value < NPV → Sell & Don’t buy
2. Management (or parenting) strategy → AFTER the portfolio decisions
“Having a management strategy that adds a significant amount of value is a central aim of any company
ambitious to own multiple business units.” & “Companies should aim to have a parenting advantage”.
Management of the resulting portfolios
o How to structure into business divisions?
o What functions/decisions to centralise (corporate level)?
o Who to appoint to the top jobs?
o What guidance to give these managers (strategic targets & controls)?
Corporate added value (e.g.)
o Appoint marketing people to look after brand
o Experts in lean manufacturing
o Managers with years of headquarter experience
o Etc.
Chapter 2. Some history: From Boston box to three logics that drive corporate action
The 4 schools throughout history
There are 4 schools of thought created throughout the years
Professional management school
Portfolio planning school
Synergy school
Capital markets school
1. According to the professional management school, corporate level strategy is
about (Around 1950):
1. Ensuring that the top team has the latest management techniques which can
help expand into attractive sectors
b. According to the portfolio planning school, corporate level strategy is about
(Around 1980’s):
1. Buying and selling businesses to maintain an optimal and attractive mix.
3. According to the synergy school, corporate level strategy is about:
, (Around 1990’s)
1. Identifying businesses where there are opportunities for synergy
2. Developing skills at making the linkage between the business work to get: e.g.
Economies of scale (EOS) or Economies of scope (EOSC)
4. According to the capital market school, corporate level strategy is about:
(mid 1980)
1. Buying and selling businesses or stakes in businesses at the right time. (Buy
low; Sell high)
Professional management school is about development of corporate actions through:
I. Management techniques
II. Strategic planning
Portfolio management school uses tools to determine the attractiveness of a company in
order to make a strategic decision on e.g. resource allocation.
I. Tools to be successful
II. Aim to be the market leader to be successful (EOS)
III. Patents (brand strength; scale of individual plants; focus on limited products)
*Tools for the portfolio management school:
a. BCG growth share matrix (star; cashcow; dog; ?)
b. Competitive environment matrix (fragmented; stalemate; volume; niche)
c. GE or Mckinsey matrix (industry attractiveness matrix with all businesses (see
above))
Synergy school worked well as it usually remains within the core competence of the
organisation
Capital market school, no additional notes.
