Summary Corporate Strategy and Growth
Summary Corporate Strategy and Growth.........................................................................1
Content session 1: Corporate strategy: Selection and Synergy.....................................................2
1.1 The difference between corporate strategy and business strategy.........................................................2
1.2. Corporate strategy acts along two mechanisms.....................................................................................3
1.3. Corporate strategy themes......................................................................................................................3
2. Synergies.....................................................................................................................................................5
3.1. Corporate strategy and the RBV..............................................................................................................7
3.2. The dynamic capability approach and corporate strategy......................................................................7
4.1. There are six modes of corporate resource creation..............................................................................8
4.2. Resource creation configurations............................................................................................................9
5.1. Numbers on corporate growth..............................................................................................................10
5.2. Challenges..............................................................................................................................................10
Content session 2: Transforming corporate portfolios: Diversification and divestment..............11
1.1. How to create portfolio so that synergy potential increases?..............................................................11
2.1. Diversification........................................................................................................................................12
2.2. Choosing between modes of diversification.........................................................................................13
2.3. Coordination costs in diversification.....................................................................................................14
3.1. Divesting................................................................................................................................................15
3.2. The divestiture decision.........................................................................................................................15
3.3. Criteria to divest....................................................................................................................................16
3.4. Ways to divest........................................................................................................................................16
3.5. Divesting costs.......................................................................................................................................18
Content session 3: The role of organization in corporate strategy.....................................19
1.1. Four building blocks...............................................................................................................................19
1.2. Design parameters.................................................................................................................................19
2.1. Organizational configurations................................................................................................................20
2.2. Creating the collaborative organization................................................................................................21
2.3. Three basic principles for grouping activities with organizational structure........................................22
3.1. Knowledge networks.............................................................................................................................26
3.2. Indirect and direct relations..................................................................................................................27
4.1. Innovation..............................................................................................................................................28
4.1. Designing the corporate HQ..................................................................................................................31
4.2. HQ influence in business modification (synergy)..................................................................................31
4.3. Models of HQ influence: four prototypes..............................................................................................32
4.4. Resource allocation by the HQ..............................................................................................................33
Content session 4: Creating value externally: Choosing between alliances and acquisitions
........................................................................................................................................35
1. Ally or acquire?.........................................................................................................................................35
2. Alliance in corporate strategy...................................................................................................................36
3.1 The importance of making proper choices.............................................................................................36
3.2. According to Dyer, Kale & Singh............................................................................................................37
3.3. Hoffman & Schaper-Rinkel (2001).........................................................................................................37
3.4. Other considerations when making choices..........................................................................................39
4.1. Relational rents......................................................................................................................................42
4.2. Dynamic relational view........................................................................................................................43
5. Managing the alliance process.................................................................................................................47
Content module 5: Target selection..................................................................................49
1. M&A motivations......................................................................................................................................49
2. Managing the M&A process ....................................................................................................................49
, 3. A capabilities-based perspective on target selection in acquisitions.......................................................51
4. Deal making and breaking........................................................................................................................53
Content session 6: Post-acquisition integration................................................................55
1. M&A integration context and interventions............................................................................................55
2. strategic and cultural fit............................................................................................................................58
3. Degree of speed, sequence and integration.............................................................................................58
...................................................................................................................................................59
5. Value creation vs. value capture in alliance management.......................................................................62
Governance structures.................................................................................................................................63
Readings:
Bowman, C. and V. Ambrosini (2003). How the resource-based and dynamic capability views
of the firm inform corporate-level strategy. British Journal of Management, 14 (4): 289-303.
Collis, D.J. and C.A. Montgomery (1998). Creating corporate advantage. Harvard Business
Review, 76 (3): 70-83.
Puranam, P. and B. Vanneste (2016). Corporate strategy: Tools for analysis and decision-
making. Cambridge: Cambridge University Press, chapters 1 & 2.
Content session 1: Corporate strategy: Selection
and Synergy
1.1 The difference between corporate strategy and business
strategy
Business strategy and competitive advantage
Business strategy involves how different businesses compete in their respective markets and
industries, and how they create competitive advantage and outperform their rivals.
Competitors are defined as the main rivals in the industry.
The goal of the business strategy is to maximize the NPV of a business by ensuring the WTP
is larger than the costs of your input. You can increase your competitive advantage by (1)
raising the price (differentiation advantage) and/or (2) by lowering supplier costs (cost
advantage).
Corporate strategy and corporate advantage
involves decisions about in which businesses to compete and how to create a corporate
advantage. A corporate advantage exists when a business can create more value through
the configuration and coordination of multiple business activities (synergies). Competitors
here, are those that can assemble same portfolios e.g., investors or other firms. The goal of
maximizing corporate advantage does not have to be consistent with maximizing the
competitive advantage of each business.
The difference between “divisional”, “holding”, and “conglomerate” forms of multi-
business corporations:
- When the different businesses are internal divisions, the corporation is called a
“multi-divisional corporation”. This structure will have an integrated treasury
function at corporate HQ that manages cash for the entire corporation.
, - Another way to organize these different businesses is to structure each as a separate
company, whose shares are held by a “parent holding company”.
- The term “conglomerate” is applied to either form when the collection of industries
(and therefore businesses) the company is involved in appears so diverse as to show
little coherence.
- The term “business group” is often used to describe a single family-controlled
conglomerate holding company structure, often some of the businesses in the
portfolio will also be publicly listed.
1.2. Corporate strategy acts along two mechanisms
1. A selection mechanism – portfolio assembly
a. Decisions on in which businesses a firms should be active.
b. Decisions about which business to jointly own.
2. A synergy mechanism
a. Decisions about inter-business activities
b. Decisions about which business to jointly operate.
Made to enhance the value created by each business by sharing activities among
them.
Traditionally, corporate strategy functioned mainly as selection mechanisms (the decision
where to compete). However, now it is more viewed as synergy mechanism, because it
offers more opportunities to create value.
Variance decomposition: Over time studies have showed that corporate effects have
become larger in explaining a firm’s performance in comparison to industry effects.
1.3. Corporate strategy themes
As a selection mechanism, corporate strategy mainly shapes the boundaries of a firm and
level of diversification.
Boundaries of the firm
By selecting in which businesses an organization is active, a company should also decide
which business to own and which not what activities do we do internally and which ones
not? The boundaries of a firm are also shaped by decisions on organic and inorganic growth
(make or buy decisions).
Diversification
Corporate strategies also determine the level of diversification considering what activity
needs to be done in each business. currently, businesses are shaped by business models
instead of the traditional product-market combinations.
As a synergy mechanism, corporate strategy mainly shapes synergies between businesses
and innovation. Managers consider the resources: level of complementary resources,
connecting resources across businesses, accessing external resources (acquisitions and
alliances).
Innovation
, To achieve innovation, corporate-wide knowledge resources are needed. Innovation is a
form of a synergy. Hence, innovation can only be created when resources are combined. To
achieve this, R&D needs to be coordinated, creating a knowledge network of corporate R&D
and business R&D.
Summary Corporate Strategy and Growth.........................................................................1
Content session 1: Corporate strategy: Selection and Synergy.....................................................2
1.1 The difference between corporate strategy and business strategy.........................................................2
1.2. Corporate strategy acts along two mechanisms.....................................................................................3
1.3. Corporate strategy themes......................................................................................................................3
2. Synergies.....................................................................................................................................................5
3.1. Corporate strategy and the RBV..............................................................................................................7
3.2. The dynamic capability approach and corporate strategy......................................................................7
4.1. There are six modes of corporate resource creation..............................................................................8
4.2. Resource creation configurations............................................................................................................9
5.1. Numbers on corporate growth..............................................................................................................10
5.2. Challenges..............................................................................................................................................10
Content session 2: Transforming corporate portfolios: Diversification and divestment..............11
1.1. How to create portfolio so that synergy potential increases?..............................................................11
2.1. Diversification........................................................................................................................................12
2.2. Choosing between modes of diversification.........................................................................................13
2.3. Coordination costs in diversification.....................................................................................................14
3.1. Divesting................................................................................................................................................15
3.2. The divestiture decision.........................................................................................................................15
3.3. Criteria to divest....................................................................................................................................16
3.4. Ways to divest........................................................................................................................................16
3.5. Divesting costs.......................................................................................................................................18
Content session 3: The role of organization in corporate strategy.....................................19
1.1. Four building blocks...............................................................................................................................19
1.2. Design parameters.................................................................................................................................19
2.1. Organizational configurations................................................................................................................20
2.2. Creating the collaborative organization................................................................................................21
2.3. Three basic principles for grouping activities with organizational structure........................................22
3.1. Knowledge networks.............................................................................................................................26
3.2. Indirect and direct relations..................................................................................................................27
4.1. Innovation..............................................................................................................................................28
4.1. Designing the corporate HQ..................................................................................................................31
4.2. HQ influence in business modification (synergy)..................................................................................31
4.3. Models of HQ influence: four prototypes..............................................................................................32
4.4. Resource allocation by the HQ..............................................................................................................33
Content session 4: Creating value externally: Choosing between alliances and acquisitions
........................................................................................................................................35
1. Ally or acquire?.........................................................................................................................................35
2. Alliance in corporate strategy...................................................................................................................36
3.1 The importance of making proper choices.............................................................................................36
3.2. According to Dyer, Kale & Singh............................................................................................................37
3.3. Hoffman & Schaper-Rinkel (2001).........................................................................................................37
3.4. Other considerations when making choices..........................................................................................39
4.1. Relational rents......................................................................................................................................42
4.2. Dynamic relational view........................................................................................................................43
5. Managing the alliance process.................................................................................................................47
Content module 5: Target selection..................................................................................49
1. M&A motivations......................................................................................................................................49
2. Managing the M&A process ....................................................................................................................49
, 3. A capabilities-based perspective on target selection in acquisitions.......................................................51
4. Deal making and breaking........................................................................................................................53
Content session 6: Post-acquisition integration................................................................55
1. M&A integration context and interventions............................................................................................55
2. strategic and cultural fit............................................................................................................................58
3. Degree of speed, sequence and integration.............................................................................................58
...................................................................................................................................................59
5. Value creation vs. value capture in alliance management.......................................................................62
Governance structures.................................................................................................................................63
Readings:
Bowman, C. and V. Ambrosini (2003). How the resource-based and dynamic capability views
of the firm inform corporate-level strategy. British Journal of Management, 14 (4): 289-303.
Collis, D.J. and C.A. Montgomery (1998). Creating corporate advantage. Harvard Business
Review, 76 (3): 70-83.
Puranam, P. and B. Vanneste (2016). Corporate strategy: Tools for analysis and decision-
making. Cambridge: Cambridge University Press, chapters 1 & 2.
Content session 1: Corporate strategy: Selection
and Synergy
1.1 The difference between corporate strategy and business
strategy
Business strategy and competitive advantage
Business strategy involves how different businesses compete in their respective markets and
industries, and how they create competitive advantage and outperform their rivals.
Competitors are defined as the main rivals in the industry.
The goal of the business strategy is to maximize the NPV of a business by ensuring the WTP
is larger than the costs of your input. You can increase your competitive advantage by (1)
raising the price (differentiation advantage) and/or (2) by lowering supplier costs (cost
advantage).
Corporate strategy and corporate advantage
involves decisions about in which businesses to compete and how to create a corporate
advantage. A corporate advantage exists when a business can create more value through
the configuration and coordination of multiple business activities (synergies). Competitors
here, are those that can assemble same portfolios e.g., investors or other firms. The goal of
maximizing corporate advantage does not have to be consistent with maximizing the
competitive advantage of each business.
The difference between “divisional”, “holding”, and “conglomerate” forms of multi-
business corporations:
- When the different businesses are internal divisions, the corporation is called a
“multi-divisional corporation”. This structure will have an integrated treasury
function at corporate HQ that manages cash for the entire corporation.
, - Another way to organize these different businesses is to structure each as a separate
company, whose shares are held by a “parent holding company”.
- The term “conglomerate” is applied to either form when the collection of industries
(and therefore businesses) the company is involved in appears so diverse as to show
little coherence.
- The term “business group” is often used to describe a single family-controlled
conglomerate holding company structure, often some of the businesses in the
portfolio will also be publicly listed.
1.2. Corporate strategy acts along two mechanisms
1. A selection mechanism – portfolio assembly
a. Decisions on in which businesses a firms should be active.
b. Decisions about which business to jointly own.
2. A synergy mechanism
a. Decisions about inter-business activities
b. Decisions about which business to jointly operate.
Made to enhance the value created by each business by sharing activities among
them.
Traditionally, corporate strategy functioned mainly as selection mechanisms (the decision
where to compete). However, now it is more viewed as synergy mechanism, because it
offers more opportunities to create value.
Variance decomposition: Over time studies have showed that corporate effects have
become larger in explaining a firm’s performance in comparison to industry effects.
1.3. Corporate strategy themes
As a selection mechanism, corporate strategy mainly shapes the boundaries of a firm and
level of diversification.
Boundaries of the firm
By selecting in which businesses an organization is active, a company should also decide
which business to own and which not what activities do we do internally and which ones
not? The boundaries of a firm are also shaped by decisions on organic and inorganic growth
(make or buy decisions).
Diversification
Corporate strategies also determine the level of diversification considering what activity
needs to be done in each business. currently, businesses are shaped by business models
instead of the traditional product-market combinations.
As a synergy mechanism, corporate strategy mainly shapes synergies between businesses
and innovation. Managers consider the resources: level of complementary resources,
connecting resources across businesses, accessing external resources (acquisitions and
alliances).
Innovation
, To achieve innovation, corporate-wide knowledge resources are needed. Innovation is a
form of a synergy. Hence, innovation can only be created when resources are combined. To
achieve this, R&D needs to be coordinated, creating a knowledge network of corporate R&D
and business R&D.
