Corporate Strategy
Lecture 1, Introduction to Corporate Strategy
Things do not always go the way as you want readjust
Corporate Strategy: repressive incident management or long range planning?
Bit of both. Ideally long range planning where things happen you planned, but things can go
wrong where you need to be proactive.
The way a company creates value through the configuration and coordination of its
multimarket activities
o i.e. multi-product, multi-location and multi-business activities
o combine activities to create value
Triggers to change: responses to (prior) crises
Three different approaches to same threat
- streamline activities make it a leaner/smoother machine, focus
- doubling down invest your way out
- authentically, responsibility
Strategy as a deliberate thinking process
- A company can outperform rivals only if it can establish a difference that it can preserve.
- But what creates a successful strategy?
o A unique value proposition compared to other organizations
o A distinctive value chain tailored to the value proposition
o Making clear tradeoffs, and choosing what not to do
, o Choices across the value chain that fit together and reinforce each other
o Strategic continuity, with continual improvement in realizing the strategy
Strategy in practice: IKEA – a unique value proposition
- Adding value in the value chain
- A distinctive value chain tailored to value
proposition
-
Making
tradeoffs: what NOT to do
Planning vs. Incrementalism
Corporate strategy is a part of a firm’s generic strategy
- Mission = why are we in business
- Vision = what do we want the business to look like 5 years from now
- Strategy = how do we intend to get there?
Values: what are the enduring principles and beliefs?
,The playground of strategy
But, what then is Corporate Strategy?
A diversified company has 2 levels of strategy
- Business-Level Strategy (Competitive Strategy)
How to create competitive advantage in each business in which the company competes
o Low cost
o Differentiation
o Integrated low cost/differentiation
o Focused low cost
o Focused differentiation
- Corporate-Level Strategy (Company-wide Strategy)
How to create value for the company as a whole
o Portfolio & Parenting
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, risky, dependent
, - 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
Definition of Corporate Strategy
= “The way a company creates value through the configuration and coordination of its multimarket
activities” (Montgomery and Collis, 1997, p.5)
Three important aspects:
- Value Creation as the ultimate purpose of corporate strategy.
- The focus on the multimarket scope of the corporation (Configuration), including its product,
geographic, and vertical boundaries.
- The emphasis on how the firm manages the activities and businesses that lie within the
corporate hierarchy (Coordination)
Typical questions addressed in corporate strategy?
- Why do we have firms?
- What are firm resources?
- How can they be developed and acquired?
- Why do we have multi-product, multi-location and multi-business firms?
- How do they create or destroy value?
- What determine the boundaries of the firm?
- How do we govern the firm given these boundaries?
- How are multi-product, multi-location and multi-business firms managed?
- How does corporate strategy differ in uptimes from economic downtimes?
Corporate Strategy is what makes the corporate whole add up to more than the sum of its business
unit parts in up- & downtimeaswzs
1. What is the appropriate growth target?
2. Where and how to look for growth?
3. How to construct a more optimal growth portfolio?
4. How to effectively execute?
Portfolio strategy – guiding logics
1. Business logic = attractiveness of the market and competitive advantage
2. Added value logic / Parenting logic = adding value to the business via HQ
3. Capital markets logic = state of the capital markets / NPV of future cash flows
Corporate strategy and Firefighting Triangle Conceptual Analogy
- Oxygen = relationships. Alliances, acquisitions, boundaries
- Combustibles = resources. Essential in (corporate) strategy i.e.
human resources, natural resources, financial resources.
Lecture 1, Introduction to Corporate Strategy
Things do not always go the way as you want readjust
Corporate Strategy: repressive incident management or long range planning?
Bit of both. Ideally long range planning where things happen you planned, but things can go
wrong where you need to be proactive.
The way a company creates value through the configuration and coordination of its
multimarket activities
o i.e. multi-product, multi-location and multi-business activities
o combine activities to create value
Triggers to change: responses to (prior) crises
Three different approaches to same threat
- streamline activities make it a leaner/smoother machine, focus
- doubling down invest your way out
- authentically, responsibility
Strategy as a deliberate thinking process
- A company can outperform rivals only if it can establish a difference that it can preserve.
- But what creates a successful strategy?
o A unique value proposition compared to other organizations
o A distinctive value chain tailored to the value proposition
o Making clear tradeoffs, and choosing what not to do
, o Choices across the value chain that fit together and reinforce each other
o Strategic continuity, with continual improvement in realizing the strategy
Strategy in practice: IKEA – a unique value proposition
- Adding value in the value chain
- A distinctive value chain tailored to value
proposition
-
Making
tradeoffs: what NOT to do
Planning vs. Incrementalism
Corporate strategy is a part of a firm’s generic strategy
- Mission = why are we in business
- Vision = what do we want the business to look like 5 years from now
- Strategy = how do we intend to get there?
Values: what are the enduring principles and beliefs?
,The playground of strategy
But, what then is Corporate Strategy?
A diversified company has 2 levels of strategy
- Business-Level Strategy (Competitive Strategy)
How to create competitive advantage in each business in which the company competes
o Low cost
o Differentiation
o Integrated low cost/differentiation
o Focused low cost
o Focused differentiation
- Corporate-Level Strategy (Company-wide Strategy)
How to create value for the company as a whole
o Portfolio & Parenting
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, risky, dependent
, - 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
Definition of Corporate Strategy
= “The way a company creates value through the configuration and coordination of its multimarket
activities” (Montgomery and Collis, 1997, p.5)
Three important aspects:
- Value Creation as the ultimate purpose of corporate strategy.
- The focus on the multimarket scope of the corporation (Configuration), including its product,
geographic, and vertical boundaries.
- The emphasis on how the firm manages the activities and businesses that lie within the
corporate hierarchy (Coordination)
Typical questions addressed in corporate strategy?
- Why do we have firms?
- What are firm resources?
- How can they be developed and acquired?
- Why do we have multi-product, multi-location and multi-business firms?
- How do they create or destroy value?
- What determine the boundaries of the firm?
- How do we govern the firm given these boundaries?
- How are multi-product, multi-location and multi-business firms managed?
- How does corporate strategy differ in uptimes from economic downtimes?
Corporate Strategy is what makes the corporate whole add up to more than the sum of its business
unit parts in up- & downtimeaswzs
1. What is the appropriate growth target?
2. Where and how to look for growth?
3. How to construct a more optimal growth portfolio?
4. How to effectively execute?
Portfolio strategy – guiding logics
1. Business logic = attractiveness of the market and competitive advantage
2. Added value logic / Parenting logic = adding value to the business via HQ
3. Capital markets logic = state of the capital markets / NPV of future cash flows
Corporate strategy and Firefighting Triangle Conceptual Analogy
- Oxygen = relationships. Alliances, acquisitions, boundaries
- Combustibles = resources. Essential in (corporate) strategy i.e.
human resources, natural resources, financial resources.
