Creating Corporate Advantage

1. Creating Corporate Advantage By Dwi Joko Pramudito Song Young Kang

2. A System of Value Creation • Corporate strategy-the way a company seeks to create value through the configuration and coordination of its multimarket activities • An effective corporate strategy can best be thought of as an integrated system in which all elements of the strategy are aligned

3. Corporate Strategy Triangle

4. Competitive Advantage • Resources should create acompetitive advantage in the business in which a firm competes • Corporate resources should be evaluated against the key success factor in each business • The firm must also compete on all the other resources are required to produce and deliver the product or service in each business

5. Control • The requirement for effective control addresses the fit between the business and the organizational structure, system and processes • The principal issue is whether individual business can be effectively monitored and controlled under the corporate infrastructure

6. Coherence • A firm’s infrastructure must be designed to enable it to achieve coherence across the businesses • A firm’s infrastructure must also be design to leverage each of its valuable resources with a minimum of corporate intervention

7. A Continuum of Effective Corporate Strategies

9. Evaluating Corporate Strategy • Five criteria are particularly helpful in corporate strategy evaluation: • Vision • Internal Consistency • External Consistency • Feasibility • Corporate Advantage

10. Vision • Is there a clear and well articulated corporate vision? Vision must convey a sense of the corporate advantage the form will exploit and be specific enough to guide a firm’s action

11. Internal Consistency • Are the elements of the firm’s corporate strategy aligned with one another? • Do they form a coherent whole? To test for consistency, it is prudent to begin with the three critical junctures: competitive advantage, control and coherence. It is also important to assess the alignment between these elements of strategy and the firm’s vision, goals and objectives

12. External Consistency • Does the strategy fit with the external environment? • Is the strategy sustainable against changing environmental and competitor strategies? It is important to consider whether the key success factors of and industry are changing and whether the strategy anticipates these changes by repositioning the business or reinvesting in resources that will be critical in the future.

13. Feasibility • Is the organization being asked to do too much in too short time? • Is the strategy too risky? It is important to ask: • Whether the firm will have the requisite resources to implement the strategy when it needs them? • Whether the time frame for the changes is realistic? • Whether the firm is capable of implementing changes on multiple fronts simultaneously?

14. Corporate Advantage • Does the strategy truly produce a corporate advantage? • Is value creation from that advantage ongoing? Corporate advantage must overcome: • Does ownership of the business create benefits somewhere in the corporation? • Are these benefits greater than the cost of corporate overhead? • Does it create more value than any other possible corporate parent or alternative governance structure?

15. Thank You