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Corporate Level Strategy

Corporate Level Strategy. Value adding activities. Establishing a clear strategic intent Focus Clarity to external stakeholders Clarity to BUs. Value adding activities. Intervening within Business Units Regular monitoring of performance Action taken to improve business unit

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Corporate Level Strategy

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  1. Corporate Level Strategy

  2. Value adding activities Establishing a clear strategic intent • Focus • Clarity to external stakeholders • Clarity to BUs

  3. Value adding activities Intervening within Business Units • Regular monitoring of performance • Action taken to improve business unit • Challenge and develop the strategic ambitions of the BU. • Coaching and training • Synergies

  4. Value adding activities Central Services and resources • Investment • Transferable managerial capabilities • Providing expertise and services • Knowledge creation and sharing

  5. Value Destroying Activities • Bureaucratic fog • Financial safety net

  6. Portfolio Managers • Agent for financial markets • Identifying and acquiring undervalued assets • Divesting low performing SBUs quickly and good performers at a premium • Small, low cost corporate staff

  7. Synergy Managers • Sharing activities/ resources to enhance competitive advantage of SBUs • Identification of appropriate bases and benefits which outweigh costs • Collaborative SBUs • Corporate staff as Integrators

  8. Parental Developers • Central competences can be used to create value in SBUs • SBUs not fulfilling their potential • Portfolio is suited to parent’s expertise • Effective structural & control linkage from parents to SBUs • Incentives based on SBU performance

  9. Managing the corporate Portfolio • Balance of the portfolio eg in relation to its markets and the needs of the corporation • The attractiveness of the Bus • Degree of ‘ fit’ each BU has with each other

  10. Portfolio Managers Synergy Managers and parental developers

  11. Portfolio Managers Synergy Managers and parental developers

  12. Portfolio Managers Synergy Managers and parental developers

  13. Value adding potential of corporate rationales

  14. Value adding potential of corporate rationales

  15. Value adding potential of corporate rationales

  16. Value adding potential of corporate rationales

  17. BCG Matrix • Star – Hi Market Share , hi market growth • Question Mark – Low Market share but hi market growth • Cash Cow – Hi Market share but low market growth • Dog – Lo Market share and lo market growth

  18. Caution in the use of the BCG • Exact meaning of ‘ Hi ‘ and ‘ Lo’ • Analysis applicable to SBUs not products • Question marks and stars are very demanding of creative resources • Position of dogs often misunderstood • Behavioral implications .

  19. Directional policy matrix The directional policy matrix positions SBUs according to (a) how attractive the relevant markets is in which they are operating and (b) the competitive strength of the SBU in that market

  20. Indicators of SBU Strength • Market Share • Sales force • Marketing • R&D • Manufacturing • Managerial competence • Competitive position in terms image breadth of product line, customer service

  21. Indicators of market attractiveness • Market size • Market growth rate • Cyclicality • Competitive structure • Barriers to entry • Technology • Environmental issues

  22. The parenting matrix • Corporations should seek to build portfolios that fit well in their corporate centre parenting skills that are appropriate for its portfolio. • Extent to which corporate parent has sufficient ‘ feel’ for it’s busineses • Fit between the parenting opportunities of BUs and the capabilities of the parent

  23. The parenting matrix ( contd ) • Heartland business units are the ones where parent can add value without doing harm • Ballast BUs are the ones where parent understands but can do little • Value trap BUs are deceptive • Alien Bus are clear misfits

  24. Challenges • Value or cost of the corporate parent • Understanding value creation at BU Level • Understanding value creation at the corporate level • Sufficient feel • Reviewing the portfolio

  25. Roles in international portfolio • Strategic Leaders – valuable resources located in countries crucial for competitive success • Contributors – valuable resources in lesser significant countries but in a key role • Implementers – help generate financial resources • Black Hole- subsidiaries located in countries of crucial significance but with low level resources or capabilities

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