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MBA Session 7 Corporate Strategy PowerPoint Presentation
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MBA Session 7 Corporate Strategy

MBA Session 7 Corporate Strategy

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MBA Session 7 Corporate Strategy

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  1. MBA Session 7 Corporate Strategy Knut Haanæs, Ph.D Associate Professor Norwegian School of Management - BI

  2. Corporate Strategy Intro to corporate strategy Issues of corporate strategy AT&T case and role play

  3. Levels of strategy CORPORATE STRATEGY Portfolio Synergies BUSINESS UNIT STRATEGY Value creation Competitive position Product- portfolio Marketing Finance HR Logistics Production FUNCTIONAL STRATEGY

  4. Corporate Strategy “In each case, executives were focusing on individual elements of corporate strategy: resources, businesses, or organization. What was missing was the insight that turns those elements into an integrated whole. That insight is the essence of corporate advantage—the way a company creates value through the configuration and coordination of its multibusiness activities.” Collis and Montgomery 1998: 72

  5. Rationale for Corporate Strategy The total value of the combined businesses is higher within the corporation than if each business was operated independently outside the corporation (or in another corporation)

  6. Corporate Strategy Intro to corporate strategy Issues of corporate strategy AT&T case and role play

  7. AT&T - 1993-94 • Network services are obliged to purchase equipment and consulting services internally, also when outside companies offer superior value. Sometimes you are stuck with «second best» solutions in terms of infrastructure.

  8. AT&T - 1993-94 • Bell Labs struggle with showing integrity vis-à-vis potential clients; often competitors of the telecom operator. This means that you do not get a number of the projects for which you are best qualified (in terms of competencies).

  9. AT&T - 1993-94 • The equipment manufacturer is accused of prioritizing the internal operator, not providing the optimal service and products to «outside» customers. This means that your external market is restricted in terms of potential customers, and that you do not reach efficient scale despite the substantial size of the internal AT&T market.

  10. AT&T - 1994-94: Role play Top management team Overall strategy and performance External consultants Support top management Bell Labs R&D, consulting and advanced solutions Telecom Sevices Operations of worlds largest telecom network Equipment Production of telecom and data equipment

  11. Business Units • 5 key actions to improve • profitability 20% and #1 in 2 years • Identify critical future competencies

  12. Corporate management • Look for synergies • Keep holistic perspective • Reduce overheads from 33% to 23% in 2 years

  13. Corporate Strategy Intro to corporate strategy Issues of corporate strategy AT&T case and role play

  14. Four approaches to corporate strategy • Portfolio • Competencies • Value creation • Competition Where do we find synergies? Where are costs?

  15. First, the Portfolio approach Good Medium Weak Winner Winner ? High Med. Low Winner Looser Average business unit Industry attractiveness Profit creator Looser Looser Hitt et al. (1996) Competitive position

  16. Traditional portfolio approach In which industries do we compete? Identify business units that fit the market How strong is our position and how attractive is the industry? Classify regarding attractivity and position Identify the right strategy for each b.u. (harvest, invest, etc.) Should we invest more or less? How much money should we invest? Allocate financial resources

  17. Assumptions behind portfoilo approaches • Strategic resources assumed to be allocated and mobile • Independence between business units • Economics-based strategy perspective

  18. Allocating money Konsern SBU SBU SBU

  19. Second, competency approach Produkter SBU SBU SBU Core product 1 Core product 2 Competense Competence Competence 1 2 3

  20. Assumptions behind competence- based corporate strategy • Companies different because of resources • Dependence between business units • Critical resources built over time through activities • Intangible resources mobilized

  21. Third, sharing activities

  22. Fourth, competition Schumpeter innovasjon Daewoo High Microsoft Lucent Input factor competition Operators Operatører Contractors Creators Low TIME Industry development

  23. Examples of corporate tensions Independence Control Sharing Autonomy Integration Responsiveness Subsidies Synergies

  24. Four ways to influence value • Stand alone influence • Linkage influence • Central functions and Services • Corporate Development Campbell, et al. 1995

  25. Examples of potential sources of synergy • Scale economies • Financing / funding • Management • Information • Resources • R&D • Reputation • Vision / mobilization