corporate level strategy related unrelated diversification n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
CORPORATE LEVEL STRATEGY: RELATED & UNRELATED DIVERSIFICATION PowerPoint Presentation
Download Presentation
CORPORATE LEVEL STRATEGY: RELATED & UNRELATED DIVERSIFICATION

Loading in 2 Seconds...

play fullscreen
1 / 20

CORPORATE LEVEL STRATEGY: RELATED & UNRELATED DIVERSIFICATION - PowerPoint PPT Presentation


  • 200 Views
  • Uploaded on

CORPORATE LEVEL STRATEGY: RELATED & UNRELATED DIVERSIFICATION. BUSINESS 189 SPRING 2013 DR. MARK FRUIN. H & V INTEGRATION VERSUS DIVERSIFICATION. UNDERSTAND CHAPTERS 9 & 10 TOGETHER THEY CONSIDER THE SAME ISSUE, CORPORATE LEVEL (MULTI-BUSINESS) STRATEGIES FROM DIFFERENT ANGLES

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'CORPORATE LEVEL STRATEGY: RELATED & UNRELATED DIVERSIFICATION' - hovan


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
corporate level strategy related unrelated diversification

CORPORATE LEVEL STRATEGY: RELATED & UNRELATED DIVERSIFICATION

BUSINESS 189

SPRING 2013

DR. MARK FRUIN

h v integration versus diversification
H & V INTEGRATION VERSUS DIVERSIFICATION
  • UNDERSTAND CHAPTERS 9 & 10 TOGETHER
  • THEY CONSIDER THE SAME ISSUE, CORPORATE LEVEL (MULTI-BUSINESS) STRATEGIES FROM DIFFERENT ANGLES
  • IN A FAMILIAR CONTEXT - U.S. POINT OF VIEW
    • RELATIVELY RARE THAT COMPANIES CAN INVEST IN DIFFERENT LINES OF BUSINESS ELSEWHERE IN WORLD
    • THUS, MOST FIRMS ARE SINGLE LINES OF BUSINESS
  • HOWEVER, DIFFERENT STORIES IN JAPAN, KOREA, CHINA, INDIA, THAILAND, AND ELSEWHERE
    • BECAUSE DIVERSIFICATION ACHIEVED THROUGH BUSINESS GROUPS AND INTERFIRM NETWORKS
3 growth strategies
3 GROWTH STRATEGIES
  • DO IT YOURSELF (INTERNAL GROWTH)
    • HORIZONTAL INTEGRATION
    • VERTICAL INTEGRATION
    • GEOGRAPHICAL EXPANSION/(INTEGRATION)
  • BUY IT (ACQUISITION)
  • PARTNER (SHORT- TO LONG-TERM COOPERATIVE STRATEGIES; JOINT VENTURES, ALLIANCES & LONG-TERM RELATIONSHIPS)
distinctive vs core competencies
DISTINCTIVE vs. CORE COMPETENCIES
  • DISTINCTIVE COMPETENCIES
    • SOMETHING YOU DO WELL & YOUR RIVALS DON’T DO AS WELL
  • CORE COMPETENCIES: VERY FEW DISTINCTIVE COMPETENCIES BECOME -->CORE COMPETENCIES – WHY?
    • HARD TO REALIZE THREE-AT-THE-SAME-TIME COMPETENCIES
      • EXPANDABILITY
      • TRANSFERABILITY
      • INIMITABILITY
increase profitability thru diversification multiple strategies simultaneously in multiple bus
INCREASE PROFITABILITY THRU DIVERSIFICATION: MULTIPLE STRATEGIES SIMULTANEOUSLY IN MULTIPLE BUs
  • PERFORM ONE OR MORE VALUE CREATING FUNCTIONS AT LOWER COSTS & HIGHER QUALITY (FL STRATEGY)
  • ONE OR MORE VALUE CREATING FUNCTIONS FOR PRODUCT DIFFERENTIATION & TO GIVE BETTER PRICING OPTIONS (LB STRATEGY)
  • HELP THE FIRM BETTER MANAGE INDUSTRY RIVALRY (LB STRATEGIES OTHER THAN CL & DIFF)
  • IN OTHER WORDS, USE STRATEGY STACK FOR COMPANY-WIDESIMULTANEOUS STRATEGIC ADVANTAGES
    • FUNCTIONAL AND BUSINESS STRATEGIES EMPLOYED SIMULTANEOUSLY IN MULTIPLE LINES OF BUSINESS ACTIVTY
  • RELYING ON SHARING OF COMPANYWIDE RESOURCES, CAPABILITES & COMPETENCIES, BOTH TANGIBLE & INTANGIBLE, E.G. BRAND; VERY HARD TO DO WELL
increasing profitability through diversification
INCREASING PROFITABILITY THROUGH DIVERSIFICATION
  • TRANSFER COMPETENCIES ACROSS INDUSTRIES (TECH VERSUS MARKET BASED DIVERSIFICATION)
    • LEVERAGE COMPETENCIES (MORE INTANGIBLE THAN TANGIBLE: SIGNIFICANT FINANCIAL OR HR SKILLS)
    • SHARING RESOURCES: ECONOMIES OF SCOPE
    • BUILDING BRAND POWER ACROSS BUSINESSES: A KIND OF SCOPE
    • PRODUCT BUNDLING: OFFERING COMPLEMENTARY BUT UNRELATED GOODS & SERVICES
      • WINTEL IS MOST FAMOUS EXAMPLE
      • FOOD & ENTERTAINMENT AT NIGHTCLUB OR MALL
    • UTILIZE GENERAL MANAGEMENT COMPETENCIES

(THIS IS VERY INTANGIBLE; WHAT ARE GENERAL MANAGEMENT COMPETENCIES?)

multibusiness models
MULTIBUSINESS MODELS
  • HOW TO TRANSFER & LEVERAGE COMPETENCIES ACROSS INDUSTRIES
    • FIRST, A BUSINESS MODEL FOR EACH INDUSTRY IN WHICH FIRM COMPETES
      • HOW TO SUCCEED IN THIS BUSINESS? THIS COMES FIRST
    • SECOND, HIGHER LEVEL MODEL (WHAT DOES THIS MEAN?) THAT JUSTIFIES ENTRY INTO DIFFERENT INDUSTRIES
      • HOW TO COMBINE MANAGEMENT SKILLS ACROSS SEVERAL DIFFERENT BUSINESSES
      • WHAT CAN WE OFFER THAT WILL ENABLE US TO COMPETE SUCCESSFULLY AG. SPECIALISTS IN THIS INDUSTRY??
        • THIS IS ALWAYS THE CHALLENGE: WHEN WE DIVERSIFY, WE GO TOE-TO-TOE AGAINST SPECIALISTS IN EACH BUSINESS AREA
free cash flow measure
FREE CASH FLOW MEASURE
  • FOR SOME, DIVERSIFICATION CHOICES ARISE WHEN FIRMS GENERATE CASH IN EXCESS OF WHAT IS REQUIRED TO FUND INVESTMENTS IN EXISTING BUSINESS/ES & MEET DEBT REQRMNTS
  • BY THIS DEFINITION, DIVERSIFICATION OPPORTUNITIES ARISE WHEN EXCESS RESOURCES OF ANY SORT AVAILABLE, NOT JUST FREE CASH
  • WHAT OTHER SORTS OF EXCESS RESOURCES MAY EXIST?
    • ?
    • ?
    • ?
transferring competencies
TRANSFERRING COMPETENCIES
  • IS NOT EASY
  • BECAUSE THEY ARE OFTEN STICKY (EMBEDDED) IN VARIOUS WAYS (E.G., SITE- & TIME- SPECIFIC)
  • NON-EMBEDDED VERSUS EMBEDDED
    • “HYBRIDIZATION” VS. TRUE HYBRIDS
    • HYBRIDS HAVE SUPERIOR TRAITS TO BOTH PARENTS
  • ECONOMIES OF SCOPE MAY ARISE WHEN TWO OR MORE BUSINESS UNITS SHARE RESOURCES, EITHER TANGIBLE OR INTANGIBLE, AND COSTS ARE SPREAD ACROSS PRODUCT VARIETIES
    • BRAND EQUITY AS EXAMPLE
    • WOULD WE EXPECT A SUCCESSFUL PERFUMERY TO MAKE GOOD FASHION APPAREL? (CHANEL; DKNY?)
      • OR A MOTORCYLCE CO TO MAKE GOOD TRUCKS: H-D F150?
multipoint competition
MULTIPOINT COMPETITION
  • COMPANIES COMPETE IN DIFFERENT INDUSTRIES AT THE SAME TIME & WITH THE SAME RIVALS
  • ONLY POSSIBLE WHEN COMPANIES HAVE MULTIPLE LINES OF BUSINESS WHICH OVERLAP
    • MANAGE RIVALRY
    • ATTACKS IN ONE INDUSTRY ARE MET/MATCHED IN ANOTHER
    • MOSTLY, MOVES ADJUST PRICING; SOME REWORKING OF PRODUCT OFFERINGS
    • WHY ARE MOVES MOSTLY MINOR?
      • DON’T WANT TO TRIGGER PRICE WARS OR RETALIATION ACROSS OTHER LINES OF BUSINESS
general organizational competencies
GENERAL ORGANIZATIONAL COMPETENCIES
  • RARE, CROSS-ORG COMPETENCIES (RELATED TO IDEA OF GEN. MGMT SKILLS)
    • ENTREPRENEURIAL CAPABILITIES
    • ORGANIZATIONAL DESIGN SKILLS (SYSTEMS, STRUCTURES & CONTROL CAPABILITIES)
    • SUPERIOR STRATEGIC CAPABILITIES (INTANGIBLE GOVERNANCE SKILLS)
      • BETTER MANAGEMENT
      • BETTER STRATEGY SELECTION & IMPLEMENTATION
    • LEADERSHIP AND/OR ABILITY TO SEIZE THE MOMENT
types of diversification
TYPES OF DIVERSIFICATION
  • RELATED
    • CONSTRAINED (OR MARKET-BASED)
    • LINKED (OR TECHNOLOGY-LINKED)
  • UNRELATED
    • CONGLOMERATES
    • BUSINESS GROUPS
limits to diversification
LIMITS TO DIVERSIFICATION
  • BUREAUCRATIC COSTS
    • NUMBER OF BUSINESSES MANAGED
      • TRANSACTION COSTS
    • COORDINATION AMONG BUSINESSES
      • BOUNDED RATIONALITY; OPPORTUNISM
  • LIMITS TO EFFECTIVE GOVERNANCE
  • CULTURE FALLS APART; THERE IS NO CENTER
  • THE FOCUS NEEDED TO SUCCEED IN INDIVIDUAL BUSINESSES IS LOST WHEN MULTIPLE BUSINESSES ARE BEING MGMED
sony s web of corporate level strategy an example
SONY’S WEB OF CORPORATE-LEVEL STRATEGY: AN EXAMPLE
  • FIGURE ON p. 358: SONY’S CORE INDUSTRY OF CONSUMER ELECTRONICS
  • SURROUNDED BY
    • RELATED DIVERSIFICATION (COMPUTERS, SMART PHONES)
    • UNRELATED DIVERSIFICATION (PLAY STATION); (THIS DOESN’T SEEM UNRELATED TO ME)
    • BACKWARD INTEGRATION (COMPONENTS)
    • FORWARD INTEGRATION (MUSIC, MOVIES)
  • WHAT DO YOU THINK OF THIS FIGURE?
  • WHAT’S BEEN HAPPENING TO SONY LATELY?
    • WHAT’S BEEN THE PROBLEM?
    • HOW DOES THIS RELATE TO DIVERSIFICATION STRAT?
internal new ventures
INTERNAL NEW VENTURES
  • A KIND OF DIVERSIFICATION
  • WHY NEW VENTURES FAIL: 3 MAIN REASONS
    • MARKET ENTRY AT TOO SMALL A SCALE
      • LARGE SCALE ENTRY A PRECONDITION OF SUCCESS, ESP. FOR LARGE FIRMS
    • POOR COMMERCIALIZATION SKILLS
      • CROSSING THE CHASM (TWICE); FROM EMBRYONIC TO GROWTH, AND GROWTH TO MATURITY
    • POOR MANAGEMENT OF VENTURE PROCESS
      • TOO MANY NEW VENTURES STARTED
      • MISUNDERSTAND STRATEGIC CONTEXT; WHAT IT TAKES TO SUCCEED AS A NEW VENTURE
      • UNDERESTIMATE TIME & COSTS INVOLVED
      • POOR IMPLEMENTATION/EXECUTION
      • RUNNING BIG FIRMS VS SMALL REQUIRES VERY DIFF. SKILLS
guidelines for successful internal venturing
GUIDELINES FOR SUCCESSFUL INTERNAL VENTURING
  • UNDERSTAND BOTH “R” & “D” OF R&D
  • DOWNSTREAM LINKS TO MARKETING & SALES ARE CRITICAL DURING “D” & “R”
  • KEY OBJECTIVES FOR STRATEGIC SUCCESS ARTICULATED EARLY & OFTEN
  • CROSS-FUNCTIONAL DEVELOPMENT TEAMS; CROSS-DIVISIONAL PROJECTS
  • KNOW WHEN TO HOLD’EM & FOLD’EM
venture stages phases steps
VENTURE STAGES-PHASES-STEPS
  • 30 + STEPS FROM START TO STOP
  • DOES NOT STANDARDIZE CYCLE TIMES - THESE VARY BY INDUSTRY
  • DOES NOT ESTIMATE PHYSICAL AND PSYCHOLOGICAL COSTS
  • MOST FIRMS DO NOT WIND UP FINISHING WHAT THEY SET OUT TO DO
  • INITIAL RESOURCES, INCLUDING HR & MARKETING, ARE NOT WHAT IS NEEDED TO MOVE ALONG THE WAY
    • ADDING RESOURCES & CAPABILITIES AFTER THE START IS DIFFICULT
      • INERTIA ALREADY IN PLACE
      • JEALOUSIES AND RIVALRIES AG. NEWCOMERS
acquisitions strategy
ACQUISITIONS STRATEGY
  • GUIDELINES FOR SUCCESS
    • 1) IDENTIFY, SCREEN & VET; DO IT ALL OVER AGAIN
    • 2) BIDDING STRATEGY (AVOID BIDDING WARS)
    • 3) INTEGRATION (PRE- & POST-INTEGRATION MEASURES)
    • 4) LEARNING FROM EXPERIENCE (OF MAKING ACQUISITIONS; LEARN FROM ACQUIRED FIRMS
    • 5) VICARIOUS LEARNING (LEARNING FROM OTHERS DOING SAME THING/SAME SORT OF ACQUISITION)
    • 6) ORGANIZATIONAL AS OPPOSED TO INDIVIDUAL LEARNING
porter s guidelines for diversification
PORTER’S GUIDELINES FOR DIVERSIFICATION
  • 3 TESTS
    • ATTRACTIVE INDUSTRY?
    • RECOVER INITIAL INVESTMENT?
    • BETTER OFF WITH (OR WITHOUT) RESOURCES & CAPABILITIES; SHORT-TERM & LONG-TERM
  • 4 STRATEGIES
    • SHARING ACTIVITIES (POOLING)
    • RESTRUCTURING (KNOW HOW TO REORG; KNOW HOW TO SLICE & DICE)
    • SKILLS TRANSFER
    • FINANCIAL MANAGEMENT
restructuring following diversification
RESTRUCTURING FOLLOWING DIVERSIFICATION
  • DIVERSIFICATION DISCOUNT
    • THE WHOLE IS OFTEN NOT MORE THAN THE SUM OF THE PARTS
      • SHARE PRICE OF ACQUIRING FIRMS GOES DOWN AFTER ACQUISITION
  • EXIT STRATEGIES
    • DIVESTMENT
      • MARKET-BASED VS MANAGEMENT BUYOUT (MBO)
    • HARVEST AND THEN LIQUIDATE
      • DELAYED DIVESTMENT