6. Strategy Execution Flashcards
1
Q
How does the Corporation add value to its’ businesses?
A
- Overall corporate portfolio management (Planning models)
- Each individual business (Business strategy)
- Linkages among businesses (Corporate strategy)
- Corporate change (Strategy implementation)
2
Q
How does the Corporation add value to its’ businesses? - Portfolio management
A
- Corporate HQ primarily acts as an investor
- Making acquisitions and divestments
- Allocating investment funds among the different businesses
3
Q
How does the Corporation add value to its’ businesses? - Individual businesses
A
- Corporate HQ is involved more directly in adding value to businesses
- Improves the management of those businesses
4
Q
How does the Corporation add value to its’ businesses? - Linkages among businesses
A
- Corporate HQ primarily acts as coordinator and orchestrator
- Manages synergies between businesses
- Supports business strategy by sharing resources and transferring capabilities between businesses
- Centralization of common services (E.g. financial planning)
5
Q
Sources of Synergy within the corporation
A
- Shared corporate services
- Transferring skills between businesses
- Sharing resources and activities
- But! exploiting synergies is not costless
6
Q
Four Models of Corporate Value added
A
- Active Portfolio Management -> Value creations for SH through analytical resources to identify attractive canditates/ Diversification through acquiring attractive companies/ Unit becomes autonomous and is not sold (passive investment)/ But(!) impossible to buy undervalued companies
- Restructuring -> Value creations for SH (Virgin) through restructuring and finding candidates/ Diversification through acquisition of undeveloped corps/ After that business is sold/ But (!) strategy is identical with portfolio management if units don’t get sold afterwards
- Proprietary Skill Transfer -> Value creations for SH through transferring unique skills across businesses/ Requires similar businesses, activities important for CA, to be a significant source for competitiveness/ But (!) must change strategy and identifying activities that leverage CA
- Activity Sharing -> Value creations for SH through lowering costs (EOS, Efficiency) or raising differentiation/ Sharing CA increasing activities across businesses (Google, Disney)/ But (!) costs of shared activities must outweigh the costs involved
7
Q
Portfolio Planning
A
- Allocating resources
- Formulating business-unit strategy
- Setting performance targets
- Portfolio balance
8
Q
BCG Matrix still relevant?
A
- Questionable because of Increased speed of change, Unpredictability, Reduced importance of market share
- Unpredictability -> Needs to be applied with greater speed with more focus on innovation
- Reduced importance of market share -> Needs a new measure of competitiveness to replace its x-axis
- Too superficial -> More deeply embedding into organization’s behavior to be useful
9
Q
The Ashridge Matrix
A
- Parenting advantage = Parent companies create more value in their businesses than rivals would
- Parenting fit matrix = Focus on the fit between the business and the parent
- Parenting fit matrix = Y-Axis -> Misfit between critical success factors and parenting characteristics/ X-Axis -> Fit between parenting opportunities and parenting characteristics/ Heartland -> / Edge of Heartland -> / Value trap (right corner)-> / Alien territory (center) -> / Ballast (left corner) ->
10
Q
The GE/ McKinsey Matrix
A
- Industry Attractiveness Criteria = 1. Market size/ 2. Market growth/ 3. Industry profitability/ 4. Inflation recovery/ 5. Overseas sales ratio
- Business Unit Position = 1. Market share/ 2. Competitive position/ 3. Relative profitability
11
Q
Pros and Cons Portfolio planning models and strategy formulation
A
- Pros = 1. Simplicity/ 2. Big picture/ 3. Analytically versatile (vielseitig)/ 4. Can be augmented (Erweiterung möglich)
- Cons = 1. Oversimplification/ 2. Ambiguity (Zweideutigkeit)/ 3. Ignored synergies
12
Q
Corporate Divestitures Definition
A
- Growth strategies with high levels of divestitures
- Also other forms of corporate restructuring
13
Q
Forms of Corporate Divestitures
A
- Sell-off -> Sale to another company
- Spin-off -> The sold part will be listed on stock market and majority of shares of spun-off company offered to shareholders of parent company
- Equity Carve-out -> Subsidiary goes stock market but parent retains majority control over shares
- Tracking stock -> Special class of parent company shares issued to track performance of subsidiary
- Management buyout (MBO) -> The acquiring group is led by its own management and the company’s executives
14
Q
Why Corporate Divestures
A
- Managerial reasons -> 1. Unable to monitor divisional performance/ 2. Defense against hostile takeover
- Financial reasons -> 1. Get rid of low-performing businesses/ 2. Raise cash to fight financial emergency/ 3. Raise cash to pay for acquisition/ 4. Divested part will be better valued by stock market if standing alone
- Strategic reasons -> 1. Poor strategic fit of business/ 2. Unwanted part of an acquired firm/ 3. Divested business has better fit with another firm and seller can share the added value
15
Q
Implementing Corporate Strategy
A
- Execution is the result of thousands of decisions that imply self-interest and information available by employees
- Failed execution of strategy -> Actions related to Decision rights and Information flow are far more important than Motivators or Structure
