Corporate Strategy Essay

Diversification is even much prominent in other parts of the world Grupos, chaebol, chore houses, keiretsu, and so on Poor corporate strategy is common Excite, one of the confidential information Internet services companies, yesterday received a takeover offer from Zapata, a Texas- base throng with holdings in marine protein and food packaging companies.Citing the excellent fit with Zapatas new strategic direction, Avram Glazer, Zapatas chief executive officer, said the proposed operation makes sense for Excites sh atomic number 18holders because of the capital resources that Zapata atomic number 50 bring to Excite. fiscal Times, May 22, 1998 2 What diversified corporation did this become? 3 rot of Variance in Profitability Evidence from the United States Year 2% Industry 18% Corporate parent 4% Transient 46% In the U. S. corporate strategy is typically the icing on the cake, non the cake itself Business units must be competitive on their suffer merits in attractive in dustries But the icing disregard make the fatal difference between a good cake and a no-count one Business segment 30% Note Ignores covariance terms based on 58,132 observations of 12,296 military control segments in 628 industries in the United States Source Anita M. McGahan and Michael E. Porter, How oft Does Industry Matter Really? Strategic Management Journal, 1997 4 guff of Variance in Profitability Evidence from 14 emerge Economies In much of the rest of the world, corporate strategy is more than prominent membership in a diversified entity has a larger effect on profitability The effect on profitability is more likely to be positive Source Ta go by Khanna and Jan W. Rivkin, Estimating the Performance Effects of Business Groups in Emerging Markets, Strategic Management Journal, 2000 Countries Argentina, Brazil, Chile, India, Indonesia, Israel, Mexico, Peru, the Philippines, South Africa, South Korea, Taiwan, Thailand, and Turkey Litmus exam of Corporate Strategy Is the combination of all furrowes of the firm worth more than the sum of how much severally business is worth individually? The dissolve could be less, e. g. J. C. Penney telemarketing division was worth 3X the market value of the completed firm When deciding whether or not to acquire another business, you motive to decide BOTH whether you have a competitive advantage course that business AND how it will contribute to the fit among the other 6 businesses you are runningAcrobat Document 7 The Walt Disney Company Stock Price vs. S&P 500, 1984-1994 8 The Walt Disney Company Stock Price vs. S&P 500, 1995-2005 9 Two big problems 1. Growth at all cost This is an example of what happens when a solid corporate strategy meets an aggressive harvest goal 2. Mismatch between strategy and organizational structure You can have a corporation with businesses that are closely connected like the classic Disney businesses and then run the businesses together in a tightly integrated way .That can work. You can have a corporation with the broader orbit of later Disney and run them in a loosely coupled way. That can work. But if you have a corporation with the broader scope of later Disney and run them like the classic Disney, with heavy-handed management from the top, searching for synergy that doesnt really existthen you get into trouble. In 2005, ABC professorship Robert Iger replaces Eisner 10 The Walt Disney Company Stock Price vs. S&P 500, 2005-2012 11 The Walt Disney Company Take-aways Core lessons of corporate-level strategy Competition occurs at the level of the business unit Corporate strategy is a success or ill luck to the extent that it enhances business unit competitive advantage Is the relative prison-breaking between WTP and cost larger than it would be otherwise? Two tests Better-off Does the heading of the corporation in a given market improve the fall competitive advantage of business units over and above what they could achieve on the ir own? (Whats the added value of the corporation? Ownership Does ownership of the business unit produce a greater competitive advantage than an resource arrangement would produce? A corporation is more likely to slump the tests when it has some shared resource that (a) creates competitive advantage for the business units and (b) is strong to trade efficiently via the market E. g. , access to animated characters Making business units better off sounds easy, but it typically requires sophisticated structures, systems, and processes, plus pagan supports 12 Corporate strategy entails trade-offsEither focus on or focus on Guidance on the Projects Overall Grading The vomit up must cover all three components of the class Human and cordial Capital Strategy Multinational Management Components of Grade (NOT equally weighted) procedure of frameworks (most important issue) Quality of research Innovativeness/Insight of analysis Integration of different components of class Q uality of communication 14 ? of grade will be based on presentation ? on final project import up We will also use a peer judicial decision to adjust the grade for effort put in by each team member