Articles on Corporate Strategy Flashcards
(30 cards)
What steps should be followed according to the parenting advantage framework to assess the nature of the fit between the parent company and its businesses?
- Examine critical success factors of each business
- Document performance improvement areas in each business through parenting advantages
- Review and group characteristics of parent into a number of categories
- Test judgments against results businesses achieve under influence of the parent
Name three reasons critical success factors should be examined in the parenting advantage framework?
(1) judging fiction between business and parent. Does parent understand CSFs? And
(2) judging how similar parenting needs of different businesses are
(3) CSF analysis is prerequisite for parenting opportunity analysis.
What is a parenting opportunity?
Areas where parent can add value represent upside potential
- Parenting opportunity: potential for improvement within a business
- Most businesses have parenting opportunities and could improve performance if they had a parent organization with exactly the right skills and experience
Name the three types of analyses to identify parenting opportunities?
List major challenges facing the business and attempt to identify parenting opportunities.
Document most important influences parent has on the business and judge whether those influences are addressing parenting opportunities not identified in first analysis.
Review influence of different parent companies on similar businesses to identify sill other parenting opportunities
What are the possible categories of parenting characteristics?
Mental maps that guide parent managers
Corporate structure, management systems and processes
Central functions, services and resources
Nature, experience, and skills of managers in the parent organization
Extent to which companies have decentralized by delegating responsibilities and authority to business-unit managers.
Which two questions should be asked once group characteristics of the parent are devided into one of the categories?
Does parent have characteristics that fit parenting opportunities?
Is there a misfit between parent’s characteristics and business’s CSF’s?
How do firms test judgments against results businesses achieve under influence of the parent?
- Through a success and failure analysis: list important decisions and classifying each as a success, failure or neutral regarding track record with different sorts of business.
- Through performance analysis: reviewing performance of each business in comparison with competitors
What should happen when a business performs worse than competitors in the parenting advantage framework?
If poor performance is due to parenting influence, the business should be divested. Can be evaluated using PIMS
What is on the two axis of the parent-fit matrix?
- Horizontal axis: how well do parent’s characteristics fit business’s parenting opportunities.
- Vertical axis: extent of misfit between parenting’s characteristics and business’s CSF’s.
What are the five possible categories of the parent-fit matrix?
- Heartland businesses
- Edge-of-heartland businesses
- Ballast businesses
- Alien-Territory businesses
- Value-trap businesses
Where do heartland businesses fall on the parent-fit matrix?
high fit between parenting opportunities and parenting characteristics & low misfit between CSF’s and parenting characteristics
What should be done with heartland businesses?
- Should be at heart of company’s future. Have opportunities the parent knows how to address, and parent understands CSF’s well.
- Heartland business should be the core of the parent organization
Where do edge-of-Heartland businesses place on the parent-fit matrix?
Sits on the edge of heartland businesses
some parenting characteristics fit, some don’t. Parent both creates and destroys value
Where are ballast businesses on the parent-fit matrix?
- Low fit parenting opportunities and parenting characteristics, but low misfit between CSF’s and parenting characteristics
What is the conclusion about ballast businesses in the parent-fit matrix?
Ballast business are businesses where potential for further value creation is low but it fits parenting approach
Search for new parenting opportunities. If this fails or parent opportunities discovered are better with a rival’s characteristics: Divest at a premium ASAP.
where do alien-territory businesses place on the parent-fit matrix?
- Low fit between parenting opportunities and parenting characteristics, and high misfit between CSF’s and parenting characteristics
What is the implication of alien-territory businesses in the parent-fit matrix?
They are likely to be value destructive
Where do value-trap business place on the parent-fit matrix?
- High fit between parenting opportunities and parenting characteristics, and high misfit between CSF’s and parenting characteristics
What is the implication of value-trap businesses in the parent-fit matrix?
- Potential for upside gain blinds managers to the misfit.
What are the two differences between business groups and multidivisional organizations?
- Companies of business groups are legally independent entities
- High level of involvement between ownership and management
In what three ways are business groups better than multidivisional organizations?
- Decision making
- Incentive design
- Resource allocation
How are business groups better than multidivisional structures in decision making?
top management of individual business in a business group get greater autonomy.
- In multidivisional companies, top management often has a large influence in decision-making with limited time, attention, focus and knowledge of the business itself.
How are business groups better than multidivisional organizations in terms of incentive design?
separate entities in business groups can tailor their performance measurement systems to their own needs.
Combination of greater autonomy in decision-making and more appropriate awards increases managers’ psychological ownership of affiliates, inspiring greater entrepreneurship.
How are business groups better than multidivisional organizations in resource allocation?
- In multidivisional companies, cash flow surpluses flow to HQ. calls for redistribution face supply-demand mismatches, bureaucratic delays etc.
- In business groups, each affiliate retains capital generated and it can raise capital directly from capital markets, which usually results in better valuations
Affiliates get access to highly diverse resources of sister companies, allowing greater growth opportunities.
