Corporate-Level andInternational Strategy

IntroductionCorporate level issues

Corporate parent

The corporate parent refers to the levels of management above that of the business units and therefore without direct interaction with buyers and competitors

PRODUCT/MARKET DIVERSITY

Diversification is a strategy that takes the organisation into both new markets and products or services

Reasons for diversification Efficiency gains from resources (by-

products) Gains from corporate managerial

capabilities Increase market power Response to environmental change Risk diversification Powerful stockholder's pressure

Related diversificationRelated diversification can be

defined as strategy development beyond current products and markets, but within the capabilities or value network of the organisation

Related diversification is often seen as superior to unrelated diversification

Time and cost saving

The difficulty for business-unit managers in sharing resources with other business units

Vertical integrationBackward integration Forward integrationHorizontal integration

Unrelated diversificationUnrelated diversification is the

development of products or services beyond the current capabilities or value network.

Unrelated diversification is described as a ‘conglomerate strategy’

Exploiting dominant logic (focusing major business)

Effective in underdeveloped markets

Diversification and performance

International diversity and international strategy

Reasons for international diversity Globalization of markets Following customers while internationalizing Bypass home market limitations Exploit differences between countries and

geographical regions * Difference in culture * Administrative difference * Geographical specific differences * Specific economic factor (labor) Economic benefits * Reap economies of scale * Stabilization of earning across markets

To broaden the size of the market to exploit strategic capabilities

Internationalization of value adding activities

To enhance their knowledge base

Market selection and entry

Macro economic condition Political environment Infrastructure Transport and communication Availability of local resources Tariff and non-tariff barrier Similarity of cultural norms Extent of political and legal risks

Entry modes Exporting, contractual arrangements, joint

ventures, foreign direct investment

Market entry Modes, Advantages and Disadvantages

Market entry Modes, Advantages and Disadvantages

Market entry Modes, Advantages and Disadvantages

Market entry Modes, Advantages and Disadvantages

International value framework

Global sourcing: Purchasing services and components from the most appropriate suppliers around the world regardless of their location

Locational advantagesCost advantage Existence of unique capabilities

as competitive advantage

International strategies Global-local dilemma (standardization) Concentration of assets and capabilities in

limitedlocation (mostly home)Generic strategies Multi-domestic strategyValue adding in individual national market

to unique local requirements Global strategy Standardized products

Value Creation and The Corporate Parent Value-adding and value-destroying activities of corporate parents

The value-adding activitiesFocusClarity to external stakeholders:Clarity to business units:Providing expertise and servicesKnowledge creation and sharing

processes

Value-destroying activitiesCorporate parents can add cost with

systems and hierarchies that delay decisions, create a ‘bureaucratic fog’ and hinder market responsiveness.

Executives are not truly answerable for the performance of their businesses.

Diversity and size of some corporations make it very difficult to see what they are about.

VALUE CREATION AND THE CORPORATE PARENTThe value-adding activities1. EnvisioningFocus:Clarity to external stakeholders:Clarity to business units:2. Intervening monitoring the performance improve business-unit level

performance coaching and training

Value-destroying activitiesBureaucratic fog’ hinder market

responsivenessExecutives are not truly

answerable for the performance of their businesses.

Diversity and size of some corporations make it very difficult to see what they are about

MANAGING THE CORPORATE PORTFOLIOThe growth share (or BCG) matrixA star is a business unit which has a

high market share in a growing marketA question mark (or problem child) is

a business unit in a growing market, but without a high market share

A cash cow is a business unit with a high market share in a mature market

Dogs are business units with a low share in static or declining markets