ch 9 interrelationships among business units

7/31/2019 CH 9 Interrelationships Among Business Units

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CH 9

Interrelationships among businessunits.


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Objectives:

Growing importance of horizontalstrategy

Interrelationships among businessunits

Tangible, intangible & competitorinterrelationships.


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Horizontal strategy:

Horizontal strategy is a concept ofgroup, sector & corporate strategybased on competitive advantage

Wider term as compared to financialstrategies

2 main types:

Existing business unitsDiversification strategy to enter into newbusiness.


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Importance of horizontal strategy:

Diversification philosophy is changing

Emphasis is shifting from growth toperformance

The strength of potentialinterrelationships within the group.

Portfolio & resource management.


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Interrelationships among businessunits:

Tangible interrelationships

Intangible interrelationships

Technological changesMultipoint competition


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Sharing & cost:

Material impact

Greater complexity

Learning sensitivityPattern of capacity utilization

Competitors interrelationships.


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Sharing & competitive advantage:

Increases uniqueness: e.g.: IBM &Intel

Automation: manual to online. E.g.:banking

Sharing order processes of relatedproduct lines.


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Sharing & differentiation:

Leads to product development

Enhances compatibility

Lowers the cost of uniquenessAffects product designing


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Costs of sharing:

Costs of coordination: e.g.:scheduling, setting priorities

Cost of compromise: e.g.: consistentperformance for optimum utilization

Cost of inflexibility:

Potential difficulty

Exit barriers


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Difficulty of matching:

Duplication of interrelationships

Adopting & other means of matching:realize & search for other ways ofimproving position.


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Identifying tangibleinterrelationships

Market interrelationships

Production interrelationships

Procurement interrelationshipsTechnological interrelationships

Infrastructure interrelationships


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Intangible interrelationships:

Same generic strategy

Same type of buyer

Similar configuration of value chainSimilar important value activities.


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Competitors interrelationships:

Functional differences

Potential multipoint competitor

Single point competitors with differentpatterns of interrelationships


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Multipoint competitors in unrelatedindustries:

Forecast possible retaliation in alljointly contested industries

Beware of smaller positions

Opportunities to exploit

Establish blocking positions for

defensive purposes.


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Competitors with different patternsof interrelationships:

Both an opportunity & a threat

Ability of firm to achieveinterrelationships

Different forms of interrelationships


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Forecasting potential competitors:

Identifying all possibleinterrelationships

Logical analysis & identification ofrelated industries

Suggestion of possibleinterrelationships

ch 9 interrelationships among business units

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