mba session 7 corporate strategy knut haanæs, ph.d associate professor norwegian school of...
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MBA Session 7Corporate Strategy
Knut Haanæs, Ph.D
Associate Professor
Norwegian School of Management - BI
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Corporate Strategy
Intro to corporate strategy
Issues of corporate strategy
AT&T case and role play
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Levels of strategy
Portfolio Synergies
Competitive position
Product-portfolio
Value creation
CORPORATESTRATEGY
BUSINESS UNIT
STRATEGY
FUNCTIONAL STRATEGY
MarketingFinanceHRLogisticsProduction
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Corporate Strategy
“In each case, executives were focusing on individual elements of corporate strategy:
resources, businesses, or organization. What was missing was the insight that
turns those elements into an integrated whole. That insight is the essence of
corporate advantage—the way a company creates value through the configuration and coordination of its
multibusiness activities.” Collis and Montgomery 1998: 72
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Rationale for Corporate Strategy
The total value of the combined businesses is higher within the
corporation than if each business was operated independently outside the corporation (or in
another corporation)
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Corporate Strategy
Intro to corporate strategy
Issues of corporate strategy
AT&T case and role play
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AT&T - 1993-94
Network services are obliged to purchase equipment and
consulting services internally, also when outside companies
offer superior value. Sometimes you are stuck
with «second best» solutions in terms of infrastructure.
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AT&T - 1993-94
Bell Labs struggle with showing integrity vis-à-vis potential
clients; often competitors of the telecom operator. This means
that you do not get a number of the projects for which you are
best qualified (in terms of competencies).
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AT&T - 1993-94The equipment manufacturer is
accused of prioritizing the internal operator, not providing
the optimal service and products to «outside» customers. This
means that your external market is restricted in terms of potential customers, and that you do not reach efficient scale despite the substantial size of the internal
AT&T market.
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AT&T - 1994-94: Role play
Top management teamOverall strategy and
performance
Top management teamOverall strategy and
performance
EquipmentProduction of telecom and
data equipment
Bell Labs R&D, consulting and advanced
solutions
Telecom SevicesOperations of worlds largest
telecom network
External consultantsSupport top management
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Business Units5 key actions to improve
profitability 20% and #1 in 2 years
Identify critical future competencies
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Corporate managementLook for synergiesKeep holistic perspectiveReduce overheads from 33% to
23% in 2 years
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Corporate Strategy
Intro to corporate strategy
Issues of corporate strategy
AT&T case and role play
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Four approaches to corporate strategy
• Portfolio• Competencies• Value creation• Competition
Where do we find synergies? Where are costs?
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First, the Portfolio approach
Competitive position
Indu
stry
att
ract
iven
ess Good Medium Weak
High
Med.
Low
Winner Winner ?
Winner Average business unit
Looser
Profitcreator
Looser Looser
Hit
t et a
l. (1
996)
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Traditional portfolio approach
Allocate financial resources
Identify business units that fit the market
Classify regarding attractivity and position
Identify the right strategy for each b.u. (harvest, invest, etc.)
In which industries do we compete?
How strong is our position and how attractive is the industry?
Should we invest more or less?
How much money should we invest?
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Assumptions behind portfoilo approaches
• Strategic resources assumed to be allocated and mobile
• Independence between business units• Economics-based strategy perspective
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Allocating money
Konsern
SBU SBU SBU
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Second, competency approach
Core product 1
Core product 2
Competense
Competence
Competence
3
Produkter
21
SBU SBU SBU
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Assumptions behind competence- based corporate strategy
• Companies different because of resources• Dependence between business units• Critical resources built over time through
activities• Intangible resources mobilized
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Third, sharing activities
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Fourth, competition
Operatører
Inpu
t fac
tor
com
petit
ion
Industry development
High
LowTIME
Schumpeterinnovasjon
Contractors
CreatorsCreators
Operators
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Independence Control
Autonomy Sharing
Responsiveness Integration
Synergies Subsidies
Examples of corporate tensions
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Four ways to influence value
• Stand alone influence• Linkage influence• Central functions and Services• Corporate Development
Campbell, et al. 1995
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Examples of potential sources of synergy
• Scale economies• Financing / funding• Management• Information• Resources • R&D• Reputation• Vision / mobilization