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1、Strategy: A View From the TopChapter 9 - Corporate Strategy: Shaping the PortfolioGroup 5:Group 5:Laura MooreLaura MooreJeffri VaughnJeffri VaughnGrant GerhardtGrant GerhardtPatrick KirklandPatrick KirklandChet VisserChet VisserShaping the PortfolioWhat exactly is your business strategy?Single busin
2、ess companies should have a clear, concise answer, and an easy-to-understand answer to this questionFor multi-business companies, the answer is a bit more complex, and much less easier to understand.Multi-business strategies, since they tend to be so complicated, are usually broken down into two to
3、five themes, which makes them much easier to comprehend.Ex. GEs Strategic Themes are developing Ex. GEs Strategic Themes are developing leaders, integrate business on a global scale, leaders, integrate business on a global scale, and prowess in making skillful acquisitions.and prowess in making skil
4、lful acquisitions.Breaking down a companys strategy creates a powerful management tool for aligning behaviors and decision making at all levels within the company.DefinitionsBusiness Unit Strategy - how to compete in a given industryCorporate Strategy - which business should the company operate inEc
5、onomies of Scale and ScopeEconomies of Scale- Cost per unit decreases as volume goes upEx. Titleist: makes millions of golf balls and Ex. Titleist: makes millions of golf balls and therefore can sell them at lower prices because of therefore can sell them at lower prices because of the sheer volume
6、producedthe sheer volume producedProvides an advantage to being big, because Provides an advantage to being big, because large plants can often produce products at a large plants can often produce products at a much lower cost than smaller plantsmuch lower cost than smaller plantsMust be large to be
7、 able to compete globally, so Must be large to be able to compete globally, so you can undersell the regions local competitors you can undersell the regions local competitors and compete with other global companiesand compete with other global companiesWhy do costs fall?From the use of better techno
8、logies in the production processGreater buyer power in large-scale purchasing situationsFinding better ways to perform a given task, thus driving the costs lowerReferred to as: Referred to as: Economics of LearningEconomics of LearningEconomies of Scope - Cost per unit falls because the asset used i
9、s shared with some other activityEx. AA using its aircraft to carry mail as well as Ex. AA using its aircraft to carry mail as well as parcels in extra space in their cargo holdsparcels in extra space in their cargo holdsThree Classes of Economies of ScopeHorizontalHorizontalGeographicalGeographical
10、VerticalVerticalHorizontal ScopeHorizontal Scope - Concerns choices of product - Concerns choices of product scopescope Ex. GE with their many different products: Jet Engines, Ex. GE with their many different products: Jet Engines, Medical, Financial, and many other areas Medical, Financial, and man
11、y other areas Ex. Virgin with its many different businesses: Airline, Ex. Virgin with its many different businesses: Airline, Music, and various other thingsMusic, and various other thingsGeographical ScopeGeographical Scope - Choices of geographical - Choices of geographical coveragecoverage Ex. Mc
12、Donalds and Coke with their operations in 100+ Ex. McDonalds and Coke with their operations in 100+ countriescountries Ex. Southwest with their choice only to operate Ex. Southwest with their choice only to operate domestically in the USA, and from 2domestically in the USA, and from 2ndnd tier airpo
13、rts tier airportsVertical Scope - How the company will link its value chain activities vertically; whether the company manufactures everything themselves or do they buy and re-brand.Ex. Boeing has a medium vertical strategy. They Ex. Boeing has a medium vertical strategy. They purchase some of their
14、 components from other purchase some of their components from other companies and manufacture other components companies and manufacture other components in-house.in-house.Capitalizing on the Advantages of Scale and ScopeCompanies must make investments related to the goal of making their global mark
15、eting and distribution organizations function properly, and efficiently.Timing is criticalFirst Movers have the best chance to succeed, First Movers have the best chance to succeed, because challengers face an uphill battle.because challengers face an uphill battle.First Movers can continue to build
16、 their market First Movers can continue to build their market share and perfect their production process as share and perfect their production process as the challengers work on building their the challengers work on building their production capacity.production capacity.CoreThe best starting point
17、for crafting a corporate The best starting point for crafting a corporate strategy is to define the core.strategy is to define the core.The The CoreCore is a companys most valuable products, is a companys most valuable products, channels, and distinctive capabilities.channels, and distinctive capabi
18、lities. Ex. AA: Maintenance Personnel, Pilots, and Cabin CrewEx. AA: Maintenance Personnel, Pilots, and Cabin CrewThe challenge is to define the company in a way The challenge is to define the company in a way that is different from all the others so that the that is different from all the others so
19、 that the company is able to build on its real capabilities and company is able to build on its real capabilities and avoid any wishful thinking.avoid any wishful thinking.Not choosing a core will result in risking confusion Not choosing a core will result in risking confusion about a companys posit
20、ioning in its served about a companys positioning in its served markets, and may even make it harder to create markets, and may even make it harder to create value on a sustained basis.value on a sustained basis.Strategy TrapsAssumption that since their business units are performing well and have re
21、ached their limit, and therefore it is not necessary to make any more investments in their core business unitsAssumption that there is a greater upside potential in underperforming businesses and making risky investments in these underperforming businessesPrematurely abandoning core businessesEx. Co
22、lgate-PalmoliveInvested in its core business and drove it to its Invested in its core business and drove it to its full potential.full potential.Resulted in Colgate outperforming GE and Resulted in Colgate outperforming GE and generating returns three times of the S&P 500.generating returns three ti
23、mes of the S&P 500.Became a leader in their industry.Became a leader in their industry.Ex. BoeingBet nearly the entire companys assets on the Bet nearly the entire companys assets on the development of the 747 airliner.development of the 747 airliner.Resulted in the most successful wide body in Resu
24、lted in the most successful wide body in aviation history.aviation history.Cemented Boeing as the leader in commercial Cemented Boeing as the leader in commercial aircraft production.aircraft production.TakeawaysA concise description of your corporate strategyEconomies of Scale and Scope and their u
25、ses and benefitsCapitalize on Economies of Scope and ScaleChoose a core and invest in itGrowth StrategiesAchieving consistent revenue and profit growth is hard, especially for large companiesA growth strategy that works for one company might not be appropriate for another May even be disastrousMay e
26、ven be disastrousHigh percentage of mergers and acquisitions fail to meet expectationsRelying on internal growth to meet revenue targets is riskyFew companies consistently achieve higher-than-GDP growth from internal sources aloneGrowth StrategiesTo formulate a successful growth strategy, a company
27、must carefully analyze its strengths and weaknesses, how it delivers value to customers, and what growth strategies its culture can effectively supportSelecting the right growth strategy requires a careful analysis of opportunities, strategic resources, and cultural fitGrowth StrategiesA company onl
28、y has three avenues by which to A company only has three avenues by which to grow its revenue basegrow its revenue base 1. Organic or internal growth1. Organic or internal growthBuild: Wal-Mart and DellBuild: Wal-Mart and Dell 2. Growth through acquisition2. Growth through acquisitionBuy: GEBuy: GE
29、3. Growth through alliance-based initiatives3. Growth through alliance-based initiativesBond: Amazon and eBayBond: Amazon and eBay“Build, Buy, or Bond” paradigm“Build, Buy, or Bond” paradigmGrowth strategies can also be characterized by Growth strategies can also be characterized by using product-ma
30、rket choice as the primary using product-market choice as the primary criterioncriterion 1. Concentrated growth1. Concentrated growth 2. Vertical and horizontal integration2. Vertical and horizontal integration 3. Diversification3. DiversificationConcentrated Growth StrategiesExisting product market
31、s often are attractive avenues for growthA corporation that continues to direct its resources to the profitable growth of a single product category, in a well-defined market, and possibly with a dominant technology, is said to pursue a concentrated growth strategyConcentrated Growth StrategiesMost d
32、irect way of pursuing concentrated growth is to target increases in market shareThis can be done in three ways1. Increasing the number of users of the 1. Increasing the number of users of the productproduct2. Increasing product usage by stimulating 2. Increasing product usage by stimulating higher q
33、uantities of use or by developing new higher quantities of use or by developing new applicationsapplications3. Increasing the frequency of the products use3. Increasing the frequency of the products useConcentrated Growth StrategiesConcentrated growth can be a powerful competitive weaponA tight prod
34、uct-market focus allows a company to finely assess market needs, develop a detailed knowledge of customer behavior and price sensitivity, and improve the effectiveness of marketing and promotion effortsHigh success rates of new products also are tied to avoiding situations that require undeveloped s
35、killsConcentrated Growth StrategiesFour specific conditions favor concentrated growthFour specific conditions favor concentrated growth 1. The industry is resistant to major technological 1. The industry is resistant to major technological advancements. This is usually the case in the late growth an
36、d advancements. This is usually the case in the late growth and maturity stages of the product life cycle and in product-maturity stages of the product life cycle and in product-markets where product demand is stable and industry markets where product demand is stable and industry barriers, such as
37、capitalization, are high.barriers, such as capitalization, are high. 2. Targeted markets are not product-saturated. Markets with 2. Targeted markets are not product-saturated. Markets with competitive gaps leave the firm with alternatives for growth, competitive gaps leave the firm with alternatives
38、 for growth, other than taking market share away from competitors.other than taking market share away from competitors. 3. The product-market is sufficiently distinctive to discourage 3. The product-market is sufficiently distinctive to discourage competitors from trying to invade the petitors from
39、trying to invade the segment. 4. Necessary inputs are stable in price and quantity and are 4. Necessary inputs are stable in price and quantity and are available in the amounts and at the times needed.available in the amounts and at the times needed.Concentrated Growth Strategies Sample of corporati
40、ons that successfully use concentrated Sample of corporations that successfully use concentrated growth strategies include:growth strategies include:AllstateAllstateJohn DeereJohn DeereAmocoAmocoKFCKFCAvonAvonMack TruckMack TruckCaterpillarCaterpillarMartin-MariettaMartin-MariettaChemlawnChemlawnMcD
41、onaldsMcDonaldsGoodyearGoodyearSwatchSwatchGiant FoodsGiant FoodsTenantTenantHyatt Legal ServicesHyatt Legal ServicesVertical and Horizontal IntegrationIf a corporations current lines of business show strong growth potential, two additional avenues for growth vertical and horizontal integration are
42、availableVertical integration describes a strategy of increasing a corporations vertical participation in an industrys value chainBackward integration entails acquiring resource suppliers or raw materials or manufacturing components that used to be sourced elsewhereVertical and Horizontal Integratio
43、nForward integrationForward integration refers to a strategy of refers to a strategy of moving closer to the ultimate customer by acquiring moving closer to the ultimate customer by acquiring a distribution channel or by offering after-sale a distribution channel or by offering after-sale servicesse
44、rvicesVertical integration can be valuable if the corporation Vertical integration can be valuable if the corporation possesses a business unit that has a strong possesses a business unit that has a strong competitive position in a highly attractive industry competitive position in a highly attracti
45、ve industry especially when the industrys technology is especially when the industrys technology is predictable and markets are growing rapidlypredictable and markets are growing rapidlyIt can reduce a corporations strategic flexibility by It can reduce a corporations strategic flexibility by creati
46、ng an exit barrier that prevents the company creating an exit barrier that prevents the company from leaving the industry if its fortunes declinefrom leaving the industry if its fortunes declineVertical and Horizontal IntegrationDecisions about vertical scope are of key strategic importance at both
47、the business unit and corporate levels because they involve the decision to redefine the domains in which the firm will operateVertical integration also affects industry structure and competitive intensityThere are four reasons to vertically integrateVertical and Horizontal IntegrationThere are four
48、 reasons to vertically integrateThere are four reasons to vertically integrate 1. The market is too risky and unreliable and is at risk 1. The market is too risky and unreliable and is at risk of “failing.” The typical features of a failed vertical of “failing.” The typical features of a failed vert
49、ical market are (1) a small number of buyers and sellers; market are (1) a small number of buyers and sellers; (2) high asset specificity, durability, and intensity; and (2) high asset specificity, durability, and intensity; and (3) frequent transactions.(3) frequent transactions. 2. A company in an
50、 adjacent stage of the industry chain 2. A company in an adjacent stage of the industry chain has more market power. Specifically, if one stage of an has more market power. Specifically, if one stage of an industry chain exerts market power over another and industry chain exerts market power over an
51、other and thereby achieves abnormally high returns, it may be thereby achieves abnormally high returns, it may be attractive for participants in the dominated industry to attractive for participants in the dominated industry to enter the dominating industry. Players in weak stages of enter the domin
52、ating industry. Players in weak stages of an industry chain might have clear incentives to move an industry chain might have clear incentives to move into the powerful stages; however, such a move is not into the powerful stages; however, such a move is not without danger. Existing players in an ind
53、ustry often without danger. Existing players in an industry often believe they can enter another business within the chain believe they can enter another business within the chain more easily than can outsiders. The key skills along an more easily than can outsiders. The key skills along an industry
54、 chain usually differ so substantially that industry chain usually differ so substantially that outsiders with analogous skills from other industries outsiders with analogous skills from other industries often are superior entrants.often are superior entrants.Vertical and Horizontal Integration3. Ve
55、rtical integration also makes strategic 3. Vertical integration also makes strategic sense when used to create or exploit market sense when used to create or exploit market powers by raising barriers to entry or allowing powers by raising barriers to entry or allowing price discrimination across cus
56、tomer segments.price discrimination across customer segments. Barriers to entryBarriers to entry. When most competitors in an industry are . When most competitors in an industry are vertically integrated, it can be difficult for nonintegrated vertically integrated, it can be difficult for nonintegra
57、ted players to enter. Potential entrants might have to enter all players to enter. Potential entrants might have to enter all stages to compete. This increases capital costs and the stages to compete. This increases capital costs and the minimum efficient scale of operations, thus raising barriers m
58、inimum efficient scale of operations, thus raising barriers to entry.to entry. Price discriminationPrice discrimination. Forward integration into selected . Forward integration into selected customer segments can allow a company to benefit from customer segments can allow a company to benefit from p
59、rice discrimination. price discrimination. Vertical and Horizontal Integration4. When an industry is young, companies 4. When an industry is young, companies sometimes forward integrate to develop a sometimes forward integrate to develop a market. This is successful only when the market. This is suc
60、cessful only when the downstream business possesses proprietary downstream business possesses proprietary technology or a strong brand image prevents technology or a strong brand image prevents imitation by “free rider” competitors. It is futile imitation by “free rider” competitors. It is futile to
61、 develop new markets if a company cannot to develop new markets if a company cannot capture the economic gains for at least several capture the economic gains for at least several years. years. Vertical and Horizontal IntegrationThree important questions with respect to vertical Three important ques
62、tions with respect to vertical and horizontal integration (PIMS Ch. 6):and horizontal integration (PIMS Ch. 6): 1. Are highly integrated businesses in general more or 1. Are highly integrated businesses in general more or less profitable than less integrated ones?less profitable than less integrated
63、 ones? 2. Under what circumstances is a high level of vertical 2. Under what circumstances is a high level of vertical integration likely to be most profitable?integration likely to be most profitable? 3. Apart from its influence on overall profitability, what 3. Apart from its influence on overall
64、profitability, what are the principal benefits and risks associated with are the principal benefits and risks associated with vertical integration strategies?vertical integration strategies?Vertical and Horizontal IntegrationAnswers:Answers: The study found that for both industrial and consumer The
65、study found that for both industrial and consumer manufacturing businesses, backward integration generally manufacturing businesses, backward integration generally raised ROI but forward integration did not, whereas partial raised ROI but forward integration did not, whereas partial integration gene
66、rally hurt ROI. integration generally hurt ROI. The impact of vertical integration on profitability varies with The impact of vertical integration on profitability varies with the size of the business. Larger businesses tend to benefit to the size of the business. Larger businesses tend to benefit t
67、o a greater extent than smaller ones. This suggests that a greater extent than smaller ones. This suggests that vertical integration might be a particularly attractive option vertical integration might be a particularly attractive option for businesses with a substantial market share in which for bu
68、sinesses with a substantial market share in which further backward integration has the potential for enhancing further backward integration has the potential for enhancing competitive advantage and increasing barriers to petitive advantage and increasing barriers to entry.Vertical and Horizontal Int
69、egration What other factors should be considered, (1) What other factors should be considered, (1) alternatives to ownership, such as long-term contracts alternatives to ownership, such as long-term contracts and alliances, should actively be considered; (2) vertical and alliances, should actively b
70、e considered; (2) vertical integration almost always requires substantial increases integration almost always requires substantial increases in investment; (3) projected cost reductions do not in investment; (3) projected cost reductions do not always materialize; and (4) vertical integration always
71、 materialize; and (4) vertical integration sometimes results in increased product innovation.sometimes results in increased product innovation.*Although useful as a general guide to crafting *Although useful as a general guide to crafting strategy, some of these findings might need to be strategy, s
72、ome of these findings might need to be validated before applying them to a specific validated before applying them to a specific industryindustryVertical and Horizontal IntegrationHorizontal integration involves increasing the range of products and services offered to current markets or expanding th
73、e firms presence into a wider number of geographic locationsHorizontal integration strategies often are designed to leverage brand potentialIn recent years, strategic alliances have become an increasingly popular way to implement horizontal growth strategiesDiversificationThe term diversification ha
74、s a wide range of meanings in connection with many aspects of business activity.In a strategic context, diversification is defined as a strategy of entering product markets different from those in which a company is currently engaged.Berkshire Hathaway is a good example of a company engaged in diver
75、sification.Berkshire HathawayExamples of Berkshires Diversity:Acme BrickAcme BrickBen Bridge JewelersBen Bridge JewelersFruit Of The LoomFruit Of The LoomGEICO Auto InsuranceGEICO Auto InsuranceNetJetsNetJetsSees CandySees CandyStar FurnitureStar FurnitureFortune BrandsJim Beam, Sauza, Makers Mark,
76、Cruzan, Canadian Club, CourvoisierMoen, Master Lock, Master Brands, SimontonTitleist, FootJoy, Cobra, Pinnacle, Scotty CameronDiversification StrategyDiversification strategies pose a great challenge to corporate executives.In the 1970s, many US companies, facing stronger competition from abroad and
77、 diminished growth prospects in a number of traditional industries, moved into industries in which they had no particular competitive advantage.Diversification StrategyBelieving that general management skill could offset knowledge gained from experience in an industry, executives thought that becaus
78、e they were successful in their own industries, they could be just as successful in others.A depressing number of their subsequent experiences showed that these executives overestimated their relevant competence and, under these circumstances, bigger was worse, not better.Diversification StrategyDiv
79、ersification strategies can be motivated by a Diversification strategies can be motivated by a variety of factors, including the desire to create variety of factors, including the desire to create revenue growth, increase profitability through revenue growth, increase profitability through shared re
80、sources and synergies, reduce the shared resources and synergies, reduce the companys overall exposure to risk by balancing companys overall exposure to risk by balancing the business portfolio, or an opportunity to exploit the business portfolio, or an opportunity to exploit underutilized resources
81、.underutilized resources.DiversifyingDiversifying RelatednessRelatedness or the potential for or the potential for synergysynergy is a major is a major consideration in formulation diversification strategies.consideration in formulation diversification strategies. Relatedness or synergy can be defin
82、ed in a number of Relatedness or synergy can be defined in a number of wayswaysRelatedness or SynergyThe most common interpretation defines relatedness The most common interpretation defines relatedness in terms of tangible linksin terms of tangible links between business units.between business unit
83、s.A second form of relatedness among business A second form of relatedness among business unities is based on common intangible resources, unities is based on common intangible resources, such as knowledge or capabilities.such as knowledge or capabilities.A third form of relatedness concerns the abi
84、lity of a A third form of relatedness concerns the ability of a business unity to jointly gain or exercise market business unity to jointly gain or exercise market power.power.A forth form is strategic relatedness. It is defined in A forth form is strategic relatedness. It is defined in terms of the
85、 similarity of the strategic challenges terms of the similarity of the strategic challenges faced by different business units.faced by different business units.RelatednessA well-known study links a companys performance to the degree of relatedness among its various businesses. It identifies three ca
86、tegories of relatedness based on a firms specialization ratio, defined as the proportion of revenues derived from the largest single group of related businesses: dominant business companies, related business companies, and unrelated business companies.Risks of Diversification StrategyWhat can the co
87、mpany do better than any of its What can the company do better than any of its competitors in its current markets?competitors in its current markets?What strategic assets are needed to succeed in the What strategic assets are needed to succeed in the new market?new market?Can the firm catch or leapf
88、rog competitors?Can the firm catch or leapfrog competitors?Will diversification break up strategic assets that Will diversification break up strategic assets that need to be kept together?need to be kept together?Will our firm simply be a player in the new market or Will our firm simply be a player
89、in the new market or will it be a winner?will it be a winner?What can the corporation learn by diversifying, and What can the corporation learn by diversifying, and is it organized to learn it?is it organized to learn it?TestsAttractiveness TestAttractiveness Test Is the industry the company is abou
90、t to enter Is the industry the company is about to enter fundamentally attractive from a growth, competitive, fundamentally attractive from a growth, competitive, and profitability perspective, or can the company create and profitability perspective, or can the company create such favorable conditio
91、ns?such favorable conditions?Cost of Entry TestCost of Entry Test Are the costs of entry reasonable? Is the time horizon Are the costs of entry reasonable? Is the time horizon until the venture becomes profitable acceptable? Are until the venture becomes profitable acceptable? Are risk levels within
92、 accepted tolerances?risk levels within accepted tolerances?Better-Off TestBetter-Off Test Does the overall portfolios competitive position and Does the overall portfolios competitive position and performance improve as a result of the diversification performance improve as a result of the diversifi
93、cation move?move?DiversificationDiversification is a powerful weapon in a corporations strategic arsenal. It is not a panacea for rescuing corporations with mediocre performance, however. If done carefully, diversification can improve shareholder value, but it needs to be planned carefully in the co
94、ntext of an overall corporate strategy.Mergers and AcquisitionsA merger signifies that two companies have joined to form one company.An acquisition occurs when one firm buys another.In acquisitions, the management team of the buyer tends to dominate decision making in the combined company.Acquisitio
95、ns are generally more expensive.Six Themes of AcquisitionSuccessful acquisitions are usually part of a well-developed corporate strategy.Diversification through acquisition is an ongoing, long-term process that requires patience.Successful acquisitions usually result from disciplined strategic analy
96、sis, which looks at industries first before it targets companies, while recognizing that good deals are firm-specific.Six Themes contAn acquirer can add value in only a few ways, and before proceeding with an acquisition, the buying company should be able to specify how synergies will be achieved an
97、d value created.Objectivity is essential, even though it is hard to maintain once the acquisition chase continues.Most acquisitions flounder on implementation; strategies for implementation should be formulated before the acquisition is completed and executed quickly after the acquisition deal is cl
98、osed.Attractive Key DriversRisk sharingprioritize strategic interests and Risk sharingprioritize strategic interests and balance them according to riskbalance them according to riskFunding limitationsto compete in the global arena, Funding limitationsto compete in the global arena, companies must in
99、cur immense fixed costs with a companies must incur immense fixed costs with a shorter payback period and at a higher level of riskshorter payback period and at a higher level of riskMarket accesscustomers benefit because the gaps Market accesscustomers benefit because the gaps in product lines are
100、filled with quality productsin product lines are filled with quality productsTechnology accesspartnering with technologically Technology accesspartnering with technologically compatible companies to achieve the prerequisite compatible companies to achieve the prerequisite level of excellence is ofte
101、n essentiallevel of excellence is often essentialCooperative StrategyCooperative strategiesjoint ventures, strategic Cooperative strategiesjoint ventures, strategic alliances, and other partneringalliances, and other partnering arrangementsarrangementshave become increasingly popular in recent years
102、.have become increasingly popular in recent years.For many corporations, cooperative strategies For many corporations, cooperative strategies capture the benefits of internal development and capture the benefits of internal development and acquisition while avoiding the drawbacks of both.acquisition
103、 while avoiding the drawbacks of both.Other reasons to pursue a cooperative strategy Other reasons to pursue a cooperative strategy are a lack of particular management skills; an are a lack of particular management skills; an inability to addinability to add value in-house; and a lack of value in-ho
104、use; and a lack of acquisition opportunitiesacquisition opportunities because of size, because of size, geographical, or ownership restrictions.geographical, or ownership restrictions.The airline industry provides a good example of The airline industry provides a good example of some of the drivers
105、and issues involved in forging some of the drivers and issues involved in forging strategic alliances.strategic alliances.The Strategic Logic of AlliancesEach business has its own, “unique alliance drivers.”Key drivers in the early growth stageProduct innovationProduct innovationCredibilityCredibili
106、tyAccess to capitalAccess to capitalExternal value, market and customer reach are the most important factors in the Rapid Growth and Consolidation phases.Stability StageReduced costValue-chain strengtheningProduct extensionAlliance Models-Booz Allen Hamilton, Inc.FranchiseFranchisePortfolioPortfolio
107、CooperativeCooperativeConstellationConstellationPortfolio and Franchise ModelsMultiple alliances are established, but are Multiple alliances are established, but are managed as a single portfolio. “One company acts managed as a single portfolio. “One company acts as the hub for the alliances and man
108、ages the as the hub for the alliances and manages the external partners.”external partners.” i.e. AT&T and Time Warner (book examples), another i.e. AT&T and Time Warner (book examples), another example is Microsoft Dynamicsexample is Microsoft DynamicsManagers use the franchise model “when gaps in
109、Managers use the franchise model “when gaps in an organizations value chain are greater than any an organizations value chain are greater than any one partner can fill.”one partner can fill.” i.e. Nintendo (book example), and many restaurants are i.e. Nintendo (book example), and many restaurants ar
110、e franchised like Blimpie, Wingstop, Beef-O-Bradys, and franchised like Blimpie, Wingstop, Beef-O-Bradys, and many more.many more.Cooperative and Constellation ModelsThe alliance is at the center, customer The alliance is at the center, customer relationships are no longer concentrated with the rela
111、tionships are no longer concentrated with the members of the company, but are with the alliance members of the company, but are with the alliance center. There is no individual company in control. center. There is no individual company in control. Instead, all of the partners work together toward In
112、stead, all of the partners work together toward one goal. one goal. i.e. Tri-Star is an alliance with CBS, Columbia Pictures, i.e. Tri-Star is an alliance with CBS, Columbia Pictures, and HBO (book example). Another is Denton County and HBO (book example). Another is Denton County Electric Cooperati
113、ve (North Texas)Electric Cooperative (North Texas)This model is for companies that design strategies This model is for companies that design strategies that will put other companies on the defensive.that will put other companies on the defensive. i.e. Constellation Energy Group, Constellation Wines,
114、 i.e. Constellation Energy Group, Constellation Wines, etcetcGroups of Alliances-Boston Consulting GroupDivides alliances into four groups by whether or not participants are competitors.Expertise AlliancesExpertise AlliancesThis brings together non-competing firms so they This brings together non-co
115、mpeting firms so they simply share their expertise.simply share their expertise. i.e. “outsourcing of information technology services.”i.e. “outsourcing of information technology services.”AlliancesNew-Business AlliancesNew-Business Alliances “Partnerships focused on entering a new business or “Part
116、nerships focused on entering a new business or market.”market.”i.e. many businesses partner when getting into new parts of i.e. many businesses partner when getting into new parts of the world.the world.Cooperative AlliancesCooperative Alliances Efforts of competing companies to achieve economies of
117、 Efforts of competing companies to achieve economies of scale. scale. i.e. “Competitors combining to seek cheaper health insurance i.e. “Competitors combining to seek cheaper health insurance for employees, for example, or combined purchasing for employees, for example, or combined purchasing arrang
118、ements.”arrangements.”M&A-like alliancesM&A-like alliances These focus on “near-complete integration but are These focus on “near-complete integration but are prevented from doing so”prevented from doing so” Expertise alliances are favored the most by the stock Expertise alliances are favored the mo
119、st by the stock market, and M&A alliances are the least favored.market, and M&A alliances are the least favored.Growth & Strategic RiskStrategic risk can be shown by the choice of growth initiative a company takes. This measure is taken as a distance from core dimensions that is “implied by a partic
120、ular strategic move, and calculated by assessing the degree of sharing between the core business and the growth opportunity.A companys success decreases as it moves away from its core.Choice of Strategy and Level of RiskLess riskyLocal geographic expansion, or the introduction Local geographic expan
121、sion, or the introduction of a new product.of a new product.More riskyTargeting new customers, or channels.Targeting new customers, or channels.Forward or backward integration.Forward or backward integration.Entering a completely new business.Entering a completely new business.Disinvestments: Sell-O
122、ffs, Spin-Offs, and LiquidationsA mismatch of corporate parent and corporate child results in a sell-off or spin-off.i.e. Chrysler to Cerberusi.e. Chrysler to CerberusSome companies try to “unlock value for shareholders” by splitting a major company into two or more single companies.However, “for ev
123、ery successful spin, there are two that fail to live up to their potential.”Successful Spin-OffsFor a successful spin-off, managers must:“Ensure that both the parent corporation and “Ensure that both the parent corporation and the unit spun off have viable business and the unit spun off have viable business and financial structures”financial structures”“Meet or exceed earnings expectations.”“Meet or exceed earnings expectations.”“Continue growth.”“Continue growth.”
