Managing Multi-Unit Organizations
Strategic Factors II
Page 1
Corporate Growth
• A major acquisition is the fastest way to
compensate for a company's failure to
grow organically (via internal means)
• You don't get a gazelle by breeding
dinosaurs.
– “When Dinosaurs Mate,” G. Hamel, WSJ
Best Path to Growth?
Ford
– Jaguar
– Mazda
General Motors
– Saab
Hewlett-Packard
– Compaq
Unilever
– Knorr
– Ben & Jerry
Starbuck’s
Southwest Airlines
Toyota
Dell
Wal-Mart
Nike
Daimler-Benz
– Chrysler
Corporate strategy solutions
Business strategy solutions
Entering New Businesses
•WHY?
– Does business fit?
o Financially
o Strategically
o Culturally
•HOW?
– Acquisition or merger
– Internal start-up
– Joint ventures
– Alliance
Justifications for M&A
•Attractiveness test
– Industry factors
– Core competencies
– Strategic position
•Cost of entry test
– Buy outstanding shares
– Cash
– Contributions to merger or JV
•Better off test
– Synergies, econ. of scale/scope
– Consolidation of resources, activities
Blue Circle
Unrelated Diversified Firm
HQ
Bricks
Cement
Cement
Products
OK
Lawn
Mowers
Gas
Stoves
Unrelated to Other Units
or
Core Competence
Boddingtons
Related Horizontal Diversified Firm
HQ
Pubs
Hotels
Restaurants
Nursing
Homes
Related to Other Units
via
Core Competence
Health
Clubs
Adidas-Reebok Merger
+
vs.
Adidas-Reebok Merger
+
Employees
26,100
24,600
U.S. Market
Share
21.1%
36.3%
Global Market
Share
25.0%
33.2%
Net Income
$517.9 mil
$1.2 bil
Hot Product
SmartShoe
+ Nelly’s shoe line
L. Armstrong apparel
+ iPod Sport Kit
Gillette
Personal
Grooming
Small
Appliances
Oral
Care
Portable
Power
PROCTER & GAMBLE
Soaps
Food
Beverages
Paper
Products
Gillette
Razors
Core Product
Mr. Coffee
Machines
Duracell
Batteries
Oral-B
Toothbrush
Unilever Matrix
Margarine Unie
Rotterdam
…it’s complicated
Finance
Marketing
Lever Bros.
London
R&D
Food
EU
US
Asia
Pacific
Household
Beauty
Health/Hygiene
The “Un-Matrix”
•Oracle - Vienna
Specialists
Problems
Generalists
Guenther Goeschl (CFO)
and his “troll”
Page 13
Integrating Newly-Merged Multi-Unit Organizations
• Processes and costs associated with…
– Integration hubris, rose-colored lenses
– Rationalizing value chain activities
• Duplicate
• Eliminate
• Integrate
– Meshing people, systems, and cultures
– Conflicting stakeholder and politics