CORPORATE STRATEGY
EXECUTIVE JULY 2008
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IPMI Graduate School of Business
Corporate Strategy
Module
Session 5-6
Session 7-8
Session 9-10
Session 11-12
Session 13-14
Session 15-16
2
Corporate Strategy Framework
Corporate Strategy In Action
Related and Unrelated Diversification
Vertical Integration
Merger and Acquisition
Divestitures
Session 17-18
Strategic Alliance
Session 19-20
Final Exam (Group
Case Work)
Corporate Strategy Framework
PORTFOLIO
STRATEGY
SKILL TRANSFER
SHARING ASSETS
RESOURCES
(assets, skill,
competence)
BUSINESS MIX
(industry, biz strategy,
ownership)
VISION
OBJECTIVE
SHARED ACTIVITIES
TIGHT CONTROL
3
CORP HQ ROLE
(organization,
control, process)
CORPORATE
ADVANTAGE
• ______
____
• ______
____
CORPORATE STRATEGY MODULE
THE STRATEGY CONTROL FRAMEWORK (2)
<- - - - - -
PERCEPTION OF PROBLEM- - - - - - - >
Internal/External
Events
< - - - - - - - - - - - - - - - - -- - - - - - - - APPRAISAL - - - - - - - - - - - - - - - - - - - ->
Internal Appraisal
Preliminary
Objectives
External Appraisal
Continous Review
Major - SWOT STRENGTHS,
WEAKNESSES,
THREATS, AND
OPPORTUNITIES
( Core Skills)
<-------------------------------------- CHOICES------------------ --- ---- ------------------------------------------------->
< -- -FOCUS ON NEW BUSINESS AREA- - - - - - >
MODIFIED
OBJECTIVES
STRATEGY
PROD/MKT
PORTFOLIO
PLANS
DEV of New Biz
Ideas (NBA)
EVALUATION
of NBA
< - - - - - - - - - - IMPLEMENTATION - - - - - - - - - - - - - - - - - - - - - - - - - >
DEV. ORG.
STRUCTURES
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DESIGN
CONTROL PROC
and FUNCTIONAL
PLANS
EVALUATION
of STRATEGY
INTERNAL
GROWTH or
ACQUISITION
Corporate Strategy
Where to Compete
• Product Scope
Coca-Cola ; chinese-food restaurant ; contractors ; packaging
• Geographic Scope
Automobile ; cement ; ceramic products ; padang-food restaurant
• Vertical Scope
Cigarette ; automobile ; dairy produces ; textile
5
Strategy In Action
•
Concentric Diversification
• Conglomerate Diversification
• Horizontal Integration
• Vertical Integration
6
Why Divest?
•
Problematic Business
–
–
–
•
Active Portfolio Management
–
–
–
–
•
–
–
–
REACTIVE,
LOW VALUE
HIGHER
VALUE OF
CORP
Aligning with strategy
Maintain a healthy portfolio of business, strengthen and rejuvenate company
Avoid high cost of holding: limited growth oppty, limited support from CHQ, depressed exit price
Divestiture is a normal act
Creative “Destruction”
–
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Under-performing
Hamper other divisions
In many cases divestiture decision has been delayed many times
Established business tend to be risk-averse, lack of entrepreneurship
Return to shareholders deteriorate over time
Hampers creativity in building new business
May actually “liberate” the business unit
BEST , BUT
REQUIRE
GUTS
STRATEGIC ALLIANCE
Sessions 17 + 18
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Quick Test – Session 17:
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When to Ally?
• Modular or sequential synergies
• Getting synergy out of “soft” resources
• Low to medium amount of redundant resources
• Medium to high uncertainty of the outcome
• Low to medium degree of competition
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Dyer, et.al, “When to Ally and When to Acquire”
TYPES OF
STRATEGIC ALLIANCES
• Multi-organizational services alliances
Group of firms to pursue a common goal.
• Opportunistic alliances
Joint ventures to quickly exploit a competitive advantage.
• Complementary strategic alliances
Firms with different positions in a value chain take advantage of
complementary capacities via coordination of activities.
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3 “Flawed”
Alliances
• Collision between Competitors
• Alliance of the Weak
• Alliance of ‘David & Goliath’
– Actually an acquisition (from Goliath) who feels more superior
– “Bootstrap” alliance (from David) will not give much to contribute
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Bleeke & Ernst, “Is Your Strategic Alliance Really a Sale?”
Joint Venture
• Types of JV:
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–
Consolidation
–
Skill-transfer
–
Coordination
–
New Business
JOINT VENTURE
Challenges and Key Success Factors
Challenges
KSF
Strategy
Governance
Economics
Organization
• Parent companies
may hold different
strategic interests
• Parents share
control
• Parents provide
on-going resources
to JV
• Cultural differences,
conflicting incentives
• Align parent interest
around JV objectives
upfront
• Apply loose-tight
governance
• Specify services
provided by
parents, establish
fair transfer pricing
• Secure commitment
from key staff,
especially parent
company employees
• Establish risk
mgmt and
performance
mgmt
• Create compelling
value proposition for
JV employees
• Specify first year
goal for JV
• Parents have
separate reporting • Transfer pricing
systems
• JV performance is
not transparent
• Create clear
protocols for
decision making
Baumford, et.al., “Launching a World Class Joint Venture”
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Case : IBM and Linux
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Case : LAURA ASHLEY and FEDERAL EXPRESS
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Laura Ashley and FEDEX
Conceptual issues of case
 Leveraging information technology to drive
customer-focused performance improvements,
 Using strategic alliances to solve problems.
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Laura Ashley and FEDEX
Conceptual issues of case
 Both LA and FedEx have expertise in different parts of
the retail distribution value chain:
 LA : Design, Marketing, Selling of Branded Merchandise.
 FedEx : comprehensive expertise in physical logistics.
 The two companies have ‘complementary’ weaknesses:
 LA : Failed in managing own logistics.
 FedEx : Desire to jump-start its global marketing capability.
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Laura Ashley and FEDEX
Conceptual issues of case
 Difference in management styles
FedEx/BLS is more centralized and formalized than at LA.

Differences in the “life cycles”
LA has a relatively established position in its markets, while BLS
is in a more dynamic stage of development.
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Case : LAURA ASHLEY and FEDEX
TASK / QUESTIONS
1. Evaluate the decision to enter a strategic alliance from the
perspective of both Laura Ashley and Federal Express. What are
the real opportunities and risks of this approach ?
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2.
Evaluate the structure of the partnership. Do the financial
arrangements make sense ? Is the loose nature of the partnership
appropriate, or should a more structured approach have been
taken ? What type of leadership was necessary to make a deal,
and what leadership skills will be necessary to implement it
successfully ?
3.
How likely is it that the partnership will succeed over the long term,
and what will it take for both companies to make it successful ?
Are there specific organizational or human resources policy
reforms that would enhance LA’s performance?
4.
Assume that the partnership is successful. What new strategic
capabilities will it provide for LA, and how, specifically, should they
be used to expand its business ?
Case: LAURA ASHLEY and FEDEX
Lessons Learned
 Creative information technology applications can be
crafted to improve
international basis.
customer
services
on
an
 Breakthroughs in customer services need not come
from company itself, but rather can be brought about
via inter-organizational alliances.
 Outstanding customer service will require both parties
to work according to a shared vision and mutual
interest rather tha legalistic rules and procedures.
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CORPORATE STRATEGY
END OF MODULE
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