Chapter three Strategic Analysis and Choice in Multibusiness Company.pptx

7/23/2019 Chapter three Strategic Analysis and Choice in Multibusiness Company.pptx

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Strategic analysis and

Choice in a MultiBusiness Company

12/2/15 1Strategic Management II by Mr.Kabi Raj Khanal for BBA EightSemester


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The Corporate Parent Role

Realiing synergies from share!ca"abilities an! core com"etenciesis a #ey $ay %al&e is a!!e! inm&ltib&siness com"anies.

'he cor"orate managers has toanalye those synergies an! (n! o&t$ays to ca"t&re.

)or"orate "arent can a!! %al&e toits b&sinesses by the follo$ing t$o$ays.

1. 'he "arenting frame$or#12/2/15 Strategic Management II by Mr.Kabi Raj Khanal for BBA EightSemester

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The Parenting Framework

'his a""roach sees m&ltib&siness com"anies ascreating %al&e by in*&encing or "arenting theb&sinesses they o$n.

'he best "arent com"anies create more %al&ethan any other b&sinesses !o if they o$ne! the

same b&sinesses.

'o a!! %al&e a "arent m&st im"ro%e itsb&sinesses.

'his a""roach call the "otential forim"ro%ement $ithin the b&siness +a "arentingo""ort&nities,.

-ere are some ten "laces to loo# for "arentingo""ort&nities.

12/2/15 Strategic Management II by Mr.Kabi Raj Khanal for BBA EightSemester


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1.Size and age

.l!0 large0 s&ccessf&l b&sinesses fre&ently

"ro!&ce $ellestablishe! b&rea&cracies an!o%erhea! str&ct&res that are har! to ta#ea"art from insi!e the b&siness.

. It co&l! a!! %al&e beca&se of an e3ternal

catalyst the "arent..Some SMEs may lac# some #ey f&nctional

s#ills0 managerial ca"abilities or lac# ofca"ital to !e"loy in reso&rces so as to

accelerate! gro$th "otential..4arenting o""ort&nities may a!! %al&e in

these circ&mstances.



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Management

Some of the iss&es in the b&sinesses are

the &se ine6cient man"o$er0 high labort&rno%er0 an! &se of lo$ le%el of s#ills$or#ers in the job.

Some managers ha%e less objecti%es

"ers"ecti%es.'he "arenting o""ort&nities ens&re an!

a!!ress these iss&es objecti%ely an! assist

in any resol&tion in the coming "erio!.'hese "arenting o""ort&nities co&l! !irect

an! "ro%i!e ne$ sha"e for theorganiation.


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Business e!nition

B&siness &nit managers may ha%e a

erroneo&s %ision of $hat their b&sinesssho&l! be.

Some managers may em"loy %erticalintegration not to others.

-o$e%er accelerate! tren!s to$ar!o&tso&rcing an! strategic alliances arechanging the !e(nitions of manyb&sinesses.

'hese creates "arenting o""ort&nity to hel"re!e(ne a b&siness &nit in a $ay thatcreates greater %al&e.


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Predicta"le #rrors

Managers are res"onsible for "re%io&s strategic!ecisions are %este! in the s&ccess of those!ecisions $hich may "re%ent o"enness to ne$alternati%es.

l!er or mat&re b&sinesses often acc&m&late a%ariety of "ro!&cts an! mar#ets0 $hich becomes

e3cessi%e !i%ersi(cation $ithin the "artic&larb&siness.

)yclical mar#ets can lea! to &n!erin%estment !&ring!o$nt&rns an! o%erin%estment !&ring &"s$ing.

8engthy life cycles can lea! to o%erreliance on ol!"ro!&cts.

All of these are "re!ictable errors a "arent canmonitor an! attem"ts to create %al&e.


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$inkages

B&siness &nits may be able toim"ro%e mar#et "osition ore6ciency by lin#ing $ith otherb&sinesses.

8in#ages among b&siness &nits$ithin or o&tsi!e the "arentcom"any may be com"le3 or !i6c&lt

to establish $itho&t "arent com"anyhel".

An o""ort&nity to a!! %al&e may

e3ist.12/2/15 Strategic Management II by Mr.Kabi Raj Khanal for BBA EightSemester :


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Common Capa"ilities

;&n!amental to s&ccessf&l

!i%ersi(cation is the notion ofsharing ca"abilities an!com"etencies nee!e! by m&lti"le

b&siness &nits. 4arenting o""ort&nities may arise

time to time thro&gh reg&lar scr&tiny

of o""ort&nities to share ca"abilitiesor a!! share! ca"abilities that $o&l!other$ise go &nnotice! by b&siness

&nit managers closer to !ailyb&siness o erations.12/2/15 Strategic Management II by Mr.Kabi Raj Khanal for BBA Eight

Semesterensi%e strategies

Cro$th Inno%ation

Ma3imie com"anystrengths

;e$er ties $ith "ast

strategy Dolatile in!&stry

Early "ro!&ct/mar#ete%ol&tion

12/2/15 2Strategic Management II by Mr.Kabi Raj Khanal for BBA Eight

Semester


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0nternal Political Considerations

4o$er/"olitical factors in*&ence strategic choice.

'he e3istence an! &se of "o$er to f&rther in!i%i!&al

or gro&" interests is common in organiational life. A major so&rce of "o$er in most organiations is the

chief e3ec&ti%e o6cer.

In smaller an! big organiation if the )E is strong

or !ominant an! he $ill begins to fa%or a "artic&larchoice it is &nanimo&sly selecte!.

In some large organiations0 s&b&nits an! in!i%i!&als"artic&larly #ey managers ha%e to reason to s&""ortsome alternati%es an! o""ose others.

'he costs are li#ely to be increase! time s"ent on!ecision ma#ing an! incremental as o""ose! to!rasticF change if there is the "ossibility of formalan! informal negotiation.


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Timing Considerations

Strategic choice $ill be stronglyin*&ence! by the match bet$eenmanagement@s c&rrent time horionan! the lea! time associate! $ith

!i>erent choices.'ime !imensions in%ol%es the lea!

time re&ire! for alternati%e choices

an! the time horion management iscontem"lating.

Management@s "rimary attention

may be on the short or long r&n012/2/15 27Strategic Management II by Mr.Kabi Raj Khanal for BBA Eight

Semester


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Competiti)e Reaction

'o" management fre&ently

incor"orates "erce"tions of li#elycom"etitor reactions to !i>erento"tions.

If management chooses an!aggressi%e strategy that !irectlychallenges a #ey com"etitor0 that

com"etitor can be e3"ecte! tomo&nt aggressi%e co&nterstrategy.

'he ca"acity of the com"etitor toreact an! the "robable im"act onthe chosen strate @s s&ccess.


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i)ersi!cation A !i%ersi(e! com"any is a collection of

in!i%i!&al b&sinesses.'he strategy ma#ing tas# $ill be more com"le3

than in!i%i!&al b&sinesses.

In !i%ersi(e! com"any strategy ma#ing in%ol%es

assessing m&lti"le in!&stry en%ironments an!!e%elo"ing a set of b&siness strategies.

In !i%ersi(e! com"any cor"orate le%ele3ec&ti%es !elegate consi!erable strategy

ma#ing a&thority to the hea!s of each b&siness&nits.

'hey "ro%i!e latit&!e to craft a b&sinessstrategy s&ite! to their "artic&lar in!&stry.

12/2/15 2:Strategic Management II by Mr.Kabi Raj Khanal for BBA Eight

Semester


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In !i%ersi(cation the cor"orate managers tas# isto (n!ing the follo$ings

1. 4ic#ing ne$ in!&stries to enter an! !eci!ing on

the means of entry.'he "artic&lar concern are ne$ in!&stries to get

into an! $hether to entry by starting a ne$b&siness from the gro&n! &"0 ac&iring a

com"any alrea!y in the target in!&stry0 orforming a joint %ent&re or strategic alliance $ithanother com"any.

2. Initiating actions to boost the combine!

"erformance of the b&sinesses the (rm hasentere!.

.)or"orate strategists m&st strengthen the longterm com"etiti%e "ositions an! "ro(ts of the

b&sinesses the (rm has in%este! in.12/2/15 2erent b&sinessesare s&6ciently as to "resent o""ort&nities for

1. 'ransferring com"etiti%ely %al&able e3"ertise0technological #no$ho$0or other ca"abilities fromone b&siness to another.

2. )ombining the relate! %al&e chain acti%ities of

se"arate b&sinesses into a single o"eration toachie%e lo$er costs.

. E3"loiting common &se of a $ell #no$n an! "otentbran! name

. )ross b&siness collaboration to create com"etiti%ely%al&able reso&rce strengths an! ca"abilities.

12/2/15 9

Strategic Management II by Mr.

Kabi Raj Khanal for BBA EightSemester


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3nrelated i)ersi!cation

An &nrelate! !i%ersi(cation strategyfoc&ses on entering an! o"eratingb&sinesses in in!&stries that allo$the com"any as a $hole to gro$ its

re%en&es an! earnings.'he basic of this strategy is that any

com"any or b&siness that can be

ac&ire! on goo! (nancial termsan! that has satisfactory gro$th an!earnings "otential re"resents a goo!

ac&isition an! a goo! b&siness12/2/15 :Strategic Management II by Mr.



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'he cor"orate manager has to consi!er follo$ing criteria$hile ta#ing &nrelate! !i%ersi(cation strategy

1. hether the b&siness can meet cor"orate targets for

"ro(tability an! ret&rn on in%estment2. hether the b&siness is in an in!&stry $ith attracti%e

gro$th "otential

. hether the b&siness is big eno&gh to contrib&tesigni(cantly to the "arent (rm@s bottom line

. hether the b&siness has b&r!ensome ca"italre&irements

5. hether the b&siness is "lag&e! $ith chronic &nion!i6c&lties an! labor "roblems

7. hether there is in!&stry %&lnerability torecession0in*ation0high interest rates0 to&gh go%ernmentreg&lations concerning "ro!&ct safety or the en%ironment

an! other "otentially negati%e factors.

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erent b&sinesses an! being$itho&t the a!!e! so&rce of com"etiti%ea!%antage that cross b&siness strategic (t"ro%i!es.

Relying solely on the e3"ertise of cor"oratee3ec&ti%es to $isely manage a set of&nrelate! b&sinesses is a m&ch $ea#er

fo&n!ation for enhancing sharehol!er %al&ethan is a strategy of relate! !i%ersi(cation$here cor"orate "erformance can bebooste! by com"etiti%ely %al&able cross

b&siness strategic (ts.12/2/15Strategic Management II by Mr.


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u ng are o er


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u ng are o er2alue

)reating a!!e! %al&e for sharehol!ers %ia

!i%ersi(cation re&ires b&il!ing a m&ltib&sinesscom"any $here the $hole is greater than the s&m ofits "arts.

i%ersi(cation m&st !o more for a com"any thansim"ly s"rea! its b&siness ris# across %ario&sin!&stries.

i%ersi(cation can not be consi!ere! a s&ccess&nless it res&lts in a!!e! sharehol!er %al&e.

'o raise the %al&e of the sharehol!ers economically

the follo$ing tests sho&l! ha%e "asse! before!i%ersify.

1. 'he in!&stry attracti%eness test

2. 'he cost of energy test

. 'he better o> test12/2/15Strategic Management II by Mr.


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The industry attracti)eness test

'he in!&stry to be entere! m&st be attracti%e eno&gh to

yiel! goo! RI or Get 4ro(t than in "resent b&sinesses.

The cost o* entry test'he cost to enter the target in!&stry m&st not be so high

as to ero!e the "otential for goo! "ro(tability.

-o$e%er the more attracti%e an in!&stry@s "ros"ects arefor gro$th an! goo! long term "ro(tability0 the more

e3"ensi%e it can be to get into.

Entry barriers for start &" com"anies are li#ely to behigh in attracti%e in!&stries $here as lo$ in otherin!&stries.

If entry barriers are lo$ "ro(t "otentials can be share!among the ne$ entrants.

B&ying a $ell "ositione! com"any in an a""ealingin!&stry often entails a high ac&isition cost that ma#es

"assing the cost of entry test less li#ely.

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The "etter o/ test

i%ersifying into a ne$ b&siness

m&st o>er "otential for thecom"any@s e3isting b&sinesses an!the ne$ b&siness to "erform better

together &n!er a single cor"orate&mbrella than they $o&l! "erformo"erating as in!e"en!ent stan!alone b&sinesses1H1F.

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Chapter three Strategic Analysis and Choice in Multibusiness Company.pptx