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SESSION 13: Strategic Analysis and Choice in The Multi-Business Company

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SONY PICTURES STUDIOS 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill. 16 ... Dog. Cash Generation (Market Share) High. Low ... – PowerPoint PPT presentation

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Title: SESSION 13: Strategic Analysis and Choice in The Multi-Business Company


1
SESSION 13 Strategic Analysis and Choice in The
Multi-Business Company
  • Rationalizing Diversification and Building
    Shareholder Value

2
The Concept of Corporate-Level Strategy
  • Primary Question - Where to Compete?
  • Are there other business opportunities?
  • Entering or exiting Industries

3
CL Strategy Whether to Diversify?
  • Synergies
  • Growth Opportunities
  • Agency Issues Empire Building

4
Multibusiness Corporations
  • Corporations comprised of multiply businesses
    are often referred to as having a portfolio of
    businesses

5
  • By Definition a change in Corporate Level
    Strategy should be reflected in a change in
    Mission Statement

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SONY PICTURES STUDIOS
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The Portfolio Approach to Corporate Level
Strategy
  • Research Allocation Decisions
  • How does Corporate Affiliation Provide Value?

20
GE and McKinsey
  • The Concept of The SBU
  • Corporate Review Capability
  • Matrices to Facilitate/Illuminate the Resource
    Allocation Decision

21
To Be Designated an SBU, Businesses had to
  • Have a unique mission independent of other SBUs
  • Have a clearly definable set of competitors
  • Compete in external markets
  • Be able to carry out integrative planning
    relatively independent of other SBUs
  • Be able to manage resources in key areas
  • Be large enough to justify senior management
    attention

22
Balancing Financial Resources Portfolio
Techniques
23
BCG Growth-Share Matrix
24
Factors Considered in Constructing an Industry
Attractiveness-Business Strength Matrix
Industry Attractiveness Factors
25
Fig. 9-3 Factors Considered in Constructing an
Industry Attractiveness-Business Strength Matrix
(continued)
Industry Attractiveness Factors
26
Fig. 9-3 Factors Considered in Constructing an
Industry Attractiveness-Business Strength Matrix
(continued)
Business Strength Factors
27
Fig. 9-3 Factors Considered in Constructing an
Industry Attractiveness-Business Strength Matrix
(concluded)
Business Strength Factors
28
Fig. 9-4 Industry Attractiveness-Business
Strength Matrix
29
Advantages of the Industry Attractiveness-Business
Strength Matrix over the BCG Matrix
  • Terminology is less offensive and more
    understandable
  • Multiple measures associated with each dimension
    tap many factors relevant to business strength
    and market attractiveness
  • Allows for broader assessment during both
    strategy formulation and implementation for a
    multibusiness company

30
Fig. 9-5 Market Life Cycle-Competitive Strength
Matrix
31
Contributions of Portfolio Approaches
Convey large amounts of information about diverse
businesses and corporate plans in a simplified
format
Illuminate similarities and differences among
businesses, conveying the logic behind corporate
strategies for each business
Simplify priorities for sharing corporate
resources across diverse businesses
Provide a simple prescription of what should be
accomplished - a balanced portfolio of businesses
32
Limitations of Portfolio Approaches
Does not address how value is created across
business units
Accurate measurement for matrix classification
not as easy as matrices implied
Underlying assumption about relationship between
market share and profits varies across different
industries and market segments
Limited strategic options viewed as basic
strategic missions
Portrays notion that firms need to be
self-sufficient in capital
Fails to compare competitive advantage a business
receives from being owned by a particular company
with costs of owning it
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