Corporate Strategic: Dwi Joko Pramudito WA Song Young Kang

 The growth/share matrix encouraged companies to balance their business portfolios  poor performance  Core Competence concept proposed that companies should build portfolios of business around shared technical or operating competencies and should develop structures and processes to enhance their core competences

 Core competence concept has not provided practical guidelines for developing corporate-level strategy  The parenting framework fills the deficiencies of the core competence concept. It provides a rigorous conceptual model as well as the tools needed for an effective corporate-level planning process

 Multibusiness companies creates value by influencing or parenting the business they own.  Parenting advantage exist when the best parent companies create more value than any of their rivals would if they owned the same business

 The parenting framework focuses on the competencies of the parent organization and on the value created from the relationship between parent and the business  Fit between parents and its business is a two-edged sword: A good fit can create value A bad one can destroy it

 Example : Divestment decision, the exit of oil companies from the mineral business  Whether a parent and its business fit is a tough question that few managers address

1. Examine the critical success factor of each business 2. Document areas in the business in which performance can be improved 3. Review the characteristic of the parent, grouped in a number of categories

 Most business-level plans define the critical success factors as part of the rationale for the action proposed  CSF analysis is an important base for assessing fit. It is useful in judging whether friction is likely to develop between the business and the parent.  A parent that doesn’t understand CSF in a business is likely to destroy value

 Parenting opportunity is the potential for improvement within a business  Most business have parenting opportunities and could improve their performance if they had a parenting organization with exactly the right skills an experience

 There are three types to identify parenting opportunities: Strategists list the major challenges facing a business, which are normally recorded in the business plan, and then examine them Strategists document the most important influences the parent has on the business and then judge whether those influences are addressing parenting opportunities that were not identified in the first analysis Looks at the influence different parent companies have on similar business to see whether they have discovered still other parenting opportunities

 Parenting characteristic fall into five categories: 1. The mental maps that guide parent managers 2. The corporate structure, management systems, and processes 3. The central functions, services, and resources 4. The nature, experience, and skill of managers in the parent organization 5. The extent to which companies have decentralized by delegating responsibilities and authority to business-unit managers

 Success and failure analysis is a useful way of summarizing a parent’s track record

 Heartland business have the opportunities to improve that the parent knows how to address, and they have critical success factors the parent understands well  They should have priority in the company’s portfolio development, and the parenting characteristic that fit its heartland businesses should form the core of the parent organization

 It happen when some parenting characteristics fit, and others do not  The parent both creates and destroys value  They could be moved into heartland businesses when the parent learns enough about the critical success factors to avoid destroying value

 They are the businesses that the potential for further value creation is low but the business fits comfortably with the parenting approach  Companies with too many ballast businesses can easily become targets for a takeover

 Most corporate portfolios contain at least a smattering of business in which the parent sees little potential for value creation and some possibility of value destruction  Companies need to be clear about their heartland before they can recognize alien territory, and they need to be clear about their alien territory in order to recognize their heartland

 They are business with a fit in parenting opportunities but a misfit in critical success factors  The potential for upside gain often blinds managers to the misfit-that is, downside risks

 Parenting characteristics are built on deeply held values and beliefs, making changes hard to implement  Good parents constantly modify, fine- tune, their parenting, but fundamental changes in parenting seldom occur, usually only when the chief executive and senior management are replaced