1. Corporate Strategy BM499 Strategic Management David J. Bryce November 5, 2002

2. Corporate vs. Business Unit Strategy Corporate Strategy Corporate Strategy What business(es) should we be in? What business(es) should we be in? How will we coordinate or integrate businesses to create value? How will we coordinate or integrate businesses to create value? Business Unit Strategy Business Unit Strategy To whom will we sell, for what price? To whom will we sell, for what price? How will we source, manufacture, distribute, etc. our product? How will we source, manufacture, distribute, etc. our product? Adapted from M. Porter, 2001, HBR

3. Definition: Corporate Advantage “The way a company creates value through the configuration and coordination of its multibusiness activities.” “The way a company creates value through the configuration and coordination of its multibusiness activities.” -- Collis & Montgomery, 1998 Source: Creating Corporate Advantage, Collis & Montgomery, HBR, 1998

4. Scope of the Firm Horizontal Scope Vertical Scope Manuf. Distrib Sales Prod./Ind. A Manuf. Distrib Sales Manuf. Distrib Sales output-products Prod./Ind. BProd./Ind. C Manuf. Distrib Sales Manuf. Distrib Sales Manuf. Distrib Sales... Input-products...

5. Newell Horizontal Scope Vertical Scope Manuf. Distrib Sales Prod./Ind. A Manuf. Distrib Sales Manuf. Distrib Sales output-products Prod./Ind. BProd./Ind. C Manuf. Distrib Sales Manuf. Distrib Sales Manuf. Distrib Sales... Input-products...

6. Wal-mart Horizontal Scope Vertical Scope Manuf. Distrib Sales Prod./Ind. A Manuf. Distrib Sales Manuf. Distrib Sales output-products Prod./Ind. BProd./Ind. C Manuf. Distrib Sales Manuf. Distrib Sales Manuf. Distrib Sales... Input-products...

7. GE Horizontal Scope Vertical Scope Manuf. Distrib Sales Refrigerators Manuf. Distrib Sales Manuf. Distrib Sales output-products Aircraft Engines Prod./Ind. C Manuf. Distrib Sales Manuf. Distrib Sales Manuf. Distrib Sales... Input-products...

8. The Triangle of Corporate Strategy Competitive Advantage Control Coordination Organization Resources Businesses Source: Creating Corporate Advantage, Collis & Montgomery, HBR, 1998

9. The Resource Continuum Source: Creating Corporate Advantage, Collis & Montgomery, HBR, 1998

10. The Resource Continuum (continued) Source: Creating Corporate Advantage, Collis & Montgomery, HBR, 1998

11. Coordination “Public Goods” May be used in a number of production processes without dminishing their value or availability; e.g. Brand names; know- how “Private Goods” Usage diminishes value or availability; e.g. human resources, machines, etc.

12. The Resource Continuum (continued) Source: Creating Corporate Advantage, Collis & Montgomery, HBR, 1998

13. Control Financial Financial Run the business by managing to a set of financial measures; e.g. return on assets, growth in revenue, profitability, etc. Run the business by managing to a set of financial measures; e.g. return on assets, growth in revenue, profitability, etc. Operational Operational Run the business by managing to a set of operational measures; e.g. days in inventory; reject rates, delivery lead times, book-to-bill ratios, etc. Run the business by managing to a set of operational measures; e.g. days in inventory; reject rates, delivery lead times, book-to-bill ratios, etc.