1. Corporate-level Strategy Page 1

2. Managing Multi-Unit Playing Cards 8 8 J 3 K

3. Page 3 Managing Multi-Unit Playing Cards 8 8 J 3 K 7 Q 10 2 4

4. Page 4 Managing Multi-Unit Playing Cards 8 8 J 3 K 7 Q 10 2 4 3 4 7 3 J

5. Managing Multi-Unit Playing Cards Organizational Units – Suit – Number 3, 4, 7, J Managing Organizational Units Positive Outcomes – Two-, Three-, Four-of-a-kind – Flush – Straight – Full house Page 5 3 4 7 3 J

6. Page 6 Corporate Strategy Decide scope/reach of the firm – In which businesses or industries does our organization operate or compete? Develop and leverage synergies across differentiated organization units Acme Inc. Product 1Product 2Product 3Product N

7. Page 7 Multi-Unit Management Unrelated organization units General Electric Light Bulbs Aircraft Engines Power Generation Equipment Kitchen Appliances

8. Page 8 Multi-Unit Management Related organization units Procter & Gamble SoapFoodPaper Products OTC Pharm.

9. Page 9 Multi-Unit Management Portfolio focus and rebalancing PEPSI 20% of total sales Carbonated Beverages Juices, Water, Sports drinks Snack Foods Fast Food

10. Page 10 Multi-Unit Management COCA-COLA Carbonated Beverages Juices, Water, Sports drinks 80% of total sales Portfolio focus Near-single business organization

11. Page 11 Diversification Strategy Examples Pepsi – Acquired Tropicana juice co. – Acquired Quaker Oats Gatorade –Spun-off fast food restaurants (YUM!) – Issued Pepsi Bottling IPO – Reinvest in Frito-Lay FedEx – Acquired Mailboxes Plus! – Acquired Kinko’s Kraft Foods’ acquisition of Cadbury Pfizer acquires Wyeth UK acquires Good Samaritan PNC Bank acquires National City Bank

12. Why Diversify?? Winter Spring Summer Fall Division Sales ($) Industry Growth (%) 1960 1970 1980 1990 2000 2010 Snowmobile Jet Ski Bulk Chemicals Pharmaceuticals

13. Benefits of Diversification Reduce earnings volatility Move organization into attractive markets and market segments Growth Minimize risk Prolong “life” of the organization Improve long-term performance Capture synergies and strategic “fit” between businesses Steer corporate resources

14. Types of Organizational Diversification Vertical Horizontal – Related – Unrelated Global

15. Page 15 Marathon Oil Oilfield Exploration Oilfield Extraction Transport Refining Wholesaling Retail Stores Gas Stations Installed Oil Shops

16. Page 16 Exxon-Mobil Oilfield Exploration Oilfield Extraction Transport Refining Wholesaling Retail Stores Gas Stations Installed Oil Shops

17. Page 17 Horizontal Diversification Related Procter & Gamble SoapsPaper Products Food Products Logistics Marketing R&D Mfg. Finance To diversify, or not?

18. Page 18 General Electric Aircraft Engines Lighting Products Appliances Finance Horizontal Diversification Unrelated

19. Page 19 Geographic Diversification International Markets Cola-Cola USGreeceChina Brand & Some Marketing Finance Brand & Some Marketing Local bottling and distribution

20. Evaluation of Diversified Firms Identify present corporate strategy – Extent and type of diversification – Geographic scope – New acquisitions – Recent divestitures – Mode of new business entry

21. Diversified Inc. Evaluation of Internal, External, Portfolio, and Synergistic Factors HQ Bus. 1Bus. 2Bus. 3 Growth Size Remote Env. Growth Size Remote Env. Growth Size Remote Env.

22. Evaluation of Diversified Firms Reveal contextual position of corporate portfolio BCG Growth-share Matrix Industry Growth Rate Hi Lo Relative Market Share 1.0< 1.0> 1.0

23. Evaluation of Diversified Firms Reveal contextual position of corporate portfolio BCG Growth-share Matrix Industry Growth Rate High good Low bad Relative Market Share 1.0< 1.0> 1.0 Behind Market Leader Market Leader

24. Evaluation of Diversified Firms Reveal contextual position of corporate portfolio BCG Growth-share Matrix Industry Growth Rate High good Low bad Relative Market Share 1.0< 1.0> 1.0 Behind Market Leader Market Leader Stars Dogs Cash Cows ?

25. Evaluation of Diversified Firms Reveal contextual position of corporate portfolio BCG Growth-share Matrix Industry Growth Rate High good Low bad Relative Market Share 1.0< 1.0> 1.0 Behind Market Leader Market Leader Aircraft Engines Appliances Light Bulbs

26. Evaluation of Diversified Firms Reveal competitive position of corporate portfolio G.E. Industry attractiveness/business strength matrix Industry Long Term Attractiveness H M L Firm’s Competitive Position Str. Avg.Weak

27. Evaluation of Diversified Firms Reveal competitive position of corporate portfolio G.E. Industry attractiveness/business strength matrix Industry Long Term Attractiveness H M L Firm’s Competitive Position Strong Avg. Weak Aircraft Engines Appliances Light Bulbs

28. Page 28 Transformation Through Diversification Enter new businesses – Change business portfolio (Monsanto) Shift from commodity chemicals to agricultural biotechnology Molecular biology GM seed/plant technologies Branded products Total Return 1994 S&P MONSANTO Chemicals (18%) Biotech (38%) Today

29. Page 29 Total Return 1993 S&P Nokia Motorola Eriksson Nokia – Founding -1989: Electrical conglomerate – 1993-today: 90% telecommunications 20091989 Transformation Through Diversification

30. Strategic Management of Diverse, Multi-Unit Organizations Turnaround – Restore competitiveness to poor performers – New advantages created within portfolio Retrenchment – Narrow scope of portfolio –“Stick to your knitting” Restructuring – Add new businesses / divest poor performers

31. Page 31 Disney: Capability Leverager Films Videos Network TV Cable TV Hotels Cruise lines Merchandise Brand licensing Retail Stores Toy Story TV Show Merchandise Food Items Theme Park

32. Page 32 Blue Circle Dominant-business Diversified Firm HQ Cement Products Core Competence: Products related to home-building

33. Page 33 HQ Cement Products Core Competence: ? Products related to home-building ? BricksGas Stoves Lawn Mowers Blue Circle

34. Page 34 Boddingtons Vertically Integrated Firm HQ Beer Brewing Pubs Core Competence : Hospitality, retailing, property management Beer Wholesaling

35. Page 35 Boddingtons Related Horizontal Diversified Firm HQ Pubs Restaurants HotelsHealth Clubs Nursing Homes Core Competence : Hospitality, retailing, property management

36. Love Your Dogs

37. Why? – Dogs are under-appreciated Neglected Same category as “value stocks” Payoffs to investing in and paying greater operational-strategic attention to underperformers better than investing in unproven “stars” – Dogs need nurturing/attention “Feed” them (resources, attention) Have them “fixed” (new strategy) Teach them “new tricks” (innovation) – “Adopt” someone else’s dogs

38. Managing Multi-Unit Playing Cards Organizational Units – Suit – Number 3, 4, 7, J Managing Organizational Units Positive Outcomes – Two-, Three-, Four-of-a-kind – Flush – Straight – Full house Page 38 3 4 7 3 J

39. Questions…? Page 39