1. Chapter 9 Corporate Strategy: Shaping the Portfolio Katy Lovett, CJ Baker, and Matt Snowden Strategy: A View from the Top

2. What is your strategy? GE’s key values- leaders, global business integration, skillful acquisitions (rather than specific businesses) Focus on actions that shape the corporate portfolio of businesses

3. Economies of Scale Cost per unit decreases as scale of activity increases Economics of learning increase as more efficient process are found

4. Economies of Scope Unit cost of an activity falls because the asset is shared with some other activity (ex. Frito Lay with chips + dips) Horizontal scope- GE appliances Geographical scope- McDonalds Vertical scope- IBM

5. What is “core”? Define it Invest in it continuously Ex. GE vs Colgate

6. Growth Strategies SWOT analysis Price-valued? Dell/Wal-mart Performance value? Intel/Genetech

7. Growth Strategies Organic or internal growth-Wal-Mart/Dell Growth through acquisition-GE Growth through alliance-based initiatives- Amazon.com

8. Concentrated Growth Strategies Increase the number of users of the product Increasing product usage by developing new applications Increase the frequency of products use 4 conditions as listed in book

9. Vertical Integration 4 reasons to enter 1.Market is too risky 2.Another company has more market power 3.Barriers to entry and Price discrimination 4.When companies forward-integrate

10. Vertical Integration Are highly integrated businesses more or less profitable? Likely to be profitable? Benefits and risks?

11. Diversification Why would you? Forms of Relatedness Categories of Relatedness

12. Diversification Core competency? What assets are needed? Can we catch them? Player or Winner? Can we learn by diversifying?

13. Mergers and Acquisitions 1.Successful acquisitions are usually part of a well-developed strategy. 2.Requires patience 3.Disciplined strategic analysis 4.Can add value in only a few ways 5.Objectivity is essential 6.Strategies should be formulated before acquisition

14. Cooperative Strategies Types ▫Joint Ventures, Strategic Alliances, etc… Benefits ▫Risk Sharing ▫Funding Limitations ▫Market Access ▫Technology Access

15. Strategic Logic of Alliances Alliances are chosen based on the different needs during the product lifecycle. Example: ▫Microsoft vs. Dell

16. Four Alliance Models Two important questions: ▫1. What role does the alliance play in the company’s corporate strategy? ▫2. How is the alliance leadership structured? Alliance determined by the answers: ▫1. Franchise – Easily replicable alliances ▫2. Portfolio – “Hub and Spoke” ▫3. Cooperative – No single partner dominates ▫4. Constellation – Aggressive and complex

17. Boston Consulting Group Expertise Alliances New-Business Alliances Cooperative Alliances M&A-Like Alliances The type of Alliance is categorized according to who takes part and the scope of the alliance.

18. Growth and Strategic Risk “Strategic risk can be measured in terms of far a growth initiative takes a company away from the established strengths of its core business.” FIVE dimensions of distance ▫Shared Customers ▫Shared Costs ▫Shared Channels ▫Shared Competitors ▫Shared Capabilities/Technologies

19. Disinvestments Sell-Offs – The parent corporation sells a business unit or company to another corporate portfolio. Spin-Offs – An undesirable business unit is carved out or sold. Afterward it becomes it’s own company. Liquidations – The business is more valuable as parts on eBay than as part of your strategy.