1.

3 Elements of Corporate Strategy: Resources, Businesses, Organization

Corporate strategy is guided by how the company will create value.

2. Corporate Advantage: The way a company creates value through the configuration and
coordination of its multi-business activities. In a great corporate strategy, all 3 elements are
aligned to each other. The nature of the alignment depends on the nature of the firms
resources specific assets, skills and capabilities.

3. The Triangle of Corporate Strategy:

Great corporate strategies come from each side of the triangle being strong
i. High Quality Resources
ii. Strong Market Position in attractive industries
iii. Efficient Administration in the organization

Moreover, linkage between each side of the triangle must be strong

i. When corporates resources are critical to success of individual businesses, it creates

competitive advantage
ii. When organization is able to leverage the resources to businesses, synergy and
coordination is achieved
iii. Corporate appraisal and reward systems in businesses create strategic control

4. The Resource Continuum:

The nature of any companys resources range along the continuum, and the position of the
company on this continuum determines which businesses it should compete in and the
limits the design of the organization along the dimensions below (coordination mechanisms,
control systems etc.). This view of corporate strategy suggests that businesses should
compete in industries where resources required are similar, and the design of the
organization should be based on the nature of the resources.
5. Should Corporate Resources be Shared or Transferred:
i. Public Goods: Resources which can be used in several businesses simultaneously
without conflict (Brand)
ii. Private Goods: Resources which can lead to competition and conflict between SBUs
(common sales force)
iii. Public goods can be transferred and shared easily, without requiring too much
coordination or intervention at the corporate level. The problem lies in the control
of use of these goods, as it is important to preserve the value and ensure that one
unit does not destroy it. Accountability for the resource is also a problem.
 iv. Sharing or transfer of private goods requires much more coordination, as one
resource is shared by multiple businesses. Therefore, use by one SBU may affect
other SBUs.

6. Financial Control:
Managers of SBUs are held accountable for a limited number of objective output measures
(growth of sales, ROI etc.). This type of control is appropriate for mature and stable
industries and for discrete business units. Incentives are provided on basis of the financial
performance of the business unit only. This type of control gives a lot of power to the
corporate centre and autonomy of individual businesses may be sacrificed. However, it
requires a smaller corporate centre, as less staff is required to coordinate with SBUs.

7. Operating Controls:
This method evaluates managers of SBUs on the basis of their judgements and decisions,
recognizing that financial performance is subject to external, uncontrollable factors.
Moreover, it is used where profits are long-term. It involves both quantitative and
qualitative assessments. Corporate managers need to be familiar with all the businesses in
the company portfolio. Such controls require frequent interaction and coordination
between the corporate and business, and demands larger corporate infrastructure.

8. Benefits of corporate membership must be greater than the costs to ensure creation of
value. Basically, being part of the company must be able to enhance the performance of all
the businesses.

9. Acid Test for Corporate Strategy: The Companys businesses must not be worth more to
another owner. To ensure this, resources and all the three individual elements of the
resource triangle must be upgraded. Creativity and Intuition is a must for all great corporate
strategies.