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Kultur Dokumente
CORPORATE STRATEGY:
DIVERSIFICATION AND
THE MULTIBUSINESS
COMPANY
McGraw-Hill/Irwin
8-2
8-2
(contd)
LO4 Gain command of the analytical tools for
evaluating a companys diversification strategy.
LO5 Understand a diversified companys four main
corporate strategy options for solidifying its
diversification strategy and improving company
performance.
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8-5
8-5
Diversify into
Related
Businesses
PostDiversification
Strategic
Alternatives
Single Business
Concentration
Diversify into
Unrelated
Businesses
Diversify into
Related &
Unrelated
Businesses
Make new
acquisitions
Divest weak
units
Restructure
portfolio
Retrench
Liquidate
Diversify into
Related
Businesses
PostDiversification
Strategic
Alternatives
Single Business
Concentration
Diversify into
Unrelated
Businesses
Diversify into
Related &
Unrelated
Businesses
Make new
acquisitions
Divest weak
units
Restructure
portfolio
Retrench
Liquidate
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Competitive Strengths of a
Single-Business Strategy
Less
If
Unforeseen
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businesses
A powerful brand name can be transferred to the products of
other businesses
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8-12
Approaches to Diversifying
the Business Lineup
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Diversification by Acquisition
of an Existing Business
Most
The
Businesses
Businesses
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Core Concept
Related
Related businesses
businesses possess
possess competitively
competitively
valuable
valuable cross-business
cross-business value
value chain
chain and
and
resource
resource matchups;
matchups; unrelated
unrelated businesses
businesses
have
have dissimilar
dissimilar value
value chains
chains and
and resources
resources
requirements,
requirements, with
with no
no competitively
competitively important
important
cross-business
cross-business value
value chain
chain relationships.
relationships.
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FIGURE 8.1
Strategic Themes
of Multibusiness
Corporations
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8-19
Fit
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Core Concept
Strategic
Strategic fit
fit exists
exists when
when the
the value
value chains
chains of
of
different
different businesses
businesses present
present opportunities
opportunities for
for
cross-business
cross-business skills
skills transfer,
transfer, cost
cost sharing,
sharing, or
or
brand
brand sharing.
sharing.
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FIGURE 8.2
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Advantage:
The greater the cross-business economies associated with
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Core Concept
Economies
Economies of
of scope
scope are
are cost
cost reductions
reductions
stemming
stemming from
from strategic
strategic fit
fit along
along the
the value
value
chains
chains of
of related
related businesses
businesses (thereby,
(thereby, aa
larger
larger scope
scope of
of operations),
operations), whereas
whereas
economies
economies of
of scale
scale accrue
accrue from
from aa larger
larger
operation.
operation.
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8-24
No strategic fit
No meaningful value chain relationships
No unifying strategic theme
Strategic
approach:
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managers must:
acquisition prices.
Do such a good job overseeing and parenting the
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8-28
Managerial Requirements:
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8-31
Dominant-Business Firms
One major core business accounting for 5080% of revenues
Multibusiness Enterprises
Diversification into several unrelated groups of related
businesses
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8-32
Assess
Assess the
the attractiveness
attractiveness of
of the
the industries
industries the
the firm
firm has
has
diversified
diversified into.
into.
Step
Step 22
Assess
Assess the
the competitive
competitive strength
strength of
of the
the firms
firmsbusiness
business
units.
units.
Step
Step 33
Evaluate
Evaluate the
the extent
extent of
of cross-business
cross-business strategic
strategic fit
fit along
along
the
the value
value chains
chains of
of the
the firms
firmsvarious
various business
business units.
units.
Step
Step 44
Check
Check whether
whether the
the firms
firmsresources
resources fit
fit the
the requirements
requirements
of
of its
its present
present business
business lineup.
lineup.
Step
Step 55
Rank
Rank the
the performance
performance of
of the
the businesses
businesses from
from best
best to
to
worst
worst and
and determine
determine aa priority
priority for
for allocating
allocating resources.
resources.
Step
Step 66
Craft
Craft new
new strategic
strategic moves
moves to
to improve
improve overall
overall corporate
corporate
performance.
performance.
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8-33
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8-35
Intensity of competition
Emerging opportunities
and threats
Social, political,
regulatory, and
environmental factors
Industry profitability
Degree of uncertainty
and business
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TABLE 8.1
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TABLE 8.2
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FIGURE 8.3
A Nine-Cell Industry
Attractiveness
Competitive
Strength Matrix
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8-45
Core Concept
A
A diversified
diversified company
company exhibits
exhibits resource
resource fit
fit
when
when its
its businesses
businesses add
add to
to aa companys
companys
overall
overall mix
mix of
of resources
resources and
and capabilities
capabilities and
and
when
when the
the parent
parent company
company has
has sufficient
sufficient
resources
resources to
to support
support its
its entire
entire group
group of
of
businesses
businesses without
without spreading
spreading itself
itself too
too thin.
thin.
8-46
8-46
Core Concept
A
A strong
strong internal
internal capital
capital market
market allows
allows aa
diversified
diversified company
company to
to add
add value
value by
by shifting
shifting
capital
capital from
from business
business units
units generating
generating free
free
cash
cash flow
flow to
to those
those needing
needing additional
additional capital
capital
to
to expand
expand and
and realize
realize their
their growth
growth potential.
potential.
8-47
8-47
Core Concept
A
A cash
cash hog
hog generates
generates operating
operating cash
cash flows
flows
that
that are
are too
too small
small to
to fully
fully fund
fund its
its operations
operations
and
and growth;
growth; aa cash
cash hog
hog must
must receive
receive cash
cash
infusions
infusions from
from outside
outside sources
sources to
to cover
cover its
its
working
working capital
capital and
and investment
investment requirements.
requirements.
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8-49
Core Concept
A
A cash
cash cow
cow generates
generates operating
operating cash
cash flows
flows
over
over and
and above
above its
its internal
internal requirements,
requirements,
thereby
thereby providing
providing financial
financial resources
resources that
that
may
may be
be used
used to
to invest
invest in
in cash
cash hogs,
hogs, finance
finance
new
new acquisitions,
acquisitions, fund
fund share
share buyback
buyback
programs,
programs, or
or pay
pay dividends.
dividends.
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8-50
Examining a Firms
Nonfinancial Resource Fits
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8-51
8-53
8-53
FIGURE 8.4 The Chief Strategic and Financial Options for Allocating
Financial
FinancialOptions
Optionsfor
for
Allocating
AllocatingCompany
Company
Financial
FinancialResources
Resources
Invest
Investin
inways
waysto
tostrengthen
strengthen
or
grow
existing
or grow existingbusiness
business
Pay
Payoff
offexisting
existinglong-term
long-term
or
short-term
or short-termdebt
debt
Make
Makeacquisitions
acquisitionsto
toestablish
establish
positions
in
new
industries
positions in new industriesor
orto
to
complement
existing
businesses
complement existing businesses
Fund
Fundlong-range
long-rangeR&D
R&Dventures
ventures
aimed
at
opening
market
aimed at opening market
opportunities
opportunitiesin
innew
newor
or
existing
businesses
existing businesses
Increase
Increasedividend
dividendpayments
payments
to
shareholders
to shareholders
Repurchase
Repurchaseshares
sharesof
ofthe
the
companys
common
stock
companys common stock
Build
Buildcash
cashreserves;
reserves;
invest
investin
inshort-term
short-termsecurities
securities
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8-55
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8-57
to focus resources on
building strength in fewer businesses
requires divesting or eliminating:
Once-attractive businesses in deteriorating markets
Businesses that will have a poor strategic or resource
returns potential
Weakly competitively positioned businesses with little
Core Concept
Corporate
Corporate restructuring
restructuring involves
involves radically
radically
altering
altering the
the business
business lineup
lineup by
by divesting
divesting
businesses
businesses that
that lack
lack strategic
strategic fit
fit or
or are
are poor
poor
performers
performers and
and acquiring
acquiring new
new businesses
businesses
that
that offer
offer better
better promise
promise for
for enhancing
enhancing
shareholder
shareholder value.
value.
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8-59
Broadly Restructuring
the Business Lineup
Radical
expectations.
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