Corporate strategy and parenting
A business may be performing well or poorly without the parent having any significant influence on it. Are linkages among units complex or difficult to establish without parental help?
Corporate strategy and parenting
The parent, we have found, is highly influential, and its impact is rarely neutral. If there is a fit, the parent is likely to create value. Three types of analyses can help strategists identify parenting opportunities. The core competence concept says that businesses are related if they have common technical or operating know-how. Can the parent exploit the upside potential of the relationship? We know how to downsize and squeeze when volumes fall. It primarily includes their pursuing of real synergy opportunities, and their positive interventions in the lateral relationships between businesses. The centerpiece of this research is a survey on the sources of corporate value creation that we sent out to CEOs, CFOs, and functional heads at approximately of the largest public and privately owned diversified companies. They represent the upside potential. Good parents constantly modify and fine-tune their parenting, but fundamental changes in parenting seldom occur, usually only when the chief executive and senior-management team are replaced. For that to be possible, there must be room for improvement.
The concept of parenting advantage makes a test for proposed corporate strategies, guiding them towards better market opportunities and higher corporate performance. Dana Corporation, another manufacturing-oriented parent company, also spotted the opportunity at Champion.
Such parent companies can justify themselves economically only if their influence creates value.
Patching approach in strategic management
Some corporate parents are dominated by managers, such as Jack Welch at General Electric or Allen Sheppard at Grand Metropolitan, whose personalities and skills make a critical difference. While good parents are always fine-tuning their parenting, they rarely change in any fundamental ways. Is each business in the portfolio defined to maximize its competitive advantage? Particularly in mature niche areas, he found that businesses often underperform. The matrix in our illustration plots the businesses of the diversified food company described in the table of critical success factors. However, the second challenge did contain a parenting opportunity: the business-unit managers had weak purchasing skills and had never recruited a top-ranking purchasing manager. Is there a match that will create value, or a mismatch that will destroy value? Sometimes that is the right decision, but it should always be examined. Publication date: 13 July Abstract Purpose — The major purpose of this paper is the development of a theoretical framework that can be used by corporate practitioners to understand the implicit parenting strategy of their company, assess its performance, and adjust it for improving the net corporate value creation. With edge-of-heartland businesses, the parent both creates and destroys value. Parents often create value because they have people with unique skills. Will an acquisition, divestment, corporate function, coordination committee, reporting relationship, or planning process enhance parenting advantage? The reality, however, is that the relationship between such businesses and the parent organization is likely to be destroying value. A third kind of analysis looks at the influence different parent companies have on similar businesses to see whether they have discovered still other parenting opportunities. One must understand a great deal about the manager and the job to judge well.
It is supposed to search for new opportunities continuously and refine and extend parenting skills, which encourage innovative ideas and help eliminate many disasters of excessive corporate ambition.
For example, those in bulk chemicals are not the same as those in specialty chemicals. First, strategists list the major challenges facing a business, which are normally recorded in the business plan.
Does the business have capabilities that could be shared among businesses? Processes of merger, acquisition, divestment, and the other processes of transformation continually create new challenges to corporate management towards providing better performance of aggregated businesses than they would achieve if they were independent, stand-alone entities.
Resources, such as patents held by the parent, the corporate brand, special government relationships, or access to scarce property or financial assets, can also be important characteristics.
Parenting and patching approach
They embody its understanding of different types of businesses. They believed they had the appropriate skills for that business because, like oil, it involved exploration, extraction, government relations, and large, technically complex projects. It is corporate hierarchy, especially senior management, that inevitably destroys some value. Parenting advantage Corporate parents compete with each other for the ownership of businesses. Should they intervene more actively in their portfolio of businesses in order to add value? For example, at one parent company, the central engineering function develops the technical procedures and standards for all its chemical businesses. Business Definition. The next step in developing a corporate-level strategy is to decide how closely the parent organization fits with the businesses in the portfolio. We do not blunt the edges of clear business-unit focus. For example, a parent that is not expert in manufacturing might not know that a business lacked world-class manufacturing skills. For example, one business faced two major challenges: to expand capacity in order to meet the demands of a growing segment and to lower costs by improving purchasing.
based on 48 review