Quản trị kinh doanh - Managing the multibusiness corporation

Managing the Multibusiness CorporationStructure of the Multidivisional CompanyTheory of the M-formThe divisionalized firm in practiceThe Role of Corporate ManagementManaging the Corporate PortfolioPortfolio planning techniquesValue-creation through corporate restructuringManaging Individual BusinessesManaging Internal LinkagesRecent TrendsOUTLINEThe Multidivisional Structure: Theory of the M-Form Efficiency advantages of the multidivisional firm:Recognizes bounded rationality—top management has limited decision-making capacityDivides decision-making according to frequency: —high-frequency operating decisions at divisional level —low-frequency strategic decisions at corporate levelReduces costs of communication and coordination: business level decisions confined to divisional level (reduces decision making at the top)Global, rather than local optimization:- functional organizations encourage functional goals. M-form structure encourages focus on profitability.Efficient allocation of resources through internal capital and labor marketsResolves agency problem-- corporate management an interface between shareholders and business-level managers.The Divisionalized Firm in PracticeConstraints upon decentralization. Difficult to achieve clear division of decision making between corporate and divisional levels. On-going dialogue and conflict between corporate and divisional managers over both strategic and operational issues.Standardization of divisional managementDespite potential for divisions to develop distinctive strategies and structures—corporate systems may impose uniformity.Managing divisional inter-relationshipsRequires more complex structures, e.g. matrix structures where functional and/or geographical structure is imposed on top of a product/market structure.Added complexity undermines the efficiency advantages of the M-formThe Functions of Corporate Management —Decisions over diversification, acquisition, divestment —Resource allocation between businesses. — Business strategy formulation —Monitoring and controlling business performance —Sharing and transferring resources and capabilitiesManaging linkagesbetween businessesManaging theindividual businessesManaging the Corporate PortfolioThe Development of Strategic Planning Techniques: General Electric in the 1970’s Late 1960’s: GE encounters problems of direction, coordination, control, and profitability Corporate planning responses:Portfolio Planning Models —matrix-based frameworks for evaluating business unit performance, formulating business strategies, and allocating resourcesStrategic Business Units —GE reorganized around SBUs (business comprising a strategically-distinct group of closely-related products PIMS —a database which quantifies the impact of strategy on performance. Used to appraise SBU performance and guide business strategy formulationPortfolio Planning Models: Their Uses in Strategy FormulationAllocating resources-- the analysis indicates both the investment requirements of different businesses and their likely returnsFormulating business-unit strategy-- the analysis yields simple strategy recommendations (e.g..: “build”, “hold”, or “harvest”)Setting performance targets-- the analysis indicates likely performance outcomes in terms of cash flow and ROIPortfolios balance-- the analysis can assist in corporate goals such as a balanced cash flow and balance of growing and declining businesses. H A R V E S TH O L DB U I L DLowMediumHighLowMediumHighIndustry AttractivenessPortfolio Planning Models: The GE/ McKinsey MatrixIndustry Attractiveness Criteria Business Unit Position - Market size - Market share (domestic,- Market growth global, and relative)- Industry profitability - Competitive position- Inflation recovery - Relative profitability- Overseas sales ratioBusiness Unit PositionHIGH LOWLOWAnnual real rate of market growth (%)Relative market shareEarnings: high stableCash flow: high stableStrategy: milkEarnings: low, unstableCash flow: neutral or negativeStrategy: divestEarnings: high stable, growingCash flow: neutralStrategy: invest for growthEarnings: low, unstable, growingCash flow: negativeStrategy: analyze to determine whether business can be grown into a star, or will degenerate into a dogHIGH?Portfolio Planning Models: The BCG Growth-Share MatrixPortfolio Planning Models: Applying the BCG Matrix to BM Foods Inc.Annual real rate of market growth (%)Relative market share0.1 0.5 1 1.5 2.0-2 0 2 4 6 8 10Frozen fooddivisionFruit juicesdivisionBakery divisionHealth foodsdivision Current position Previous position. Area of circle proportional to $ sales.Do Portfolio Planning Models Help or Hinder Corporate Strategy Formulation? ADVANTAGES Simplicity: Can be quickly prepaired Big picture: Permits one page representation of the corporate portfolio & the strategic positioning of each business Analytically versatile: Applicable to businesses, products, countries, distribution channels. Can be augmented: A useful point of departure for more sophisticated analysis DISADVANTAGES Simplicity: Oversimplifies the factors determining industry attractiveness and competitive advantage Ambiguous:The positioning of a business depends critically upon how a market is defined Ignores synergy: the analysis takes no account of any interdependencies between businessesCorporate Restructuring to Create Value: The McKinsey PentagonCurrentmarketvalueMaximum raideropportunityCurrent perceptions gapCompanyvalue as isOptimalrestructuredvalueStrategic andoperatingopportunitiesPotential valuewith internalimprovementsDisposal/acquisitionopportunitiesTotal companyopportunities125RESTRUCTURINGFRAMEWORK34Potential valuewith externalimprovementsExxon’s Strategic Planning ProcessEconomic ReviewEnergy ReviewBusiness PlansDiscuss- -ion with contact directorApproval by Mgmt. CommitteeStewardship ReviewStewardship BasisFinancial ForecastCorporate PlanInvestment ReappraisalsAnnual BudgetCorporate Control over the Businesses2 basic approachesInputcontrolMonitoring & approving business level decisionsOutput (or performance) controlSetting & monitoring the achievement ofperformance targetsPrimarily through strategic planning system & capital expenditure approval systemPrimarily through performance management system, including operating budgets and HR appraisalsGoold & Campbell’s Corporate Management Styles: Financial and Strategic ControlHighLowCONTROL INFLUENCEStrategicplanningCentralizedStrategiccontrolHoldingcompanyFinancialcontrolCORPORATE INFLUENCEFlexible strategicTight strategicTight financialCorporate Management Applications of PIMS Analysis Setting performance targets—feeding business unit strategic and industry data into the PIMS regression model gives performance norms for the business (PAR ROI). Formulating business unit strategy— PIMS model can simulate the impact of changing strategic variables. Allocating investment funds between businesses— PIMS Strategic Attractiveness Scan comparison different business units’ strategic attractiveness and their cash flow characteristicsManaging Linkages between BusinessesKEY ISSUE—How does the corporate center add value to the business? BASIS OF BUSINESS LINKAGES—Sharing of resources and capabilities.SHARING OCCURS AT TWO LEVELS: Corporate level—common corporate services Business level—sharing resources, transferring capabilitiesPORTER’S ANALYSIS OF BUSINESS LINKAGES AND CORPORATE STRATEGY TYPES Portfolio management— Parent creates value by operating an internal capital market Restructuring—Parent create value by acquiring and restructuring Inefficiently-managed businesses Transferring skills—Parent creates value by transferring capabilities between businesses Sharing activities—Parent creates value by sharing resources between businesses ROLE OF DOMINANT LOGIC—importance of corporate managers’ perception of linkagesWhat Corporate Management Activities are Implied by Porter’s “Concepts of Corporate Strategy”(1) Portfolio Management Using superior information and analysis to acquire attractive companies at favorable prices (e.g. Berkshire Hathaway). Minimizing cost of capital (e.g. GE) Create efficientt internal system for capital allocation (e.g. Exxon-Mobil) Efficient monitoring of business unit performance (e.g BP-Amoco).(2) Restructuring: Intervening to cut costs and divest under performing assets (e.g. Hanson during 1980s & early 1990s)(3) Transferring skills: —Transferring best practices (e.g. Hewlett-Packard) —Transferring innovations (e.g. Sharp) —Transferring key personnel between businesses (e.g. Sony)(4) Sharing activities: —Common corporate services (e.g. 3M) —Sharing operational resources and functions (e.g. sales and distribution, manufacturing facilities).Rethinking the Management of Multibusiness Corporations: Lessons from General Electric Delayering --- from 9 or 10 layers of hierarchy to 4 or 5Decentralizing decisions.Reformulating strategic planning—from formal, document-intensive analysis to direct face-to-face discussion of key issues.Redefining the role of HQ—from checker, inquisitor, and authority to facilitator, helper, and supporter.Coordinating role of HQ— corporate HQ to lead in creating the “boundaryless corporation” where innovations and ideas flow and where horizontal coordination occurs to respond to new opportunities.HQ as change agent— corporate HQ driving force for continual organizational change (e.g. “workout”, “six-sigma”).Jack Welch’s transformation of GE’s structure and management systems:Rethinking the Management of Multibusiness Corporations: Lessons from ABBMatrix organization—both product and country / regional coordination, but reporting requirements flexible.Radical decentralization—ABB’s corporate HQ is tiny (<100 staff). Decision making authority lies with individual national subsidiaries (mostly small or medium-sized businesses).Bottom-up management. Each business has its own balance sheet and can retain 1/3 of net income.Informal collaboration and integration.Key features of ABB’s corporate management system:Yet, for all of ABB’s apparent success at reconciling coordination with Decentralization, by 2002-03, deteriorating profitability and complexity of matrix structure causes ABB to adopt simpler line of business structure Rethinking the Management of Multibusiness Corporations: Bartlett & Ghoshal’s Analysis of Key Management ProcessesManaging the tension between short-term ambitionManaging operational interdependencies and personal networksCreating and pursuing opportunitiesCreating and maintaining organizational trustLinking skills, knowledge, and resourcesReviewing, developing, and supporting initiativesShaping and embedding corporate purposeDeveloping and nurturing organizational values Establishing strategic mission & performance standardsFront-line Management Middle Management Top ManagementRENEWAL PROCESSINTEGRATION PROCESSENTREPRENEURIAL PROCESS