• Reduces costs of communication and coordination: business level decisions confined to divisional level (reduces decision making at the top). • Global, rather than local optimization:[r]
Trang 1Managing the Multibusiness
Corporation
Managing the Multibusiness
Corporation
• Structure of the Multidivisional Company
o Theory of the M-form
o The divisionalized firm in practice
• The Role of Corporate Management
• Managing the Corporate Portfolio
o Portfolio planning techniques
o Value-creation through corporate restructuring
• Managing Individual Businesses
• Managing Internal Linkages
• Recent Trends
OUTLINE
Trang 2The Multidivisional Structure: Theory of the M-Form
Efficiency advantages of the multidivisional firm:
• Recognizes bounded rationality—top management has limited
decision-making capacity
• Divides decision-making according to frequency:
—high-frequency operating decisions at divisional level
—low-frequency strategic decisions at corporate level
• Reduces 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 markets
• Resolves agency problem corporate management an interface between shareholders and business-level managers.
Trang 3The Divisionalized Firm in Practice
• Constraints 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 management
– Despite potential for divisions to develop distinctive strategies and
structures—corporate systems may impose uniformity.
• Managing divisional inter-relationships
– Requires 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-form
Trang 4The 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 capabilities
Managing
linkages
between
businesses
Managing the
individual
businesses
Managing the
Corporate
Portfolio
Trang 5The Development of Strategic Planning Techniques:
General Electric in the 1970’s
The 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:
for evaluating business unit performance, formulating business strategies, and allocating resources
SBUs (business comprising a strategically-distinct
group of closely-related products
strategy on performance Used to appraise SBU
performance and guide business strategy formulation
Trang 6Portfolio Planning Models: Their Uses in Strategy Formulation
Portfolio Planning Models: Their Uses in Strategy Formulation
• Allocating resources the analysis indicates both the
investment requirements of different businesses and their likely returns
• Formulating 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 ROI
• Portfolios balance the analysis can assist in corporate
goals such as a balanced cash flow and balance of growing and declining businesses.
Trang 7
H A
R V
H O
Low
Medium
High
Portfolio Planning Models:
The GE/ McKinsey Matrix
Portfolio Planning Models:
The GE/ McKinsey Matrix
Industry Attractiveness Criteria Business Unit Position
- Overseas sales ratio
Business Unit Position