Managing the Multibusiness CorporationThe Multidivisional Structure: Theory of the M-FormThe Divisionalized Firm in PracticeThe Functions of Corporate ManagementThe Development of Strategic Planning Techniques: General Electric in the 1970’sPortfolio Planning Models: Their Uses in Strategy FormulationPortfolio Planning Models: The GE/ McKinsey MatrixPortfolio Planning Models: The BCG Growth-Share MatrixPortfolio Planning Models: Applying the BCG Matrix to BM Foods Inc.Do Portfolio Planning Models Help or Hinder Corporate Strategy Formulation?Corporate Restructuring to Create Value: The McKinsey PentagonExxon’s Strategic Planning ProcessCorporate Control over the BusinessesGoold & Campbell’s Corporate Management Styles: Financial and Strategic ControlCorporate Management Applications of PIMS AnalysisManaging Linkages between BusinessesWhat Corporate Management Activities are Implied by Porter’s “Concepts of Corporate Strategy”Rethinking the Management of Multibusiness Corporations: Lessons from General ElectricRethinking the Management of Multibusiness Corporations: Lessons from ABBRethinking the Management of Multibusiness Corporations: Bartlett & Ghoshal’s Analysis of Key Management ProcessesManaging the Multibusiness CorporationManaging the Multibusiness Corporation•Structure of the Multidivisional CompanyoTheory of the M-formoThe divisionalized firm in practice•The Role of Corporate Management•Managing the Corporate PortfoliooPortfolio planning techniquesoValue-creation through corporate restructuring•Managing Individual Businesses•Managing Internal Linkages•Recent TrendsOUTLINEThe Multidivisional Structure: Theory of the M-FormThe Multidivisional Structure: Theory of the M-FormEfficiency 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.The Divisionalized Firm in PracticeThe 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-formThe Functions of Corporate ManagementThe 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’sThe Development of Strategic Planning Techniques: General Electric in the 1970’sLate 1960’s: GE encounters problems of direction, coordination, control, and profitabilityCorporate planning responses:Portfolio Planning Models —matrix-based frameworks for evaluating business unit performance, formulating business strategies, and allocating resourcesStrategic 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 FormulationPortfolio 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.H A R V E S TH O L DB U I L DLowMediumHighLow Medium HighIndustry AttractivenessPortfolio Planning Models: The GE/ McKinsey MatrixPortfolio 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: The BCG Growth-Share MatrixPortfolio Planning Models: Applying the BCG Matrix to BM Foods Inc.Portfolio 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