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Week 6-Corporate Strategies

Week 6-Corporate Strategies - Corporate Strategies...

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Corporate Strategies Instructor: Mahka Moeen M&O Department Spring 2012 1
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Corporate Strategy: Key Questions What businesses should the firm be in? How should the corporate office manage the group of businesses? Are the businesses in the portfolio worth more as part of the corporation than they would be under other ownership? A B C D Business Units
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How is corporate level strategy different from business level? Corporate level strategy Scope of the firm how to achieve above normal returns (competitive advantage) by operating in more than one business/ industry. Business level strategy how to compete in a single business/ industry.
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Understanding the Value Chain Raw Materials Distribution Manufacturing Backward Integration Forward Integration Diversification
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Motivations for Diversification Diversification’s value is ultimately determined by the degree to which “the businesses in the portfolio are worth more under the management of the company than they would be under any other ownership” Presence of some synergy Three sets of motives Value-enhancing motives Value-neutral motives Devaluating motives
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Value Enhancing Diversification Related Diversification Builds on economies of scope Sharing activities: Operational relatedness Transferring core competencies: Corporate relatedness Market power Vertical integration Unrelated Diversification Financial economies Efficient internal capital allocation Business restructuring
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Related Diversification Economies of scope
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