Kernochan, Where have we been; Where are we going? What is Strategy: Language of Strategic Thinking Business-level Strategy as Gestalts –Strategy, firm (value chain), environment –Strategy: cost leadership, differentiation, etc. –External Analysis incl. competitive dynamics –Internal Analysis: value chain, resource based view Going to: –Other types of Strategy: corporate, international, cooperative

Kernochan, Corporate Strategy: Central Issue How to select & manage multiple businesses (strategic gestalts) in a way that provides greater value to the stakeholders, creates competitive advantage for the firm Conceptual Underpinnings: –Corp. firm = bundle or portfolio of businesses –the combination or mix of such businesses can create value or reduce risk (for managers and/or the firm) –combination involves 2 sets of relationships (1) across businesses, and (2) between parent/HQ and subsidiary businesses

Kernochan, Corporate Strategy & Strategic Gestalts A strategic gestalt involves one product- market. Multiple businesses involve multiple product-markets. A firm may have one or multiple generic strategies for different product-markets Therefore corporate strategy may involve only one or multiple strategic gestalts

Kernochan, Corporate Strategy: Key Concepts Diversification –Moving into multiple (related/unrelated) businesses –reduces risk of (reliance on) core business Relatedness –Different degrees/types of commonalities across businesses: how are businesses similar in ways that are important? –Different perspectives/views of what constitutes relatedness Operational (Value Chain) vs. Corporate (Resources, Capabilities)

Kernochan, Corporate Strategy: Sources of Competitive Advantage (value creation) economies of scope market power –within markets: includes the use of size to create cost, distribution or other types of advantages –across markets: multipoint competition financial economies

Kernochan, Levels & Types of Diversification Three Levels of diversification: –low, moderate-high, very high Five Types of diversification: –Low: single or dominant business –Mod-Hi: related constrained or related linked –Very High: unrelated

Kernochan, Corporate Strategy: Importance of Core Business Centers or focuses the firm Drives/dominates company thinking, culture and strategic perspectives Generally, represents career path for top executives, hence technical knowledge Importance: depends on culture, values regarding conformity over performance

Kernochan, Corporate Strategy: Action Patterns What are the actions or patterns of actions that represent corporate strategy? What do I look for? Actions that affect the mix of businesses –Mergers, acquisitions, creation of horizontal or vertical, related or unrelated new businesses –divestiture or closing, significant expansion or downsizing of existing businesses Actions that affect relationships among businesses –new ways of managing, organizing, controlling or knowledge/skills transfer across existing businesses to increase value