1. Chapter 6

2. El proceso de administracion estrategica
Analisis
Externo
Decisiones
estrategicas
Implementacion
Estrategica
Ventaja
competitiva
Mision
Objetivos
A que negocio entrar?
Analisis
Interno
Integracion vertical
Estrategia
a nivel corporativo

3. Logica de la estrategia a nivel corporativo
Estrategia a nivel corporativo debe de crear valor
1) A fin de que la compania como un todo crezca
A fin de que los negocios dentro de la compania
puedan tener valor por si mismos de manera independiente
Que el valor de capital no pueda ser creado a traves de
inversion en portafolios
• La estrategia a nivel corporativo debe de generar
sinergias que no son posible de crear en
mercados de capital
• integracion vertical+ cadenas economicas de valor

4. Que es la integracion vertical
Ejemplo de la pizza
Ganaderos
semillas
Cadenas de
Pizza
Porcesadoras
de queso
Agricultores
Consumidor final
Distribuidores
de alimentos

5. Integracion hacia atras
Que es la integracion vertical?
Integracion hacia atras
ganaderos
semillas
Cadenas de
pizza
procesadores
Consumidor
final
agricultores
distribuidores
Inegracion hacia adelante

6. Economias de la cadena de valor
Logica economica
Integracion
hacia atras
ganaderos
La firma focal es capaz
de crear sinergia con
otras firmas
• reduccion en costos
procesadores
• mejora en beneficios
• La firma focal es capaz de
generar beneficios mayores
a los de la competencia
distribuidores
Integracion hacia
adelante

7. Ventaja competitiva Si la integracion vertical cumple
los criterios del VRIO,
entonces puede generar
una ventaja competitiva

8. Valor de la integracion vertical
Mercado vs. intercambio economico integrado
• los mercados y las formas de integracion permiten en intercambio economico
• el intercambio economico debe de ser tal que permita
Maximizar el valor de la firma focal
• asi las firmas buscan la manera de maxmizar sus beneficios
La integracion hace sentido cuando la firma
focal puede generar mayor valor que aquel
en el que el mercado se crea

9. Valor de la integracion vertical
Consideraciones de valor
Apalan-
camiento
Oportu-
nismo
flexibilidad
• las capacidades de
Una firma pueden
Ser fuentes de ventaja
Competitiva en otros
negocios
• se puede generar al
internalizar
• internalizar es
menos flexible
• flexibilidad se da
cuando la
Incertidumbre es
alta
• internalizar puede
ser menos costoso
Que utilizar
oportunismo
• de no ser asi, no
Se da el intercambio

10. Rareza de la IV Integracion vs no integracion
• la estrategia de integracion puede ser rara si integra
o no lo hace pues esta NO depende la forma que la
empresa tome sino quer depende en el valor generado

11. Imitabilidad de la IV Forma vs funcion
• la forma, per se, no es costosa de imitar
• la funcion de valor puede ser costosa de imitar si:
•la combinacion de los recursos y capacidades le da:
historicidad unica
Abiguedad causal
Complejidad social
Requerimientos de capital son limitados

12. Imitabilidad de IV Modos de entrada
• adquisicion de desarrollo interno
• adquriri un proveeedor en vez de generarlos
• los limites son las capacidades y recursos de las empresas
• las alianzas estrategicas son un ejemplo de la IV a menos costo

13. Organizacion Functional Structure (U-Form) CEO’s Role Cooperation
Accounting
Finance
Marketing HR
Engineering
Original
Business
Original
Business
Original
Business
Original
Business
Original
Business
Conflict
Cooperation
New
Business
New
Business
New
Business
New
Business
New
Business
Conflict

14. Organizacion de la IV Metodos de control administrativo
Que se necesita controlar?
• los esfuerzos para generar sinergias
• cooperacion y conflicto entre areas
• integracion de nuevos negocios
• horizonte de tiempo entre administradores

15. Expansion Internacional
Costo-Control tradeoff
Cost
(capital en riesgo)
alto
inversion
Int. vertical
adquisicion
Alianza estrategica
IV parcial
franquicia
licencia
No IV
exportacion
Control
bajo
alto

16. Resumen Integracion vertical…
• hace sentido cuando economias de la cadena de
Valor se pueden crear y capturar
• puede peritir a algunas companias apalancar sus
capacidades
• puede ser una respuesta al oportunismo y
la incertidumbre
• como un tipo de intercambio NO es raro ni
ostoso de imitar

17. Resumen La integracion vertical…
• es una decision importante de considerar para
Posibles expansiones internacionales
• hace sentido en circunstancias especificas
• puede ser costosa si se hace mal
Propiedad puede ser costosa, integrarse solo
cuando los beneficios son mas que los costos

18. Chapter 7

19. The Strategic Management Process
External
Analysis
Strategic
Choice
Strategy
Implementation
Competitive
Advantage
Mission
Objectives
Which Businesses
to Enter?
Internal
Analysis
• Vertical Integration
Corporate Level
Strategy
• Diversification

20. Logic of Corporate Level Strategy
Corporate level strategy should create value:
1) such that businesses forming the corporate whole
are worth more than they would be under
independent ownership
2) that equity holders cannot create through
portfolio investing
Therefore,
• a corporate level strategy must create
synergies
• economies of scope - diversification

21. Integration and Diversification
Raw Materials
Focal Firm
Distribution
Customer
Supplier
Backward
Forward
Diversification
Other
Businesses
Current
Businesses
Other
Businesses No
Links
Unrelated
Related
Many
Links

22. Types of Corporate Diversification
At a general level…
Product Diversification:
• operating in multiple industries
Geographic Market Diversification:
• operating in multiple geographic markets
Product-Market Diversification
• operating in multiple industries in multiple
geographic markets

23. Types of Corporate Diversification
At a more specific level…
Limited Diversification
• single business: > 95% of sales in single business
• dominant business: 70% to 95% in single business
Related Diversification
• related-constrained: all businesses related on most
dimensions
• related-linked: some businesses related on some
dimensions
Unrelated Diversification
• businesses are not related

24. Product and Geographic Diversification
Possibilities:
• single-business in one geographic area
• single-business in multiple geographic areas
• related-constrained in one or multiple geographic areas
• related-linked in one or multiple geographic areas
• unrelated in one or multiple geographic areas
Note:
• relatedness usually refers to products
• seemingly unrelated products may be related on
other dimensions

25. Competitive Advantage
If a diversification strategy meets the
VRIO criteria…
Is it Valuable?
Is it Rare?
Is it costly to Imitate?
Is the firm Organized to exploit it?
…it may create competitive advantage.

26. Value of Diversification
Two Criteria
1) There must be some economy of scope
2) The focal firm must have a cost advantage over
outside equity holders in exploiting any
economies of scope

27. Value of Diversification
Business X +
Business Y +
Business Z
Independent: equity holder could buy shares of each firm
Focal Firm
Business X
Value
Economies Of
Scope
Business Y
Business Z
Combined: equity holder buys shares in one firm

28. Economies of Scope Four Types Operational Financial Anticompetitive
Managerialism

29. Economies of Scope Operational Economies of Scope Sharing Activities
• exploiting efficiencies of sharing business
activities
Example: Frito-Lay’s Trucking
Spreading Core Competencies
• exploiting core competencies in other businesses
• competency must be strategically relevant
Example: Orbitz

30. Economies of Scope Financial Economies of Scope
Internal Capital Market
• premise: insiders can allocate capital across
divisions more efficiently than the external capital
market
• works only if managers have better information
• may protect proprietary information
• may suffer from escalating commitment
Example: Hanson Trust, PLC

31. Economies of Scope Financial Economies of Scope Risk Reduction
• counter cyclical businesses may provide
decreased overall risk
however,
• individual investors can usually do this more
efficiently than a firm
Example: Snow Skiis & Water Skiis

32. Economies of Scope Financial Economies of Scope Tax Advantages
• transfer pricing policy allows profits in one
division to be offset by losses in another division
• this is especially true internationally
• can be used to ‘smooth’ income
Example: Ireland

33. Economies of Scope Anticompetitive Economies of Scope
Multipoint Competition
• mutual forbearance
• a firm chooses not to compete aggressively
in one market to avoid competition in another
market
Example: American Airlines & Delta: Dallas & Atlanta
Market Power
• using profits from one business to compete in
another business
• using buying power in one business
to obtain advantage in another business

34. Economies of Scope Managerialism
• an economy of scope that accrues to managers
at the expense of equity holders
• managers of larger firms receive more compensation
(larger scope = more compensation)
• therefore, managers have an incentive to
acquire other firms and become ever larger
• even though the incentive is there, it is difficult
to know if managerialism is the reason for an
acquisition

35. Equity Holders and Economies of Scope
Most economies of scope cannot be captured
by equity holders
• risk reduction can be captured by equity holders
Managers should consider whether corporate
diversification will generate economies of scope
that equity holders can capture
• if a corporate diversification move is unlikely
to generate valuable economies of scope,
managers should avoid it

36. Rareness of Diversification
Diversification per se is not rare
Underlying economies of scope may be rare
• relationships that allow an economy of scope
to be exploited may be rare
• an economy of scope may be rare because
it is naturally or economically limited
• a soft drink bottler buys the only source of
spring water available
• a hotel in a resort town creates a large water park,
there are only enough customers to support one park

37. Imitability of Diversification
Duplication of Economies of Scope
Less Costly-to-Duplicate
Costly-to-Duplicate
Employee Compensation
Core Competencies
Tax Advantages
Internal Capital Allocation
Risk Reduction
Multipoint Competition
Shared Activities*
Exploiting Market Power
(codified/tangible)
(tacit/intangible)
*may be costly depending on relationships

38. Imitability of Diversification
Substitution of Economies of Scope
Internal Development
Strategic Alliances
• find a partner with the
desired complementary
assets
• start a new business under
the corporate whole
• avoids potential cross-
firm integration issues
• less costly than
acquiring a firm
Competitors may use these strategies to arrive at a
position of diversification without buying another firm

39. International Diversification
Three Types of International Risk
Cultural/Popular
Financial
Political
• product may not be
accepted simply
because of your
country of origin
• currency
exchange
• nationalization
• quotas
• general
economic
conditions
• tariffs
• regulations
Example: Resistance
to McDonald’s by
France’s older
generation
Example: Asian
economic crisis
of the 1990s
Example: Bolivia
nationalized its
petroleum
industry in the ’70s

40. International Diversification
Managing International Risks
Cultural/Popular
• avoidance
• neutral branding (disguising country of origin)
Example: Where is Häagen-Dazs from?
Financial
• currency hedging
• geographic diversification
• spreading risk across several countries

41. International Diversification
Managing International Risks
Political
• find a local partner
• political neutrality
• negotiation with governments
• foreign governments often have an interest
in direct investment
Example: Case International in Brazil

42. Summary Corporate Strategy: In what businesses should
the firm operate?
• an understanding of diversification helps managers
answer that question
Two Criteria:
1) economies of scope must exist
2) must create value that outside equity holders
cannot create on their own

43. Summary Economies of Scope
• a case of synergy—combined activities generate
greater value than independent activities
• may generate competitive advantage if they
meet the VRIO criteria
Firms should pursue diversification only if careful
analysis shows that competitive advantage is likely!