1. MBA Session 7 Corporate Strategy Knut Haanæs, Ph.D Associate Professor Norwegian School of Management - BI

2. Corporate Strategy Intro to corporate strategy Issues of corporate strategy AT&T case and role play

3. Levels of strategy Portfolio Synergies Competitive position Product- portfolio Value creation CORPORATE STRATEGY BUSINESS UNIT STRATEGY FUNCTIONAL STRATEGY Marketing Finance HR Logistics Production

4. Corporate Strategy “In each case, executives were focusing on individual elements of corporate strategy: resources, businesses, or organization. What was missing was the insight that turns those elements into an integrated whole. That insight is the essence of corporate advantage—the way a company creates value through the configuration and coordination of its multibusiness activities.” Collis and Montgomery 1998: 72

5. Rationale for Corporate Strategy The total value of the combined businesses is higher within the corporation than if each business was operated independently outside the corporation (or in another corporation)

6. Corporate Strategy Intro to corporate strategy Issues of corporate strategy AT&T case and role play

7. AT&T - 1993-94 Network services are obliged to purchase equipment and consulting services internally, also when outside companies offer superior value. Sometimes you are stuck with «second best» solutions in terms of infrastructure.

8. AT&T - 1993-94 Bell Labs struggle with showing integrity vis-à-vis potential clients; often competitors of the telecom operator. This means that you do not get a number of the projects for which you are best qualified (in terms of competencies).

9. AT&T - 1993-94 The equipment manufacturer is accused of prioritizing the internal operator, not providing the optimal service and products to «outside» customers. This means that your external market is restricted in terms of potential customers, and that you do not reach efficient scale despite the substantial size of the internal AT&T market.

10. AT&T - 1994-94: Role play Top management team Overall strategy and performance Top management team Overall strategy and performance Equipment Production of telecom and data equipment Bell Labs R&D, consulting and advanced solutions Telecom Sevices Operations of worlds largest telecom network External consultants Support top management

11. Business Units 5 key actions to improve profitability 20% and #1 in 2 years Identify critical future competencies

12. Corporate management Look for synergies Keep holistic perspective Reduce overheads from 33% to 23% in 2 years

13. Corporate Strategy Intro to corporate strategy Issues of corporate strategy AT&T case and role play

14. Four approaches to corporate strategy Portfolio Competencies Value creation Competition Where do we find synergies? Where are costs?

15. First, the Portfolio approach Competitive position Industry attractiveness Good Medium Weak High Med. Low Winner ? Average business unit Looser Profit creator Looser Hitt et al. (1996)

16. Traditional portfolio approach Allocate financial resources Identify business units that fit the market Classify regarding attractivity and position Identify the right strategy for each b.u. (harvest, invest, etc.) In which industries do we compete? How strong is our position and how attractive is the industry? Should we invest more or less? How much money should we invest?

17. Assumptions behind portfoilo approaches Strategic resources assumed to be allocated and mobile Independence between business units Economics-based strategy perspective

18. Allocating money Konsern SBU

19. Second, competency approach Core product 1 Core product 2 Competense Competence 3 Produkter 21 SBU

20. Assumptions behind competence- based corporate strategy Companies different because of resources Dependence between business units Critical resources built over time through activities Intangible resources mobilized

21. Third, sharing activities

22. Fourth, competition Operatører Input factor competition Industry development High Low TIME Schumpeter innovasjon Contractors Creators Operators

23. Independence Control Autonomy Sharing Responsiveness Integration Synergies Subsidies Examples of corporate tensions

24. Four ways to influence value Stand alone influence Linkage influence Central functions and Services Corporate Development Campbell, et al. 1995

25. Examples of potential sources of synergy Scale economies Financing / funding Management Information Resources R&D Reputation Vision / mobilization