CORPORATE STRATEGY

1
Firms need support activities and may also have
multiple business units competing in different industries;
hence,

Corporate Strategy caters to:

• Deciding the governance structure
• Deciding the business portfolio and their relationship

Should result in value creation and value capture over

and above the individual businesses.
2
INTEGRATION

3
 Corporate strategy

Value creation/capture
A
Synergy M
Ownership Organization R
Organization K
E T
Transaction cost: opportunism, asset
specificity, frequency, uncertainty

Need long term relationship? When to internalize? Institutional context? Organizational structure and process?

4
Market: (Added Value) – (Market Transaction Cost)

Relationship: (Added Value) * (Share) – (Contract Cost)

Ownership: (Added Value) – (Acquisition Cost + Coordination Cost)

DIVERSIFICATION

6
 7

Ansoff (1957)
 Decision on Diversification:

• Related Diversification: Choose related diversification if the firm has strong,

transferable resources, significant potential for synergies, and a cohesive
organizational structure to support integration.
• Unrelated Diversification: Opt for unrelated diversification if the firm seeks to
mitigate risks, leverage financial resources, and is equipped with robust control
mechanisms for managing a diversified portfolio. 8

(Collis & Montgomery, 1998)

 9

(Collis & Montgomery, 1998)

 10

(Collis & Montgomery, 1998)

 11

(Collis & Montgomery, 1998)

Some decision points:

• Market vs hierarchy vs network

• Level of strategic alliance
• M&A
• Diversification
• Internal structure and processes (control vs autonomy)

12