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Corporate Strategy and Diversification

17 important questions on Corporate Strategy and Diversification

What is parenting advantage?

The value-adding effect of head office to individual business units that make up the organization's portfolio.

Which 2 constraints may organizations that seek for greater market penetration face?

1. Retaliation from competitors
2. Legal constraints

Despite potential for benefits from relatedness, product development can be an expensive and high-risk activity for 2 reasons, which?

1. New strategic capabilities
2. Project management risk

Name the 4 potentially value-creating drivers for diversification?

1. Economies of scope
2. Stretching corporate management competences
3. Exploiting superior internal processes
4. Increasing market power

Explain stretching corporate management competences?

Special case of economies of scope, and refers to the potential for applying the skills of talented corporate-level managers to new businesses.

What is dominant logic?

Set of corporate-level managerial compentences applied across the portfolio of businesses.

Explain exploiting superior internal processes?

Internal processes within a diversified corporation can often be more efficient than external processes in the open market.

Explain increasing market power?

Being diversified in many businesses can increase power vis-à-vis competitors in at least 2 ways.

Name 3 potentially value-destroying diversification drivers?

1. Responding to the market decline
2. Spreading risk across range of markets
3. Managerial ambition

What is the same in vertical integration and diversification and what is the difference?

They both increase the corporation scope, but vertical integration brings together activities up and down the same value network. And diversification typically involves more or less different value networks.

Market reationships tend to fail in controlling subcontractor opportunism where? (3)

1. There are few alternatives and hard to shop around
2. The product or service is complex and changing
3. Investments have been made in specific assets

There are 5 main types of activities by which a corporate parent can add value, which?

1. Envisioning
2. Facilitating synergies
3. Coaching
4. Providing central services and resources
5. Intervening

There are 3 broad ways in which the corporate parent can inadvertently destroy value, which?

1. Adding management costs
2. Adding bureaucratic complexity
3. Obscuring financial performance

What is the role of the portfolio manager?

Identify and acquire undervalued assets or businesses and to improve them.

What are the 3 challenges when trying to achieve synergistic benefits?

1. Excessive costs
2. Overcoming self-interest
3. Illusory synergies

There are 2 crucial challenges to managing a parental developer, which?

1. Parental focus
2. Crown jewel problem

What is the crown jewel problem?

Some diversified companies have business units in their portfolios which are performing well but to which the parent adds little value. These can become crown jewels, to which corporate parents become excessively attached.

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The question on the page originate from the summary of the following study material:

Strategy and Organization | 9781784471842

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Corporate Strategy and Diversification

17 important questions on Corporate Strategy and Diversification

What is parenting advantage?

Which 2 constraints may organizations that seek for greater market penetration face?

Despite potential for benefits from relatedness, product development can be an expensive and high-risk activity for 2 reasons, which?

Name the 4 potentially value-creating drivers for diversification?

Explain stretching corporate management competences?

What is dominant logic?

Explain exploiting superior internal processes?

Explain increasing market power?

Name 3 potentially value-destroying diversification drivers?

What is the same in vertical integration and diversification and what is the difference?

Market reationships tend to fail in controlling subcontractor opportunism where? (3)

There are 5 main types of activities by which a corporate parent can add value, which?

There are 3 broad ways in which the corporate parent can inadvertently destroy value, which?

What is the role of the portfolio manager?

What are the 3 challenges when trying to achieve synergistic benefits?

There are 2 crucial challenges to managing a parental developer, which?

What is the crown jewel problem?

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