Creating Corporate Advantage

ByDwi Joko Pramudito

Song Young Kang

Corporate strategy-the way a company seeks to create value through the configuration and coordination of its multimarket activities

An effective corporate strategy can best be thought of as an integrated system in which all elements of the strategy are aligned

A System of Value Creation

Corporate Strategy Triangle

Resources should create acompetitive advantage in the business in which a firm competes

Corporate resources should be evaluated against the key success factor in each business

The firm must also compete on all the other resources are required to produce and deliver the product or service in each business

Competitive Advantage

The requirement for effective control addresses the fit between the business and the organizational structure, system and processes

The principal issue is whether individual business can be effectively monitored and controlled under the corporate infrastructure

Control

A firm’s infrastructure must be designed to enable it to achieve coherence across the businesses

A firm’s infrastructure must also be design to leverage each of its valuable resources with a minimum of corporate intervention

Coherence

A Continuum of Effective Corporate Strategies

Five criteria are particularly helpful in corporate strategy evaluation:◦ Vision◦ Internal Consistency◦ External Consistency◦ Feasibility◦ Corporate Advantage

Evaluating Corporate Strategy

Is there a clear and well articulated corporate vision?

Vision must convey a sense of the corporate advantage the form will exploit and be specific enough to guide a firm’s action

Vision

Are the elements of the firm’s corporate strategy aligned with one another?

Do they form a coherent whole?To test for consistency, it is prudent to begin with the three critical junctures: competitive advantage, control and coherence.It is also important to assess the alignment between these elements of strategy and the firm’s vision, goals and objectives

Internal Consistency

Does the strategy fit with the external environment?

Is the strategy sustainable against changing environmental and competitor strategies?

It is important to consider whether the key success factors of and industry are changing and whether the strategy anticipates these changes by repositioning the business or reinvesting in resources that will be critical in the future.

External Consistency

Is the organization being asked to do too much in too short time?

Is the strategy too risky?It is important to ask:

◦ Whether the firm will have the requisite resources to implement the strategy when it needs them?

◦ Whether the time frame for the changes is realistic?

◦ Whether the firm is capable of implementing changes on multiple fronts simultaneously?

Feasibility

Does the strategy truly produce a corporate advantage?

Is value creation from that advantage ongoing?

Corporate advantage must overcome:◦ Does ownership of the business create benefits

somewhere in the corporation?◦ Are these benefits greater than the cost of

corporate overhead?◦ Does it create more value than any other possible

corporate parent or alternative governance structure?

Corporate Advantage

Thank You