The “World’s Most Admired Company” 
In this module, the role of the  corporate headquarters in a multibusiness company — in particular, how  the corporate headquarters can create value for the individual  businesses. This necessitates examining the role of the corporate  headquarters and its relations with individual businesses. For this  week’s assignment, review CASE 13
How Do You Solve a Problem Like General Electric?, Chapter 13 (in your textbook). (Attached along with the slides).

Remember: A case study is a puzzle to be  solved, so before reading and answering the specific case study  questions, develop your proposed solution by following these five steps:
Read the case study to identify the key issues and underlying  issues. These issues are the principles and concepts of the course  module, which apply to the situation described in the case study.
Record the facts from the case study which are relevant to the  principles and concepts of the module. The case may have extraneous  information not relevant to the current course module. Your ability to  differentiate between relevant and irrelevant information is an  important aspect of case analysis, as it will inform the focus of your  answers.
Describe in some detail the actions that would address or correct the situation.
Consider how you would support your solution with examples from  experience or current real-life examples or cases from textbooks.
Complete this initial analysis and then read the discussion  questions. Typically, you will already have the answers to the questions  but with a broader consideration. At this point, you can add the  details and/or analytical tools required to solve the case.
Case Study Questions:

What were the key challenges faced by General Electric in the early 2000s, and how did the company respond to these challenges?
How did General Electric’s corporate strategy change under the  leadership of Jeff Immelt, and what were the implications of these  changes for the company’s various business units?
What role did divestitures play in General Electric’s corporate  strategy, and how did the company decide which businesses to sell off?
How did General Electric allocate resources across its various  business units, and what factors influenced these resource allocation  decisions?
How did General Electric leverage synergies across its different  businesses, and what benefits did this approach offer the company?
Contemporary Strategy Analysis
Eleventh Edition
Robert M. Grant
Chapter 13
Implementing Corporate Strategy: Managing the
Multibusiness Firm
Implementing Corporate Strategy: Managing the
Multibusiness Corporation
Outline
• The Role of Corporate Management
• Managing the Corporate Portfolio
• Managing Linkages across Businesses
• Managing Individual Businesses
• Managing Change in the Multibusiness Corporation
• Governance of Multibusiness Corporations
3-2
The Role of Corporate Management (1 of 2)
How does Corporate Management add Value to its Individual Businesses?
• Managing the corporate portfolio
o including acquisitions, divestments, and resource allocation
• Managing linkages among businesses
• Managing each individual business
• Managing change
3-3
The Role of Corporate Management (2 of 2)
Berkshire Hathaway’s portfolio of businesses
3-4
Managing the Corporate Portfolio (1 of 5)
The Uses of Portfolio Planning Models in Strategy Formulation
• Allocating resources—indicating both the investment requirements of
different businesses and their likely returns
• Formulating business-unit strategy—offering generic strategy
recommendations (e.g.: “build”, “hold”, or “harvest”)
• Setting performance targets—indicating likely performance outcomes in
terms of cash flow and ROI
• Portfolio balance—guiding business portfolio changes in order to achieve
corporate goals such as a balanced cash flow by combining mature and
growing businesses.
3-5
Managing the Corporate Portfolio (2 of 5)
The GE/McKinsey Matrix
Industry Attractiveness Criteria
• Market size
• Market growth
• Industry profitability
• Inflation recovery
• Overseas sales ratio
Business Unit Position
• Market share (domestic,
global, and relative)
• Competitive position
• Relative profitability
3-6
Managing the Corporate Portfolio (3 of 5)
The BCG Growth-Share Matrix
3-7
Managing the Corporate Portfolio (4 of 5)
Ashridge Portfolio Display: The Potential for Patenting Advantage
3-8
Managing the Corporate Portfolio (5 of 5)
Do Portfolio Planning Models Help or Hinder Corporate Strategy
Formulation?
•
•
•
•
ADVANTAGES
Simplicity: Quick and easy to prepare
Big picture: Permits one page
representation of the corporate
portfolio & strategic positioning of
each business
Analytically versatile: Applicable to
businesses, products, countries,
distribution channels.
Can be augmented: A useful point of
departure for more sophisticated
analysis
DISADVANTAGES
• Simplicity: Oversimplifies the factors
determining industry attractiveness and
competitive advantage
• Ambiguity: The positioning of a business
depends critically upon how a market is
defined
• Ignores synergy: the analysis takes no
account of any interdependencies between
businesses
3-9
Managing Linkages Across Businesses
Sources of Synergy within the Multibusiness Corporation
• Shared corporate services: Centralizing services such as IT, HR, purchasing, research, facilities
management exploits cost economies and develops capabilities
• Transferring skills between businesses: E.g. LVMH transfers brand management capabilities;
P&G transfers technologies and product development skills across product sectors and across
countries
• Sharing resources and activities: E.g. Virgin Group shares its brand across its businesses;
Samsung Electronics’ globally dispersed design centers serve all its businesses
BUT, Exploiting synergies is not costless: Transferring skills and sharing resources and activities
tends to involve the corporate HQ in managing relationships between the businesses and
complicates the appraisal of business performance
3-10
Managing Individual Businesses (1 of 6)
The McKinsey Restructuring Pentagon
3-11
Managing Individual Businesses (2 of 6)
Exxon’s Strategic Planning Process
3-12
Managing Individual Businesses (3 of 6)
Rethinking Strategic Planning
Critiques of strategic planning:
• Strategic planning systems don’t make strategy—strategic planning a ritualistic
process, but most strategic decisions are made outside the system
• Weak execution—procedures for converting plans into actions are weak.
Proposals for improving execution include:
o Strategic milestones
o Strategy maps
o Replacing strategic planning units by “offices of strategy management”
3-13
Managing Individual Businesses (4 of 6)
Performance Management and Financial Control
• Multibusiness companies have a dual planning process:
o Strategic planning: medium and long term
o Financial planning : short-term
• The two are closely linked. Strategic plan is a basis for:
o Operating budget
o Capital expenditure budget
o Annual performance plans
o Strategic milestones
• Balance between strategic and financial control:
o Varies by firm and sector
o There’s a trade-off between the two—more of one means less of the other
3-14
Managing Individual Businesses (5 of 6)
Strategic Planning and Financial Control as Alternative Modes of Corporate
Control
3-15
Managing Individual Businesses (6 of 6)
Alternative Corporate Management Styles
Business strategy
formulation
Controlling
performance
Advantages
Disadvantages
Style suited to
Strategic planning
Strategy formulated by businesses; corporate
HQ guides and coordinates
Primarily strategic goals with medium- to longterm horizon
Exploits (a) linkages among businesses, (b)
innovation, (c) long-term development
Loss of divisional autonomy and initiative
Unitary strategic view
Tendency to persist with failing strategies
Companies with few closely related businesses
Capital and technology-intensive sectors with
large, long term investment projects
Financial control
Strategy formulated at business unit level;
HQ exerts financial control
Financial budgets set annual targets—
monitored quarterly
Business unit autonomy conducive to
initiative, responsiveness, and efficiency
Short-term focus discourages innovation and
long-term development
Limited sharing of resources and capabilities
Highly diversified companies with low
relatedness among businesses
Mature, low-tech sectors where investment
projects small and short term
3-16
Managing`Change in the Multbusiness Corporation
The Challenge of Leading Change
• The Problem: Counteracting Inertia
o The bigger and more complex the company—the greater the forces of inertia
• Facilitating change:
o Adaptive tension Imposing high performance expectation on individual and departments can create
not just stress, but dynamism and responsiveness that counteracts complacency (e.g. Jack Welch at
GE)
o Institutionalizing change Shift focus of strategic planning from resource allocation to sensing and
responding to external change (e.g. IBM)
o New business development Incubating the new businesses that will ultimately replace the old
(Amazon, Netflix, Nokia)
o Top-down, large-scale development initiatives—the CEO as change leader e.g. Samsung
Electronics; Haier
3-17
Governance of Multbusiness Corporations (1 of 2)
The Challenge of Corporate Governance
• What are the rights of shareholders?
o To transfer shares, access company information, elect directors, share in the profits of the firm, vote on key strategic decisions
o Despite potential for divisions to develop distinctive strategies and structures—corporate systems may impose uniformity.
• What are the responsibilities of Company Boards?
o To act in the best interests of the company and its shareholders
o To oversee strategy, budgets, management performance, etc.
• What’s gone wrong?
o Failure by boards to prevent managers pursuing their interests rather than those of shareholders (e.g. excessive compensation)
o Failure board to take account of social/national interest
• What other problems do multidivisional corporations face?
o Lack of decentralization of decision making to divisional managers
o Standardization of management systems across divisions
3-18
Governance of Multbusiness Corporations (2 of 2)
Highest Earning CEOs of US Companies 2019
Rank
1
2
3
4
5
6
7
8
9
10
CEO
Company
Elon Musk
Tesla
Tim Cook
Apple
Thomas Rutledge Charter Communications
Joseph Ianniello Viacom/CBS
Sumit Singh
Chewy
Jonathon Gray
Blackstone Group
Robert Swan
Intel
Sundar Pichai
Alphabet
Satya Nadella
Microsoft
Douglas Ingram Sarepta Therapeutics
Direct compensation ($m)
595
134
117
117
108
108
99
32
77
72
3-19
Appendix
External Growth Strategies: Mergers, Acquisitions, and Alliances
1-20
Global M&A 1998-2020
3-21
Mergers and Acquisitions (1 of 3)
Are Mergers Successful?
• Evidence from Shareholder Returns:
o Small increase in the combined value of the 2 companies involved
o Gains flow (almost) entirely to shareholders of acquired companies
o Returns to shareholders of acquiring companies negative on average
• Evidence from Accounting Profits
o Diverse findings: “…the results from these accounting-based studies are all over the map”
o Key problem: separating the effects of the merger from the many other factors that influence firms’
profitability
• Diversity of M&A
o Lack of consistent findings reflects the vast diversity in types of mergers and characteristics of the firms
involved
o Even when mergers categorized (e.g. horizontal, vertical, conglomerate) no consistent performance differences
3-22
Mergers and Acquisitions (2 of 3)
Motives for Mergers and Acquisitions
• Managerial Motives
o Top management remuneration depends more on firm size than profitability
o Psychological rewards–M&As project power, confer CEO celebrity status
o Imitation: the fear of not participating in an industry’s merger wave
• Financial Motives
o Stock market inefficiencies—acquire undervalued companies (Berkshire Hathaway-Heinz): use overvalued equity to acquire (A
OL-Time Warner)
o Quest for tax savings—cross-border acquisitions to relocate to lower tax regime (Burger King-Tim Horton)
o Financial re-engineering: debt-financed acquisitions that reduce the acquired company’s cost of capital (KKR-RJR Nabisco)
• Strategic Motives
o
o
o
o
Horizontal M&A—economies of scale and market power (A-B Inbev-SAB Miller)
Geographical extension M&A—to enter overseas market (Geely-Volvo)
Vertical M&A—to acquire supplier or customer (Gencore-Xstrata)
Diversifying M&A—to enter a new area of business (Amazon-Whole Foods)
3-23
Mergers and Acquisitions (3 of 3)
Managing Mergers and Acquisitions
• Challenges of Pre-merger Planning
o Careful identification of the goals of M&A
o Difficulties in estimating the benefits of M&A: on average cost savings overestimated by 25%,
revenue increases by 70%
• Challenges of Post-Merger integration
o Problems of integration: incompatible management systems; clash of cultures; adjustment
difficulties by employees of acquired company
o Building acquisition capability—managing the learning process to ensure that acquisition
experience builds capability
o Marching post-merger management to the strategic goals of the merger: leveraging the firm’s
existing business model (e.g. Walt Disney and Pixar) v s. reinventing the business model (e.g. HP and
Autonomy)
ersu
3-24
Strategic Alliances (1 of 5)
Types of Strategic Alliance
• Strategic Alliances:
o Collaborative arrangements between two or more firms to pursue common goals
o Alliance goals: technological, marketing and distribution, operational, standard setting,
lobbying…
o Formal (contractual agreements, written understandings) or Informal
o Equity (partners take equity stakes in one another) or non-equity
o Bilateral alliances (two partners), multilateral alliances (many partners), networks of
alliances (Toyota supplier network; Apple “ecosystem”)
• Joint Ventures:
o Partners form a jointly-owned enterprise to pursue the goals of the alliance
3-25
Strategic Alliances (2 of 5)
Samsung Electronics’ Alliances, 2014
3-26
Strategic Alliances (3 of 5)
General Motors’ International Alliances
3-27
Strategic Alliances (4 of 5)
Management Issues
• Motives:
o To exploit complementarities among the resources and capabilities of different companies, e.g. airline alliances
allow access to members’ route networks; Bulgari and Marriott combine to operate luxury hotels
o These benefits include: Economizing on investment, Speed, Risk sharing, Learning (capability acquisition)
• Challenges:
o Need for relational capability: building trust, developing knowledge-sharing and coordination mechanisms
o Managing the relationship: greatest benefits often involve greatest management challenges—e.g. cross-border
alliances
o Sharing of benefits: determined by
a) strategic intent of the partners (Which partner is clearer about what it wants from the alliance?)
b) appropriability of the contribution (Which partner’s resources and capabilities are easier to capture)
c) absorptive capacity (Which partner is the faster learner?
3-28
Strategic Alliances (5 of 5)
Choosing the Right Growth Path
3-29
Name
CT_Rubric_100
Description
100 Points
Rubric Detail
Levels of Achievement
Criteria
Exceeds Expectation
Meets Expectation
Some Expectations
Unsatisfactory
Content
33 to 35 points
29 to 32 points
26 to 28 points
0 to 25 points
Demonstrates
substantial and
extensive knowledge of
the materials, with no
errors or major
omissions.
Demonstrates adequate
knowledge of the
materials; may include
some minor errors or
omissions.
Demonstrates fair
knowledge of the materials
and/or includes some
major errors or omissions.
Fails to demonstrate
knowledge of the
materials and/or
includes many major
errors or omissions.
33 to 35 points
29 to 32 points
26 to 28 points
0 to 25 points
Provides strong thought,
insight, and analysis of
concepts and
applications.
Provides adequate
thought, insight, and
analysis of concepts and
applications.
Provides poor though,
insight, and analysis of
concepts and applications.
Provides little or no
thought, insight, and
analysis of concepts and
applications.
15 to 15 points
13 to 14 points
11 to 12 points
0 to 10 points
Sources go above and
beyond required criteria
and are well chosen to
provide effective
substance and
perspectives on the
issue under
examination.
Sources meet required
criteria and are
adequately chosen to
provide substance and
perspectives on the issue
under examination.
Sources meet required
criteria but are poorly
chosen to provide
substance and perspectives
on the issue under
examination.
Source selection and
integration of knowledge
from the course is clearly
deficient.
15 to 15 points
13 to 14 points
11 to 12 points
0 to 10 points
Project is clearly
organized, well written,
and in proper format as
outlined in the
assignment. Strong
sentence and paragraph
structure, contains no
errors in grammar,
spelling, APA style, or
APA citations and
references.
Project is fairly well
organized and written
and is in proper format as
outlined in the
assignment. Reasonably
good sentence and
paragraph structure, may
include a few minor
errors in grammar,
spelling, APA style, or APA
citations and references.
Project is poorly organized
and written and may not
follow proper format as
outlined in the assignment.
Inconsistent to inadequate
sentence and paragraph
development, and/or
includes numerous or
major errors in grammar,
spelling, APA style or APA
citations and references.
Project is not organized
or well written and is not
in proper format as
outlined in the
assignment. Poor quality
work; unacceptable in
terms of grammar,
spelling, APA style, and
APA citations and
references.
Analysis
Sources
Demonstrates
college-level
proficiency in
organization,
grammar and
style.
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