Chapter 1 Corporate Strategy, Apuntes de Administración de Empresas

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© Artur Baldauf l Department of Management l University of Bern 1

Chapter 1:

An Introduction to

Corporate Strategy

Prof. Dr. Artur Baldauf

General Information

• Time: Thursday 08.00 – 10.00 a.m. (theory) /

10.00 – 12.00 a.m. (cases)

(with exceptions – please see course overview!)

• Room: 001, Engehaldenstrasse 8
• Professor/ Assistant: Artur Baldauf / Thomas Brüsehaber
• Department: Engehaldenstrasse 4
• Office Hours: after class, on appointment
• E-mail: [email protected]
• Downloads: ILIAS
• Text: Collis/Montgomery: Corporate Strategy, 2nd edition,

2005 (McGraw-Hill) (or higher editions)

There is a master copy available at Beatrice

Rüfenacht, Engehaldenstr. 4, Room 122.

?? Baldauf ??

Education

Commerce (WU-Wien)

DBA (WU-Wien)

Profess.

Experiences

Marketing Assistant (Wienerberger)

Assistant to Project-Managers (Porr)

Assistant Prof., University of Vienna (1992-2000)

a.o. Univ.-Prof. University of Vienna (2000-2002)

Visiting Professor Texas Christian University; WHU;

Bocconi, UTD

Professor Universität Bern

Family

Ursula (HR Manager; Philips)

Daughter Katrin

Interests

Sports, Reading, Travelling

Corporate Strategy: Challenges

 Why are some firms only active in one (single) business (CocaCola) while others

operative in multiple businesses (PepsiCo)?

 Why do some firms operate locally while others are international players (Nestlé)?

 Why is Swisscom reorganizing steadily? (Fixnet, Mobile und IT-Services under one

firm)

 Why does Valora want to focus on core competences?

 What were the options for Lufthansa to enter the Swiss Market (Austrian Market)?

 Why to buy at Migros instead of running your own retailing store?

 What are the duties/tasks of a CEO (the headquarters)?

 What is the responsibility of the board (governance)?

Course Process – Chapter Overview

Resources

2 Resources and Rents

Businesses

Scale and Scope within an Industry

Diversified Expansion

Structure, Systems, and Processes

Organizational Limits to Firm Scope

Managing the Multibusiness Corporation

Putting It All Together

Creating Corporate Advantage

Corporate Governance

Corporate Transformation

1 Course Overview

Corporate Strategy Framework

 Definition: „ The way a company creates value through the

configuration and coordination of its multimarket activities .“

(Collis/Montgomery 2005, p. 8)

 Resource Based View

 Triangle

VISION

ZIELE

STRUCTURE SYSTEM PROCESS

Corporate

Advantage

“She’s always in your

face isn’t she. I don’t get

it. What is it about her?

She’s not a great dancer

or singer.”

Michael Jackson

Opening Vignette

 Madonna / July 27, 1983 / 10 million  Like a Virgin / Nov 12, 1984 / 21 million  True Blue / June 30, 1986 / 25 million  Who’s That Girl / July 21, 1987 / 6 million  You Can Dance / Nov 17, 1987 / 7 million  Like a Prayer / March 21, 1989 / 15 million  I’m Breathless / May 22, 1990 / 7 million  The Immaculate Collection / Nov 13, 1990 / 26 million  Erotica / Oct 13, 1992 / 5 million  Bedtime Stories / Oct 25, 1994 / 6 million  Something to Remember / Nov 7, 1995 / 9 million  Evita / Nov 12, 1996 / 11 million  Ray of Light / March 3, 1998 / 16 million  Music / Sep 19, 2000 / 15 million  GHV2/ Nov. 13, 2001 / 7 million  American Life / April 22, 2003 / 4 million  Confessions on a Dance Floor / Nov. 15, 2005 / 12 million  I’m Going to Tell You a Secret / June 20, 2006 / 1 million  Hard Candy / April 29, 2008 / 4 million  Sticky & Sweet / March 26, 2009  Celebration / September 18, 2009  MDNA / March 2012

 Total record sales > 300 million

Successful Strategy

STRATEGIC

POSITIONING:

Decisions concerning

how one behaves in

an industry

RESOURCES &

CAPABILITIES:

How a strategic

position is acquired

and defended

Effective Implementation and Adaptation

What Can We Learn from Madonna?

Goals of the Course

 Why do corporations exist? What influence(s) do(es) an industry have on

corporations?

 What is understood about corporate resources?

• Where do these valuable resources originate?
• How can resources be used jointly by several company divisions to create “value”?

 Why do diversified corporations exist?

• In which areas do the size (scale) and/or the range (scope) of diversified corporations exist?
• What is an “ideal” organizational development? Acquisition, consolidation, networking…?
• How would a takeover (alliance, merger, etc.) be best managed?

 Is there a connection between a corporation‘s success and its structure?

 Is the central task of the corporation central or de-central establishment?

 How can corporate strategies be effectively implemented?

Deriving goals from the stakeholder value approach

Company Customers

Others

Suppliers

Management

Employees

Creditors

Owners

Interest and repayment (^) Capital

Manpower Income

Manpower Income

Goals Form a Benchmark in Company Analyses

«Competence, ambition and integritiy ensure that we create value»

“We believe that it is only possible to create long- term sustainable value for our shareholders

if our behaviour, strategies and operations are also creating value for the communities where

we operate, for our business partners and, of course, for our consumers. We call this

“Creating Shared Value”

Board

Potential for success

Success Liquidity

Competitive

advantages

Appropiate return on

investment

Continuous liquidity

Strategic goal Operative goal Financial goal

To Ensure the Long-Term Survival of a Firm, it is

Neccessary to…

…Continuously Aiming to Increase the Firm Value.

For being an attractive investment target, companies must, at least, earn their cost of capital.

Fixed assets

Current assets

Equity

Debt

Assets Balance sheet Liabilities

Why Do We Need Corporate Strategy?

Changes in Market Value (in Billion USD)

Corporation 1995 2000 2014 Δ % per Year

Aetna 8,1 8,7 29.4 ++

BankOne 29,2 35,1 merged with JPMorganChase & Co. in 2004 +/

Campbell Soup 8,6 11,9 13.6 +

Coca-Cola 69,2 123,8 181.5 ++

Mattel 8,0 5,4 11.6 -/+

Xerox 12,0 17,3 15.6 +/-

S&P 500 Index 530,0 1.407,0 1.985,4 ++

Why Do We Need Corporate Strategy?

The Increasing Significance of “Intangible Assets”

0

10

20

30

40

50

60

70

80

90

100

1980 1990 Peak (3/2000) Post Crash (8/2002)

Market Value (%)

Accounting Book Value

Unexplained Value

(^1980 1990) (3/2000)Peak Post-Crash (8/2002) Sources: Lev, Baruch. “Intangibles: Management, Measurement, and Reporting,” Brookings Institution Press, 2001 Lev, Baruch. “Remarks on the Measurement, Valuation, and Reporting of Intangible Assets”. Economic Policy Review (Federal Reserve Bank of New York) , September 2003 Accenture Analysis

Market to Book Value Over Time

S&P 500 – (1980 – 2002)