What is a corporate parent strategic management? The corporate parent refers to the levels of management above that of the business units, and therefore without direct interaction with buyers and competitors. There are basically three styles of corporate parenting as follows; financial control, strategic planning and strategic control.
Full Answer
What is the role of the corporate parent in strategic planning?
However the corporate parent sets performance standards for control purposes. Strategic planning. Under this style the role of the corporate parent is to enhance synergies across the business units.
What is a corporate parent?
The corporate parent consists of all managers and staff not assigned to a business unit, including not only the corporate headquarters but also the division, group, region, and other intermediate levels of management. Do these parent managers and staff create or destroy value?
What is the role of the corporate parent in multi-business companies?
This article focuses on the role and influence of corporate parents in multi-business companies. The corporate parent consists of all managers and staff not assigned to a business unit, including not only the corporate headquarters but also the division, group, region, and other intermediate levels of management.
What is the purpose of the parent company's financial management process?
The process permits parent managers to challenge and stretch the profit targets of the businesses, to press for price increases and margin improvements, and to raise the standards of financial management throughout the company.
What is a corporate parent strategy?
We define a corporate parenting strategy as the consistent and effective combination of value creating activities, resulting either from direct corporate parent activities or from the composition of the portfolio (interactions between businesses without direct intervention of the corporate parent).
What is a corporate parent business?
Corporate parent means a business that possesses the majority of shares in another business, which gives them control of their operational procedures.
What are the functions of corporate parent?
Under this style the role of the corporate parent is to monitor and evaluate the financial performance of investment portfolio of the respective business units. The corporate managers act as agents on behalf of shareholders and financial markets to identify and acquire viable assets and businesses.
What is corporate parent advantage?
Multibusiness companies create value by influencing—or parenting—the businesses they own. The best parent companies create more value than any of their rivals would if they owned the same businesses. Those companies have what we call parenting advantage.
What is an example of a parent company?
Facebook is a parent company. It has operations of its own and also has subsidiaries such as WhatsApp and Instagram. Amazon, another parent company, owns subsidiaries such as Zappos and Whole Foods.
How do corporate parents add value?
Ways of adding value By providing access to markets, suppliers and sources of finance that would not be available to individual units. By improving performance through monitoring performance against targets and taking corrective action. Sharing expertise, knowledge and training across business units.
What is strategic functional strategy management?
A functional strategy is the approach a business functional takes to achieve corporate and business unit objectives and strategies by maximizing resource productivity. It deals with a relatively restricted plan that provides the objectives for a specific business function.
What are the parenting opportunities in manufacturing?
Sir Owen Green, managing director of BTR from 1967 to 1987, identified certain parenting opportunities in industrial manufacturing businesses. Particularly in mature niche areas, he found that businesses often underperform. Their financial information on product profitability may not tell them where they are making money and where they need to improve productivity. Their fear of losing customers may cause them to underprice, especially with larger customers. They may adopt a fill-the-factory mentality and pursue marginal sales, particularly in a recession. In an attempt to move away from mature product areas, they often diversify in a way that is wasteful.
What is corporate level strategy?
Corporate-level strategies, therefore, make sense to the extent that the parent creates sufficient value to compete with other intermediaries. That occurs when the parent’s skills and resources fit well with the needs and opportunities of the businesses. If there is a fit, the parent is likely to create value.
What are some examples of parenting opportunities?
Many kinds of parenting opportunities may present themselves. For example, a business may have excessive overhead costs that its managers are unaware of. For the right parent, the high overhead is an opportunity. Or two businesses might be able to gain economies of scale by combining their sales forces.
How do multi business companies create value?
Multibusiness companies create value by influencing—or parenting—the businesses they own. The best parent companies create more value than any of their rivals would if they owned the same businesses. Those companies have what we call parenting advantage.
What is core competence?
The core competence concept says that businesses are related if they have common technical or operating know-how. The parenting framework, in contrast, focuses on the competencies of the parent organization and on the value created from the relationship between the parent and its businesses.
What is bad parenting?
A good fit can create additional value; a bad one can destroy value. Bad parenting causes business-unit managers to make worse decisions than they would otherwise. In one company, the managers in the minerals business had taken bad advice about exploration techniques from their oil-company bosses.
How to pull judgments about fit together and rank a company's businesses?
To pull the judgments about fit together and rank a company’s businesses, it helps to summarize the assessments into a matrix. (See the graph “Parenting-Fit Matrix for a Diversified Food Company.”)
What is strategic management?
Strategic management is the formulation and implementation of major objectives and projects, by an organization’s management on behalf of its shareholders (or owners). Shareholder A shareholder can be a person, company, or organization that holds stock (s) in a given company. A shareholder must own a minimum of one share in a company’s stock ...
What should companies focus on in their strategy?
Companies should concentrate their strategy on either cost leadership, focus, or differentiation . According to famed business strategist Michael Porter, if a company does not place focus on a singular factor, it risks wasting its resources. Such a strategy places emphasis on either specializing in a product or service by creating a unique selling proposition or creating economies of scale#N#Economies of Scale Economies of scale refer to the cost advantage experienced by a firm when it increases its level of output.The advantage arises due to the#N#to achieve low costs of production.
What is the competitive advantage of a company?
Competitive Advantage A competitive advantage is an attribute that enables a company to outperform its competitors. It allows a company to achieve superior margins. the company has over its competitors. #2.
What is the competitive force model?
The Competitive Forces Model (Porters 5 Forces)#N#Competitive Forces Model The competitive forces model is an important tool used in strategic analysis to analyze the competitiveness in an industry. This model is more commonly#N#is a framework used to assess the competitiveness of the industry.
What is corporate strategy?
Corporate strategies are arguably the most essential and broad ranging strategy level within organizational strategy. The corporate strategy level concerns itself with the entirety of the organization on a more or less abstract level, where decisions are made with regard to the overall growth and direction of a company.
What is corporate planning?
Corporate planning starts with defining an abstract vision or overarching goal, based on the current organization and the environment in which it exists. This vision will provide a point of reference against which goals and strategies can be measured.
What is the topmost level of corporate planning?
At this level of strategic planning, general strategic goals are reduced to concrete strategic measures. It is important to note that while on a hierarchical level, corporate strategy can be viewed as the topmost level of the corporate planning process, each level of decision making involves two-way influence.
What is the business strategy level?
The business strategy level is the strategic level that mediates the abstract strategic goals which underpin corporate strategy, with the needs and capacities of the business unit level, for organizations with more than one business unit.
What is the most sophisticated level of strategic planning?
Corporate strategy planning is the topmost level of strategic planning within a business or organization. As a result, the corporate planning process is the most sophisticated level of strategic planning ...
What are the three levels of organizational strategy?
What are the Three Strategy Levels? As we noted earlier, a complete organizational strategy is divided into three distinct levels, based on the concerns and goals of the three hierarchical elements which make up an organization - at the corporate level, the business level, and the functional level .
What is strategic allocation of resources?
Allocation of Resources refers to decisions which concern the most efficient allocation of human and capital resources in the context of stated goals and aims. Strategic Trade-Offs are at the core of corporate strategic planning. It's not always possible to take advantage of all feasible opportunities.
What is the purpose of corporate strategy?
The nature and purpose of business strategy are to govern and execute a company’s plans, whereas the corporate strategy has more of a deterministic and legislative nature. The time length of the business strategy is short term and ...
What is the difference between corporate strategy and introvert strategy?
The business strategy follows the introvert approach where it deals with the internal functionality of the company. The corporate strategy follows the extrovert approach, and it deals with the business environment. The business strategy applies strategies like differentiation, focus, and cost leadership.
What is re-inventing strategy?
Re-inventing strategy is all about reinventing your existing business that hasn’t changed for years. Companies usually reinvent their business with the latest technology. Businesses reinvent their businesses through following strategies
Why is business strategy important?
The business strategy usually follows the concerns of the corporate strategy that impacts the whole company. It helps the company to attract new investors so that they could invest their capital. Moreover, it assures creditors about the financial health of the organization.
What is stability strategy?
Stability Strategies. Businesses and companies following the stability strategy don’t focus on business development and growth. Instead, their focus is on staying in the business, because they’re satisfied with the current state of affairs of their business. The achieve stability through; Profitability.
What is organizational design?
Organizational design means making sure that the company has a proper system and structure in place that could generate value. The leader should consider following the centralized or decentralized approach and the reporting system of the individuals and business divisions.
What is corporate level strategy?
Corporate-level strategy considers issues at a broader level of analysis. The word “corporate” does not refer to the legal entity of a corporation, but to the level of strategy higher than direct head-to-head competition. Any size firm can develop corporate-level strategy.
What is McDonald's corporate strategy?
The owner of a McDonald’s franchise can pursue a corporate strategy, as can the owner of a local plumbing company. Corporate Strategy. –Specifies actions taken by the firm to gain a competitive advantage by selecting and managing a group of different businesses in several industries and/or product markets.
Does Disney expand beyond its initial choice of industry?
In contrast, many firms never expand beyond their initial choice of industry. Disney executives could consider further diversifying geographically, diversifying into additional industries, and diversifying deeper into its value chain, for example, by acquiring some of its suppliers.
Edited by Andrew Campbell and David O. Faulkner
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Abstract and Keywords
This article focuses on the role and influence of corporate parents in multi-business companies. The corporate parent consists of all managers and staff not assigned to a business unit, including not only the corporate headquarters but also the division, group, region, and other intermediate levels of management.
Components of Strategic Management
Frameworks For Strategic Management
- #1. Competitive Advantage
An organization may achieve either lower cost of production or product differentiation as an advantage against its rivals. It is important to look at the market positioning of the brand and company and also to pinpoint all the competitive advantagesthe company has over its competit… - #2. Corporate Strategy and Portfolio Theory
The Modern Portfolio Theory provides a framework for allocating assets so that, for a given level of risk, the expected returnis maximized. Portfolio Theory allows corporations to perform a cost-benefit analysis on the deployment of resources and view the merit of individual resource place…
Generic Competitive Strategies
- Companies should concentrate their strategy on either cost leadership, focus, or differentiation. According to famed business strategist Michael Porter, if a company does not place focus on a singular factor, it risks wasting its resources. Such a strategy places emphasis on either specializing in a product or service by creating a unique selling proposition or creating economie…
Industry Structure and Profitability
- The Competitive Forces Model (Porters 5 Forces) is a framework used to assess the competitiveness of the industry.
SWOT Analysis
- SWOTis an acronym for Strengths, Weaknesses, Opportunities, Threats. This framework is employed to assess internal strengths and weaknesses, to explore the external scope of opportunities available for the business to exploit, and to confront threats presented by opponents or policies.
Value Chain
- The value chain consists of a list of processes or activities that a company performs to bring a product or service into the market. The activities are divided into two functions:
Related Readings
- Thank you for reading CFI’s guide to Strategic Management. To keep learning and developing your knowledge of financial analysis, we highly recommend the additional CFI resources below: 1. Corporate Strategy 2. CVP Analysis 3. Management Theories 4. Organizational Analysis