CORPORATE LEVEL STRATEGY

Lina WidyatamaRonald M. Sutedjo

Yunior Liem

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READING 6.1 Strategy and the business portfolio

• As a result of an existence competitor in a high market share segment, business must able to develop the lowest cost position and hence most stable and highest profit.

• The important of growth in shaping strategy:– Business growth, hence cost->gain market share– Opportunity to investment

• In low-growth business: tend to require an actual volume reduction in competitor sales.

• In high-growth business: securing largest share of growth in the business.

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BCG Growth share matrix

Portfolio

• Strategy involves striking a balance in portfolio such that the cash generated by cash cows sufficient to support the company’s stars and to fund the selected question marks through to dominance.

• Stars: Maintain market share, Cash cow: current profitability, Dogs: yield cash, ?: increase market share or managed for cash.

• To reduce vicious circle of decline select only few question marks through careful analysis and finance those.

READING 6.2 The Core Competence of the Corporation

• Company’s competitiveness derives from the price/performance attributes of current products, but in long term it’s from the ability to build at lower cost and more speedily than competitors, the core competencies that spawn unanticipated products.

• Core competence is about harmonizing streams of technology, organization of work and delivery of value, communication, involvement and deep commitment, do not dimmish with use.

• Identify core competencies:– It provides potential access to a wide variety of markets. (Casio: watch, remote TV)– Should make a significant contribution to perceived customer benefits of the end

product. (Honda)– Difficult for competitors to imitate.

• Core products is the tangible link between core competencies and end products. (physical embodiments)

Two concepts of the corporationSBU Core competence

Basis for competition

Competitiveness of today’s products

Interfirm competition to build competencies

Corporate structure Portfolio of business related in product-market terms

Portfolio of competencies, core products and business

Status of the business unit

Autonomy is sacrosanct; the SBU ‘owns’ all resources other than cash

SBU is a potential reservoir of core competencies

Resources allocation Discrete businesses are the unit of analysis; capital is allocated business by business

Businesses and competencies are the unit of analysis: top management allocates capital and talent

Value added of top management

Optimizing corporate returns through capital allocation trade-offs among business

Enunciating strategic architecture and building competencies to build the future

Digestive problems..?

Case: DANONE

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• Mission:“Bring the health through tasty, nutritious, & affordable food

and beverage products.”• Positioning as:►Bottled water

Evian, Badoit, Volvic, Bonafont, Aqua

►Baby food Blédina

►Medical nutrition Activia, Actimel, Crush

Danone has opened exclusive talks to sell its biscuit and cereal division to Kraft Foods

to sharpen its business focus on the health and

nutrition segments

DANONE

Source: http://www.nutraceuticalsworld.com/contents/view_online-exclusives/2007-07-01/danone-acquires-royal-numico/

NUMICO• Who?

– Specialist in healthy baby food and healthcare nutrition– Leader in baby products as number one in Western Europe and Eastern

Europe, number two in Asia and number three in Australia, Africa and the Middle East

• Positioning as:►Oral nutrition

Nutridrink, Fortimel and Fortisip

►Tube nutrition Nutrison

►Targeted nutrition Infatrini and Nutrini, Diasip and Diason

►Special needs nutrition Neocate, Lophlex LQ

DANONE - NUMICO• Danone acquired Numico (July 2007)

– Danone agreed to pay 55 euros a share, or 12.3 billion euros ($16.8 billion), or a 44% premium over Numico's average share price in the last three months

Source: http://www.reuters.com/article/2007/07/10/us-danone-numico-idUSL1087495920070710

Overpaid??

NO!!•Numico was the most sought-after target in the sector•…and also…..

DANONE - NUMICO• Danone acquired Numico (July 2007)

– The reason behind:• Danone has sharpen its business segment• Numico has the in-line products with Danone business

focus (health & nutritious)• Numico’s strength in the infant nutrition segment will

boost Danone’s sizable dairy market presence• The collaboration in R&D of Danone (Probiotics) &

Numico (Prebiotics)• The form of business culture is close to Danone’s own

Source: http://www.danone.de/download/Danone-Economic-Social-Report.pdf

DANONE - NUMICO

Source: http://www.danone.de/download/Danone-Economic-Social-Report.pdf

DANONE - NUMICO

Source: http://www.danone.de/download/Danone-Economic-Social-Report.pdf

Baby Product (Formerly Numico)

Medical Nutrition (Formerly Numico)

DECENTRALIZE

Source: http://www.danone.de/download/Danone-Economic-Social-Report.pdf

THANK YOUBinus Business School 2012