Page 1 Managing Multi-Unit Organizations Strategic Factors II.

Page 1

Managing Multi-Unit OrganizationsStrategic Factors II

Corporate Growth

• A major acquisition is the fastest way to compensate for a company's failure to grow organically (via internal means)

• You don't get a gazelle by breeding dinosaurs.

– “When Dinosaurs Mate,” G. Hamel, WSJ

Best Path to Growth?

Ford– Jaguar– Mazda

General Motors– Saab

Hewlett-Packard– Compaq

Unilever– Knorr– Ben & Jerry

Daimler-Benz– Chrysler

Corporate strategy solutions

Starbuck’s

Southwest Airlines

Toyota

Dell

Wal-Mart

Nike

Business strategy

solutions

Entering New Businesses

•WHY?– Does business fit?

o Financiallyo Strategicallyo Culturally

•HOW?– Acquisition or merger– Internal start-up– Joint ventures– Alliance

Justifications for M&A

•Attractiveness test– Industry factors– Core competencies– Strategic position

•Cost of entry test– Buy outstanding shares– Cash– Contributions to merger or JV

•Better off test– Synergies, econ. of scale/scope– Consolidation of resources, activities – Leverage strategic assets for competitive advantage?

Blue CircleUnrelated Diversified Firm

HQ

Cement

CementProducts

Bricks GasStoves

LawnMowers

Unrelated to Other Units or

Core Competence

OK

BoddingtonsRelated Horizontal Diversified Firm

HQ

Pubs

Restaurants

Hotels HealthClubs

NursingHomes

Related to Other Units via

Core Competence

Adidas-Reebok Merger

+

vs.

+

Employees 26,100 24,600

U.S. Market Share 21.1% 36.3%

Global Market Share 25.0% 33.2%

Net Income $517.9 mil $1.2 bil

Hot ProductSmartShoe

+ Nelly’s shoe lineL. Armstrong apparel

+ iPod Sport Kit

Adidas-Reebok Merger

Gillette

Personal Grooming

SmallAppliances

Oral Care

PortablePower

PROCTER & GAMBLE

Soaps Food Beverages PaperProducts

Gillette

RazorsCore Product

Mr. CoffeeMachines

DuracellBatteries

Oral-BToothbrush

Unilever Matrix …it’s complicated

Lever Bros.London

Margarine UnieRotterdam

Food Household Beauty Health/Hygiene

R&D

MarketingFinance

EU

US

Pacific

Asia

The “Un-Matrix”

•Oracle - Vienna

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Problems

Specialists

Generalists Guenther Goeschl (CFO)

and his “troll”

Integrating Newly-Merged Multi-Unit Organizations

• Processes and costs associated with…– Integration hubris, rose-colored lenses– Rationalizing value chain activities

•Duplicate•Eliminate•Integrate

– Meshing people, systems, and cultures– Conflicting stakeholder and politics