Developing A Corporate Parenting Strategy

How the deloping a corporate parenting strategy. I get a theory from Campbell, Goold and Alexander, they recommend that the search for appropriate corporate strategy involves three analytical steps:

1.     1. Examine each business unit (or target in the case of acquisition) in terms of its stragic factors: People in the business units probably identified the strategic factors when they were generating business strategies for their units. One popular approach is to establish centers of excellence throughout the corporation. According to Frost, Birkinshaw, and Ensign, a center of excellence is “an organizational unit that embodies a sef of capabilities that has been explicitly recognized by the firm as an important source of value creation, with the intention that these capabilities be leveraged by and or disseminated to other parts of firm.

2.      2. Examine each business unit (or target firm) in terms of areas in which performace can be improved: these are considered to be parenting opportunities. For example, two business units might be able to gain economies of scope by combining their sales forces. In another instance, a unit may have good, but not great, manufacturing and logistics skills. A parent company having world class expertise in these areas could improve that unit’s performance. The corporate parent could also transfer some people from one business unit who have the desired skills to another unit that is in need of those skills. People at corporate headquarters may, because of there experience in many industries, spot areas where improvements are possible that even people in the business unit may not have noticed. Unless specific areas are significantly weaker than the competition, people in the business units may not even be aware that these areas could be improved, especially if each business unit monitors only its own particulary industry.

3.      3. Analyze how well the parent corporation fits with the business unit (or target firm): corporate headquarters must be aware of its own strengths and weaknesses in term of resources, skills, and capabilities. To do this, the corporate parent must ask whether it has the characteristics that fit the parenting opportunities in each business unit. It must also ask whether there is a misfit between the parents’s characteristics and the critical success factors of each business unit.