Corporate Input Strategy

7/29/2019 Corporate Input Strategy

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Reported by:

Jhoanna Mary E. Pescasio


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CORPORATE INPUT STRATEGY

Gaining greater differential advantagethan they could muster if they operated

independently.


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General Electric as a conglomerate

General Electric buys dozens of firms every year. Theacquisitions help GE to obtain new technologies and enternew markets. The Company acts swiftly in integratingtarget aspects of acquired companies into the GE cultureand releases parts it does not need. GE is a global company

with 60% of its business and 54% of its employeesoperating outside America and uses local markets to fuelboth its employment. While it began in America, it isessential for GE to operate in the global market to remaincompetitive and achieve production efficiency.

The combined value ofGEs businesses is of greater value to

the organization than the value of each of the individualbusinesses, because GE derives corporate managementsynergies from utilizing distinctive corporate organizationdesign and corporate strategic capabilities as discussed indetail in the table below


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Strategic/Organizational design capability How capability leads to value-adding synergies toGE

Active portfolio management Through actively managing its corporateportfolio, GE provides its businesses with a solidfinancial and strategic resource base and opensup future growth opportunities.

Corporate leadership systems (values, culture andvarious HR policies)

GEs strong values, culture and HR processesdevelop skilled and motivated managers thatallow GEs businesses to rapidly staff keymanagement positions with the most appropriateleaders and establish high performance learningcultures.

Corporate management systems GE has a strict financial planning system focusedon continuous performance improvement to help

businesses rapidly translate new ideas intostrategic initiatives and execute them successfully.

Corporate mission and long-term strategy GE corporate managers apply a thorough andcarefully designed mission and corporate strategyto provide its businesses strategic intent,direction and long-term orientation.

Corporate structure (primary, secondary anddecision rights)

GEs corporate structure facilitates the reductionof overhead costs to businesses by exchangingbest practices, and also fosters adaptation,innovation and customer focus.

Development of corporate initiatives GE corporate managers leverage the strategicbrain of the combined firm to improve thestrategic positioning and organizationalcapabilities of GEs businesses by anticipatingcompetitive requirements early on andfacilitating change through strategic initiatives.


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CentralIssues of CIS

Contributions

Integratingstrengths

Differentialadvantage

Quality & Value


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CORPORATE RESOURCE ARSENAL

Providing one ormorevaluableresources on

attractive terms.Central managementofsynergies among

the business units.


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Low-CostCapital OutstandingExecutives

CorporateR & D

CentralizedMarketing

CORPORATE VALUABLERESOURCES


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Low-Cost Capital If capital structure permits more borrowing and its

enjoy a favorable credit rating, interest will be ataxable expense, and thus the net cost of capital

will be relatively low for new venture.

If parent corporation enjoys a high price earnings(P/E) ratio on its stock, equity capital may costless than the business-unit would have to pay.


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Outstanding Executives Our greatest strength is our people. Selection, training and know-how are designed to give

managers a competitive edge.

Spend effort and money on executive development, tohave outstanding managers who can moved intovarious business units- with expectation that thosemanagers will be able to run their units better thantheir competitors.


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Corporate R & D Centralized R & D, that could be a cost saving on the

part of the company. The aim is to create a powerfulresearch group at the corporate level than makescontributions to the operating divisions- contributionsthat the division acting alone would be unable toachieve or even unlikely to investigate.


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Centralized Marketing By combing selling and promotion into a single

division, the corporation provided the severaloperating companies much more complete coverageand skillful promotion than any company couldmuster when acting separately.

Coca-Cola Company, leaves most marketing functionswith its local distributors but it centralizes control overpromotion of the trade name.


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CORPORATE MANAGEMENT AND

SYNERGIES

CombinedServices

FullUtilization

of RawMaterials

VerticalIntegration


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Vertical IntegrationInvolves gaining ownership or

increased control over suppliers ordistributors.


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Kinds of Vertical Integration

a. Backward integration involves gainingownership of firms suppliers. For example, amanufacture of finished products may take over

the business of a supplier who manufactures rawmaterials, component parts and other inputs. Itdecreases the dependability of the supply andquality of raw materials used as production

inputs.b. Forward integration involves gaining

ownership or increased control over distributorsor retailers.


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Full Utilization of Raw MaterialsMinimizes raw materials and maximizes

output of the most profitable components

of the mix.The corporate task is to make the combineswhole more valuable than the sum of the

independent parts.


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Combined Services

Combined services or products for the consumerare often suggested as a source of synergy .

A set of combined services normally must be

backed up by series o specialized business-units,each with its own technological and institutionalconstraints.

If these supplying organizations take the limelightor pursue strictly parochial interest, little merging

will occur. Otherwise, f the corporation managesthe synchronizing the services, the strategy has

much better chances of success.


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Corporate Input Strategy

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