Corporate Strategy:

The Quest for Parenting

Advantage
Corporate Strategic:
Dwi Joko Pramudito WA
Song Young Kang

Introduction

The growth/share matrix encouraged

companies to balance their business
portfolios poor performance
Core Competence concept proposed
that companies should build
portfolios of business around shared
technical or operating competencies
and should develop structures and
processes to enhance their core
competences

Core competence concept has not

provided practical guidelines for
developing corporate-level strategy
The parenting framework fills the
deficiencies of the core competence
concept. It provides a rigorous
conceptual model as well as the tools
needed for an effective corporatelevel planning process

Multibusiness companies creates

value by influencing or parenting the
business they own.
Parenting advantage exist when the
best parent companies create more
value than any of their rivals would if
they owned the same business

The parenting framework focuses on

the competencies of the parent
organization and on the value
created from the relationship
between parent and the business
Fit between parents and its business
is a two-edged sword:
A good fit can create value
A bad one can destroy it

Example :
Divestment decision, the exit of oil

companies from the mineral business

Whether a parent and its business fit

is a tough question that few
managers address

Assessing Fit
1.
2.
3.

Examine the critical success factor

of each business
Document areas in the business in
which performance can be improved
Review the characteristic of the
parent, grouped in a number of
categories

Critical Success Factors

Most business-level plans define the

critical success factors as part of the
rationale for the action proposed
CSF analysis is an important base for
assessing fit. It is useful in judging
whether friction is likely to develop
between the business and the parent.
A parent that doesnt understand CSF
in a business is likely to destroy value

Critical Success Factor for a

Diversified Food Company
SuccessFactors
Product branding
Selling
Product mix
management
Scaleandcapacity
utilization
Businessdevelopment
skills
Formulabranding
Positioningto match
locality
Site selection
Property development
cost
Value engineering
Detailedoperating
controls
Management selection
andtraining
Supply chain logistics
Low overheads

Food
Products

Property

Restaurant
RestauranB
A

Retail

Hotels

Parenting Opportunities

Parenting opportunity is the potential

for improvement within a business
Most business have parenting
opportunities and could improve their
performance if they had a parenting
organization with exactly the right
skills an experience

Parenting Opportunity Analysis

There are three types to identify parenting

opportunities:
Strategists list the major challenges facing a business,

which are normally recorded in the business plan, and

then examine them
Strategists document the most important influences
the parent has on the business and then judge whether
those influences are addressing parenting opportunities
that were not identified in the first analysis
Looks at the influence different parent companies have
on similar business to see whether they have
discovered still other parenting opportunities

Characteristic of The
Parent

Parenting characteristic fall into five

categories:
1. The mental maps that guide parent managers
2. The corporate structure, management

systems, and processes

3. The central functions, services, and resources
4. The nature, experience, and skill of managers
in the parent organization
5. The extent to which companies have
decentralized by delegating responsibilities
and authority to business-unit managers

Impact on Results: Validating the

Judgements

Success and failure analysis is a useful way of

summarizing a parents track record

Making Changes to Improve Fit

Heartland Business

Heartland business have the

opportunities to improve that the parent
knows how to address, and they have
critical success factors the parent
understands well
They should have priority in the
companys portfolio development, and
the parenting characteristic that fit its
heartland businesses should form the
core of the parent organization

Edge of Heartland
Businesses

It happen when some parenting

characteristics fit, and others do not
The parent both creates and destroys
value
They could be moved into heartland
businesses when the parent learns
enough about the critical success
factors to avoid destroying value

Ballast Businesses

They are the businesses that the

potential for further value creation is
low but the business fits comfortably
with the parenting approach
Companies with too many ballast
businesses can easily become targets
for a takeover

Alien Territory Business

Most corporate portfolios contain at least

a smattering of business in which the
parent sees little potential for value
creation and some possibility of value
destruction
Companies need to be clear about their
heartland before they can recognize alien
territory, and they need to be clear about
their alien territory in order to recognize
their heartland

Value Trap Business

They are business with a fit in

parenting opportunities but a misfit in
critical success factors
The potential for upside gain often
blinds managers to the misfit-that is,
downside risks

Changing Parenting Characteristics

Parenting characteristics are built on

deeply held values and beliefs,
making changes hard to implement
Good parents constantly modify, finetune, their parenting, but
fundamental changes in parenting
seldom occur, usually only when the
chief executive and senior
management are replaced

Thank You