How Corporate Parents Add Strategic Value

Abstract

AbstractThere is often confusion between “business strategy” and “corporate strategy.” The fundamental differences between business and corporate strategy are in the level of organizational focus and in the primary questions management must answer. Business strategy resides at the business unit level and requires business unit-level management to answer the question “How do we compete?” Meanwhile, corporate strategy resides at the multi-business unit level and answers two key questions. First, corporate-level management must decide “Which businesses should we be in?” Once the decision has been made to diversify, management must then determine “How will the corporate office manage the array of businesses?” Therefore, this chapter presents the best practices for analyzing and selecting markets and industries in which a firm should operate to fill the “growth gap,” and how a corporate office can best add value by choosing a focused “corporate parenting” approach to manage their portfolio businesses.