Non-core Businesses Research Articles

Larsen & Toubro: constructing competencies and building the nation

Learning outcomes The following are the objectives of the case study: building and leveraging core competence, realizing the strategic advantage of incumbency and contribution to nation building as a business potential. Case overview/synopsis Larsen and Toubro (L&T) started as a trading company in 1938. By 2023 L&T was a mammoth infrastructure company with a market cap INR 4,750bn operating 800–1,000 projects in engineering and construction at any point in time. It also worked in the domain of hydrocarbons, power and heavy engineering including defence engineering, financial services and development projects supported by technology. The company went through several phases of environmental disruptions in the form of the Second World War and India’s independence, which brought several opportunities for growth. L&T built competencies to leverage these opportunities, which also contributed to the nation building efforts in India. In 2023, several changes were occurring in the ecosystem in the form of energy changes, sustainability becoming a way of life and digitalization impacting every aspect of business. The managing director and chief executive officer Mr S.N. Subrahmanyan reiterated the need to focus on performance to make L&T a global leader in futuristic tech-driven engineering and solutions. He faced three major challenges – reducing exposure in non-core businesses, adopting technology to strengthen traditional business and leveraging the competence built over 85 years to improve the performance of L&T, while contributing to nation building. Complexity academic level This case study is suitable for MBA and executive programmes. Supplementary materials Teaching notes are available for educators only. Video of protagonist in conversation with Anant Maheshwari, President Microsoft India discussing the future plans of L&T for adopting new age technology. The video is available at the following YouTube link https://www.youtube.com/watch?v=OKb-_z_ch4E Subject code CSS 11: Strategy.

Has Japan’s work style reform had the intended effect?

ABSTRACT Since 2016, the Japanese government has promoted the reform of work styles to reduce working hours, facilitate flexible working arrangements, and ensure the fair treatment of nonregular workers while improving productivity. Policies such as flexible work styles that leave the time and place of work to the worker’s autonomy and efforts to enhance work efficiency through the use of IT have rapidly penetrated both large companies and medium-sized companies since 2016. We use an original retrospective survey of 847 Japanese firms combined with financial data from 2009 to 2019 to examine how Japan’s work style reforms have affected overtime hours, turnover rates, sales per person, and corporate profits. By estimating fixed effect models, we find that (1) the policies for business prioritization to improve efficiency by outsourcing noncore businesses and taking on more selective orders have had positive effects on sales per employee and profits, (2) flexible work styles have reduced overtime and raised profits, and (3) the effects are heterogeneous: flexible work styles have reduced overtime hours, increased ROA and sales per employee in the service sector, and had significantly negative effects on sales per capita in the nonservice sector. Potential estimation biases are also examined in additional analyses.

An integrated fuzzy group decision-making model for construction enterprise contractor selection based on EDAS method and Information entropy

With the rapid development of China’s construction industry, the competition in the construction industry is becoming increasingly fierce. Enterprises need to continuously improve their competitiveness in the market. Some non-core businesses can be outsourced to professional contractors. At present, contractors have more and more influence on the operation and development of enterprises. Whether it is the construction period or the quality of the project, it will have a greater impact on the operation of the construction project. In the environment of increasingly fierce market competition and increasing project quality requirements, for the construction project contracting enterprises, in order to achieve the goal of low cost and high quality, it is necessary to select the most suitable contractor on the basis of comprehensive consideration of multiple factors. The construction enterprise contractor selection is a classical multiple attribute group decision making (MAGDM) problem. In recent years, the MAGDM problem has become an important research field in modern decision science. This paper extends the EDAS method to the 2-tuple linguistic Pythagorean fuzzy sets (2TLPFSs). On the basis of the original EDAS method, 2-tuple linguistic Pythagorean fuzzy EDAS (2TLPF-EDAS) is built for MAGDM. Finally, a case study for construction enterprise contractor selection and some comparative analysis with the other methods show that the new method proposed in this paper is effective, reasonable and accurate.

Chinese MNE acquisition of unrelated foreign businesses: The role of diversified business group affiliation, private ownership and strategic asset seeking

While the acquisition by Chinese firms of unrelated foreign businesses has become quite common, it is a highly risky undertaking not fully explained by international business scholars. Using resource-based and institutional theory, we hypothesize that affiliation with a domestically diversified business group confers pre- and post-acquisition advantages and legitimacy, fostering unrelated foreign acquisitions. In addition, we argue that private ownership as well as a motive to seek strategic assets amplify this tendency among Chinese firms affiliated to diversified groups. Ordered logit modelling for 662 Chinese cross-border M&As over a 10-year period provides support for our hypotheses. Our findings shed new light on: the distinctive characteristics of Chinese MNEs; broader conceptual arguments regarding the strategy of emerging market MNEs; the apparent paradox of why Chinese MNEs have used international acquisitions to diversify at a time when many Western diversified conglomerates are divesting non-core businesses.

Analysis of Reasons for Layoffs by Technology Startups during Covid-19 Pandemic

Several technology startups, both in US and India announced layoffs during the Covid-19 pandemic. Many of them gave the reason to be the pandemic which caused almost total shutdown of the business. This contrasted with many other companies like airlines which took the route of salary cuts and leave without pay rather than layoffs. However, the researcher’s study of these technology startups,indicates that the layoffs were more to do with shedding non-core businesses, eliminating management layers and terminating non-performers. Many of these startups had a large runway of capital and could have retained employees if they chose to. Severalof them resorted to layoffs after a fundraising round. Hence the pandemic was an excuse to realign their businesses, which would havehappened in normal course. However due to the pandemic situation and focus on companies to retain jobs, the severance policies announced were more generous than the ones announced earlier. This could set up a new precedent of more generous severance policies during layoffs. The employees can take away that they are always at risk if they do not belong to the core business or area of competency in a company. The mid-level and senior level managers must be cognizant that the value they bring in will always be evaluated against their compensation. They must ensure that their value is recognized. The researcher has analyzed startups that have enough capital to sustain.

Impact of Internet Banking on the Customer Satisfaction: Evidence from the Indian Banking Sector

Internet Banking is about using the infrastructure for digital age to create opportunities, both in local & global market. IT enables the considerable lowering of transaction cost and the creation of new types of banking opportunities that address the obstacles of time and distance. Banking opportunities are local, global and immediate in internet banking. Internet banking is an online payment system that enables customers of a bank or other financial institutions to conduct a range of financial transactions through websites of financial institutions. Internet banking has many advantages over other traditional banking delivery methods. Internet banking provides banks with an increased customer base, cost savings, mass customization, product innovations, improved marketing, and communication, the ability to develop non-core businesses, and the ability to offer services regardless of geography and time constraints, viewing account balances, recent transactions, ordering cheque books and many more. With the development of new technology, Internet banking is expected to become a major banking method for customers. Internet banking reduces costs by providing customers with another means of accessing their accounts without physically visiting a bank. The main purpose of this study is to analyze various online facilities provided by major public and private banks in India and to measure their impact on customers in terms of customer satisfaction.

Service Satisfaction Evaluation of Customer Preference-Driven Public Warehousing Product Service Systems for Small- and Medium-Sized Enterprises in an Industrial Park

Facing fierce market competitions and fast technological transformation, manufacturing enterprises eagerly aspire to cut down investments in non-core businesses with the low return such as logistics, warehousing, and machine maintenance. In the context of service-oriented manufacturing (SOM), these non-core businesses are expected to be undertaken by third-party service providers in a centralized product + service manner. Supported by SOM principles, public warehousing product-service system (PW-PSS) is defined as integration of public warehouses and related warehousing services (e.g., raw material purchasing, work-in-progress storing/sorting/monitoring, and finished products packaging/distribution) for different manufacturing enterprises in an industrial park (IP). PW-PSS especially benefits for small- and medium-sized enterprises (SMEs) who are suffering from a heavy investment and management burden of self-built warehouses. To well operate the PW-PSS, third-party service providers must improve the service satisfaction degree of customers (i.e., manufacturing enterprises) to attract their continuous cooperation. This paper proposes a service satisfaction evaluation (SSE) method considering customer preferences to ensure the PW-PSS solutions more reliable and reasonable. First, the standard impact loss method is adopted to determine the initial weights of SSE indexes, and then the Kano model is used to adjust the above weights based on the consideration of customer preferences. Second, according to whether an SSE index is profit-oriented or cost-oriented, a positive or negative distance is obtained based on a distance average solution method. Finally, an example is given to verify the proposed method. It is expected that SSE can provide a decision-making basis for SMEs in an IP to choose optimal PW-PSS solutions.

C&EN profiles Ingevity, a new player in the chemical industry

It’s not hard to imagine that D. Michael Wilson’s first thought upon being offered the job as chief executive officer of Ingevity was “Wow, this company is doing pretty well. I better not screw it up.” Ingevity is the former specialty chemical business of the paper company MeadWestvaco. Around in one form or another for more than a century, it converts sawdust into activated carbon and the papermaking by-product crude tall oil into fatty acids, rosin, and downstream chemicals. For most of its history, the business hummed along quietly and profitably within MeadWestvaco. But in mid-2014, an activist investor, Starboard Value, started urging MeadWestvaco’s CEO, John A. Luke Jr., to jettison noncore businesses such as chemicals. In early 2015, Luke finally agreed, announcing plans to spin off the $1 billion-per-year chemical business as a separate company. The name Ingevity was announced in July 2015, and Wilson became CEO two months

Effects of human resource outsourcing on service innovation in public sectors

To deal with a lot of public services, first-level human resources are largely required in governmental institutes. The changes of industries and employment structure have the government, in consideration of budgets and downsizing, apply Human Resource Outsourcing and introduce temporary employees to reduce labor personnel costs and labor flexibility and to solve the demands for temporary and non-core businesses for achieving the innovation of administrative services and organizational reform as well as enhance organizational competitiveness. Acquiring expected and stable temporary employees with favorable work performance is a dilemma for personnel units. By distributing and collecting questionnaires on-site, 230 copies of questionnaires were distributed to the superiors and public servants in various sectors of Kaohsiung City Government. A total of 169 valid copies were retrieved, with the retrieval rate of 73%. The empirical results show partially positive effects of Human Resource Outsourcing on Service Concept, Customer Interface, and Delivery System in Service Innovation, significantly positive effects of Human Resource Outsourcing on Technology Option in Service Innovation, and remarkable moderating effects of background variables on the correlations between Human Resource Outsourcing and Service Innovation.

Technology and Corporate Scope: Firm and Rival Innovation as Antecedents of Corporate Transactions

AbstractThis paper studies the role of technological innovation as an antecedent of changes in corporate scope. It argues that technological innovations prompt the firm to reconfigure its corporate portfolio—to redeploy resources to areas of new opportunity while it divests out of marginal businesses. Results from a cross‐industry sample of U.S. manufacturing firms show successful innovation by a firm is followed by both expansion into new areas through complementary resource seeking acquisitions and divestment out of existing noncore businesses. This relationship is found to be moderated by the level of investible resources available to the firm, and supports the notion of scarce resources as a constraint on firm scope. In addition, firms are found to change their corporate scope in response to rival innovation. Copyright © 2011 John Wiley & Sons, Ltd.

General Electric at the crossroads: the end of the last US conglomerate?

In 2000, General Electric (GE) was the world’s most valuable company, with a market capitalisation of $520 billion. At the end of 2008, GE’s market capitalisation had fallen 69% to $163 billion. This paper analyses first the direct causes of the decline, and then the longer-term root causes, which are attributed to the mismatch and dissonance between GE’s present leadership, strategy and structure and the continuing crisis environment. We offer guidelines for the restructuring of the now obsolete corporate conglomerate, and how to meet the major challenges faced by GE’s executive management: 1 go back to GE’s traditional core competences and divest non-core businesses 2 strengthen the authority of the financial and auditing function 3 expand globalisation 4 rebuild the mutual trust between company and employees 5 continue to expand global R&D to become again a leader in creativity and innovation. We develop a pessimistic and an optimistic scenario for the next decade and conclude that the most probable outcome will be GE survival and gradual recovery.

Liberating a Business from Its History:The Turnaround of Dana Corporation

When auto-parts maker Dana Corp. was near collapse, restructuring professionals entered the scene and effected a comprehensive reorganization of Dana’s global business. They facilitated negotiations between various stakeholder groups and utilized the Chapter 11 bankruptcy process strategically, resulting in a restructuring that included groundbreaking deals to limit Dana’s liabilities for retiree welfare benefits and pension plans; the divestment of noncore businesses, both domestic and overseas; the institution of a pan-European receivables securitization facility; the out-of-court reorganization of its European operations, avoiding insolvency proceedings in multiple jurisdictions; the restructuring of a struggling finance subsidiary; and the renegotiation of unfavorable contracts with Dana’s significant OEM customers. Dana emerged from the process with a competitive cost structure, rationalized manufacturing footprint, and streamlined corporate organization, in stark contrast to the well-publicized difficulties of other auto industry participants.

PLASTICS BUSINESS Polyester maker Wellman declares bankruptcy

Polyester fiber and resin maker Wellman Inc., long troubled by high raw material costs and a crushing debt burden, has filed for Chapter 11 bankruptcy. According to CEO Thomas Duff, the company has tried reducing debt, selling noncore businesses, laying off workers, and cutting costs, but these efforts were “not sufficient to offset the deterioration in business conditions and the cost of our substantial debt obligations.” According to its bankruptcy petition, filed in New York City on Feb. 22, Wellman has $600 million in debt but only about $500 million in assets. The company has reported losses from continuing operations every year since 2003. Its 2006 sales were $1.3 billion. The petition is only the latest setback for Wellman. In December, the New York Stock Exchange delisted the company’s shares because they traded for less than $1.00 for 30 days straight. Last October, Wellman engaged investment bank Lazard Freres to explore “strategic alternatives” such as ...

Examining the scope of multibusiness health care firms: implications for strategy and financial performance.

Use theory and data to examine the scope of corporate strategies for multibusiness health care firms, also known as organized or integrated health care delivery systems. Data are from the 2000 HIMSS Analytics Annual Survey of integrated health care delivery systems (IHDS), which provides complete information on businesses owned by IHDS. Scope defined as the breadth and type of businesses in which a firm chooses to compete is measured across seven separate business areas: (1) health plans, (2) ambulatory, (3) acute, (4) subacute, (5) home health, (6) other related nonpatient care businesses, and (7) external collaborations. Theories on strategy and organizational configurations along with measures of scope and a novel dataset were used to classify 796 firms into five mutually exclusive groups. The bases for classification were two competitive dimensions of scope: (1) breadth of businesses and (2) mix of existing core businesses versus new noncore businesses. Unit of analysis is the multibusiness health care firm. Sample consists of 796 firms, defined as nonprofit organizations that own two or more direct patient care businesses in two or more separate areas across the health care value chain. Firms were clustered into five mutually exclusive organizational configurations with unique scope characteristics revealing a new taxonomy of corporate strategies. Analysis of the scope variables revealed five strategic types (along with the number of firms and distinguishing features of each strategy) defined as follows: (1) Core Service Provider (340 firms with the smallest scope providing core set of patient care services), (2) Mission Based (52 firms with the next smallest scope offering core set of services to underserved populations), (3) Contractor (266 firms with medium scope and contracting with physician groups), (4) Health Plan Focus (83 firms with large scope and providing health plans), and (5) Entrepreneur (55 firms with the largest scope offering both a core set of services and investing in a variety of new noncore business opportunities including many for-profit ventures). Significant differences in financial performance among the strategies were found when controlling for payer reimbursement conditions. Specifically, in an unfavorable condition with high Medicaid and low commercial insurance, the Mission Based strategy performs significantly worse while the Entrepreneur strategy performs surprisingly well, in comparison with the other strategies. Findings suggest: (a) scope can be used to classify a large number of multibusiness health care firms into a taxonomy representing a small group of distinct corporate strategies, which are recognizable by senior management in the health care industry, (b) no single strategy dominates in performance across different payer profiles, instead there appears to be complementarities or fit between strategy and payer profiles that determines which firms perform well and which do not under different conditions, and (c) senior management of nonprofit health care firms are cross-subsidizing unprofitable patient care through ownership of nonpatient care businesses including for-profit ventures.

EXAMINING THE SCOPE OF MULTIBUSINESS HEALTH CARE FIRMS: IMPLICATIONS FOR STRATEGY AND PERFORMANCE.

This study applies theory and data to examine the organizational scope of multibusiness health care firms. Scope defined as the breadth and type of businesses in which a firm chooses to compete is measured across seven separate business areas: (1) health plans, (2) ambulatory, (3) acute, (4) subacute, (5) home health, (6) other related non-patient-care businesses, and (7) collaborations. Theories on strategy and organizational configurations along with measures of scope and a novel data set were used to classify 796 firms into five mutually exclusive groups. Each group had distinct scope characteristics across two competitive dimensions: (1) breadth and (2) mix of core versus non-core businesses. Analysis of the scope variables revealed five strategic types (along with the number of firms representing each strategy) defined as follows: (1) Core Service Provider (340 firms with the smallest scope providing core set of patient care services), (2) Mission Driven (52 firms with the next smallest scope offerin...

RHODIA STANDS FAST

EMERGING FROM AN EXTREMELY depressed year and an aborted merger bid, the top managers at French specialty chemicals producer Rhodia were remarkably sanguine in presenting their 2001 results at the end of January. The company posted a net loss of $183 million, compared with a profit of $186 million in 2000. The loss, though, reflected heavy restructuring charges; excluding nonrecurring charges, the firm had a net profit of $59 million. Sales were down by 2% from the preceding year to $6.3 billion. And the company knocked $425 million off its corporate debt of roughly $2.6 billion at the end of 2000, in large part with the proceeds from asset sales. The strategic sale of assets is expected to continue this year: In a bid to reduce debt by at least $430 million, the company has hired consultants to advise it on the sale of noncore businesses. According to Pierre Prot, chief financial officer, Rhodia expects ...

EARNINGS REMAIN STABLE AT DRUG FIRMS

LAST YEAR WAS A PERIOD OF SIGnificant change for the worldwide pharmaceutical industry. Major drug producers merged, acquired businesses, and focused even more intently on pharmaceuticals, shedding noncore businesses. Smaller biopharmaceutical and drug discovery companies also had consolidation in their sector. For the industry as a whole, new and existing drug products continued to fuel sales and earnings growth for the giants as well as the up-and-comers. Combined 2000 sales for a group of 13 major pharmaceutical firms surveyed by C&EN rose 10% compared with 1999 to $251 billion. Net earnings for the group were up 15% to $48.2 billion, or about 19% of combined sales. Missing from the list are a few major drug producers based in Europe that have not yet reported 2000 sales and earnings, such as Aventis and Roche. Former life sciences companies that combined pharmaceutical and agrochemical operations underwent some major shifts in 2000. AstraZeneca and Novartis decided to focus ...

Large firms and catch-up in a transitional economy: the case of Shougang Group in China

This study examines the possibility of catch-up of the Chinese steel industry, in particular the Shougang Group, with the leading global steel giants. Shougang is one of the four steel companies that have been selected by the Chinese government to constitute the core of the future Chinese steel industry. The contract system at Shougang, which operated from 1979 to 1995, unleashed an extraordinary entrepreneurial energy in the formerly traditional state-run steel plant. In the post-contract system, Shougang's range of decision-making independence in respect to the purchase of inputs, its production structure and product marketing has increased substantially compared to the contract system, when the government still controlled many of the key decisions. As a result of institutional constraint, the low value-added steel products dominate Shougang's portfolio. To challenge the established giants in the steel industry, Shougang has to divest the loss-making non-core businesses, slowly downsize employment in the core business, raise capital on the stock market and generates the resources for continued upgrading of its steel technology and diversifying its product portfolio.

Celanese faces difficult road ahead

Claudio Sonder, chairman of Celanese, calls the scheduled Oct. 25 split of Celanese from Hoechst great opportunity to increase the value oi; our company (C&EN,0ct 11, page 23). There may indeed be significant value waiting to be unlocked from the Frankfurt-based Celanese. But first, it must wade out of an oversupplied market for the commodity chemicals that make up most of its sales. In addition, it must wrap up two expensive legal problems and the planned sale of several noncore businesses. In a filing with the U.S. Securities & Exchange Commission (SEC) last month, Celanese said it posted an operating loss of $267 million in the first half of 1999 on sales of $2.44 billion. Much of this loss came from a $132 million charge taken to settle claims that Celanese's polybutylene terephthalate was used to make defective plumbing pipe. Celanese also had to pay $39 million to the U.S. government to ...

Unlocking your imprisoned assets: The joint venture solution

In recent times, more intense competition has forced companies to concentrate their resources on a few, core businesses, and either to shut down or try to sell off their non-core businesses. The latter alternative has proved quite difficult, especially in the European environment. Result? - many companies have been left with ‘imprisoned assets’ which they no longer wish to focus on and either cannot sell or sell only at a disappointing price. Ashish Nanda and Peter Williamson first identify the characteristics of a company which is sitting on imprisoned assets, and then suggest a way of extracting value from them. The solution is to create a transitory joint venture with a partner leading eventually to a transfer of ownership, and the terms of separation can be negotiated as part of the initial deal. Such transitory joint ventures have to be structured and managed differently from the joint venture norm. They are essentially ‘restructuring’ joint ventures, and have many advantages. The authors discuss why companies such as Corning, Philips, IBM, and Dresser have used joint ventures to restructure and ultimately exit from non-core businesses.