[13:21:52] Ysbq: SESSION-12 [13:22:29] Ysbq: OK guys what is the concept of value creation [13:23:08] Ysbq: in the context of coporate parent [13:24:05] savvy2012: corporate parent should create value by deploying its reseources and competences and provising it to SBUS [13:24:39] Ysbq: ok [13:24:52] Ysbq: any1 else? [13:25:42] lotte77: there are three value creationg roles [13:25:57] savvy2012: there will be various functions which will be performed by head office on behalf of other SBUs [13:26:00] Ysbq: Value creation is a means by which the coporate parent creates value for its SBU [13:26:06] Ysbq: {lotte77} yes [13:26:12] lotte77: envisioning corporate intent, communicating the vision to stakeholders and SBU [13:26:33] lotte77: intervention to improve performance [13:26:48] lotte77: and provision of services, resources and expertise [13:26:57] Ysbq: {lotte77} good all three listed [13:27:23] Ysbq: these are the ways in which a parent creates value for its SBU [13:27:43] Ysbq: there are called @JS&W three main value creating roles of parents [13:28:08] Ysbq: so how it will help the first one [13:28:09] Ysbq: envisioning corporate intent, communicating the vision to stakeholders and SBU [13:28:14] Ysbq: any comments [13:28:49] Ysbq: it willl create goal congruence in an organisation [13:29:35] lotte77: stakeholders and investors need a clear understanding of corporate intent in order to better understand the company's activity [13:29:50] savvy2012: it will create strategy for entire organisation and make sure its being followed [13:30:30] lotte77: and also the managers of SBU's need to know exactly what it is expected from them, which are the goals [13:30:53] Ysbq: yeah that is called an effective corporate strategy, define the scope of organisation markets and products [13:31:24] Ysbq: ok moving on , how abt the second one , intervention to improve performance [13:31:31] Ysbq: i guess that is easy one [13:31:54] Ysbq: it would involve benchamrking and setting KPIs [13:31:59] lotte77: it has a monitoring and controlling approach [13:32:06] Ysbq: exactky [13:32:18] Ysbq: movin on to the third one [13:32:25] Ysbq: provision of services, resources and expertise [13:32:39] Ysbq: how this coulld help [13:33:06] savvy2012: it could help to achieve economies of scope [13:33:36] lotte77: may provide services as financial, managerial assistance [13:33:51] lotte77: and alsol central cervices [13:33:57] lotte77: services [13:34:15] Ysbq: {savvy2012} yeah [13:35:01] Ysbq: they could benefit from the coporate image in gaining finance and stuff like that [13:35:45] Ysbq: or they could gain advantage by looking in new markets where they have operations of unrelated products [13:36:06] Ysbq: ok lets move on [13:36:48] Ysbq: i guess every one is familiar with the concept of value destruction [13:36:59] Ysbq: any one wanna contribute [13:37:20] savvy2012: is it when parent actually destroys value by existance? [13:37:47] lotte77: Corporate parent must create value at least equal to the costs involved [13:38:16] savvy2012: because their costs could be outweighed by benefits or they cause disruption between SBUs worseining their performacnce and culture rather than improving it [13:39:15] Ysbq: {savvy2012} {lotte77} yeah this is done by lack of goal congruence, where senior management gets involved in politics and the size could be lethal factor when considering flexibilty to change in accordance to environment [13:40:05] Ysbq: ok how can we stop or hinder value destrcution [13:40:07] Ysbq: ? [13:41:45] savvy2012: by improving communication between headoffice and SBUs [13:42:03] lotte77: setting a clear corporate vision [13:42:18] savvy2012: by allowing SBUs managers to contribute to decision making [13:43:44] lotte77: by evaluating the value creation of corporate parent [13:44:21] Ysbq: i think the best case would be to see whether the business to be acquired is in line with the coporate strategy and does the parent has reources and expertise to effective manage those by giving appropriate direction [13:44:36] savvy2012: by headoffice giving up some functions in which it is seen not to create value [13:45:05] Ysbq: yeah good one, it can outdource non value addition actitvities [13:45:07] savvy2012: {Ysbq} yeah [13:45:58] Ysbq: one of the most important factor could be the culture of SBU [13:46:03] Ysbq: ok lets move on [13:46:20] Ysbq: What are portfolio managers [13:47:16] lotte77: they buy undervalued companies and improve their value and performance [13:47:23] potter2009: they are mangers that seek other businesses where they believe they can improve their perfomance [13:48:03] Ysbq: {potter2009} {lotte77} llike venture capitalists [13:48:07] Ysbq: :) [13:48:14] potter2009: yup [13:48:48] Ysbq: ok what are synergy managers [13:49:36] Ysbq: as savvy said economies of scope [13:49:48] lotte77: they look for high efficiency in the shared use of resources and competences [13:50:51] lotte77: but I guess this does not work between SBU's with unrelated activities, isn't it? [13:51:04] Ysbq: yeah they create synergetic effect on a whole in the activities they undertake to create value [13:52:01] Ysbq: {lotte77} yeah it could be argued, but to develop synergetic effect , the quality of experience and expertise play an important role at corporate level [13:52:16] lotte77: ok [13:52:38] Ysbq: lets take an example here [13:53:34] Ysbq: like it worked for a company that was into retailing shoes so they used that network to market entertainment media [13:53:36] Ysbq: lolz [13:53:50] Ysbq: at their shops [13:53:57] Ysbq: does that make sense [13:54:25] Ysbq: ok lets move on [13:54:42] Ysbq: it seems no one is interested in my example [13:54:56] lotte77: I am interested [13:55:02] lotte77: but I have no answer [13:55:10] Ysbq: ok [13:55:21] Ysbq: what are parental developers? [13:56:00] potter2009: they use their resources and expertise to help sbu's [13:56:33] Ysbq: yeah this concept is more like the one we discussed in value crretion [13:56:40] Ysbq: *creation [13:56:48] potter2009: true [13:56:56] lotte77: yes, provision of services resource and expertise [13:57:37] Ysbq: Welll that finishs the first part of the topics that were scheduled today [13:58:00] Ysbq: lets take a practical view to these tpics [13:58:42] Ysbq: in past exams there was one question of Shoal Fish i guess it was dec-10 [13:59:10] Ysbq: and they asked a 10 mark question to discuess these concepts and rellate to the text [14:00:09] Ysbq: try that question on self basis again as we have attempted that in previous sessions [14:00:28] lotte77: ok [14:00:31] Ysbq: lets move on to Corporate portfolio [14:01:31] Ysbq: ok what r the four policies that a parent adopt with respect to SBUS [14:01:56] lotte77: Build, Hold, Harvest, Divest [14:02:56] Ysbq: good Build means to employ and provide more resources , time and expertise to get the SBU on track to become a cash cow [14:03:02] Ysbq: what abt harvest [14:03:56] Ysbq: in build we have a long term stance [14:03:57] potter2009: helping an sbu improve like a value trap business [14:04:24] Ysbq: what is a value trap business [14:05:10] lotte77: or when the SBU already became a Cash cow, there is no need to build, but to harvest, seeking short term profits [14:06:18] Ysbq: {lotte77} yeah since the parent sees no benefit on further investing as the market growth and stoped and the market share has gone to the maximum limit [14:06:18] potter2009: its when it is not cash rich part of the business and need assistance from the parent\ [14:06:27] Ysbq: any one disagrees with me [14:07:52] Ysbq: ok what is divest scenario [14:09:24] potter2009: not investing any more time and effort into that business [14:09:45] Ysbq: when it is done [14:10:00] lotte77: is when a company sells a SBU in order to reduce the negative cash flow [14:10:11] Ysbq: good [14:12:32] Ysbq: ok a general question what factor would a parent consider in sbu for acquirin it [14:12:47] Ysbq: factors [14:13:25] potter2009: whether it can provide economies of scale to other sbu's\ [14:14:30] lotte77: what is the market share of the SBU [14:14:53] lotte77: whether the parent has competences and resources for the SBU [14:14:58] potter2009: whether they can have the capabilities to take on the sbu [14:15:39] lotte77: what is the market growth of the market in which the SBU activates [14:16:07] Ysbq: good u all are going in the right direction , [14:16:22] lotte77: why they want to achieve the SBU, what is the target [14:16:42] Ysbq: {lotte77} as u said market growth and share, this will determine the ATTRACTIVENESS [14:16:47] lotte77: to acquire, sorry [14:18:12] Ysbq: {potter2009} economies of scope come under the coporrate strategy, hence here we can say that does the SBU balance with the current corporate needs [14:18:24] Ysbq: thirrd factor is the Strategic Fit [14:19:03] Ysbq: which all mentioned the existence of competences and resources at coprate level to create value for SBU [14:19:13] Ysbq: i guess i am making sene [14:19:15] Ysbq: sence [14:19:19] Ysbq: sense [14:19:48] Ysbq: so the factors summed are; attractiveness, balance and strategic fot [14:19:50] Ysbq: fit [14:20:04] Ysbq: lets move on [14:20:18] Ysbq: Boston Control Group matrinx [14:20:53] Ysbq: what does BCG suggest [14:21:19] savvy2012: sorry guys [14:21:58] potter2009: look at the market share and growth of a company or sbu [14:22:53] lotte77: SBU's are categorised in terms of market growth rate and relative market share [14:23:01] savvy2012: Looking at market grows and market share of product [14:23:12] lotte77: not of product [14:23:13] Ysbq: yeah [14:23:48] Ysbq: well SBU could be a product , a division and a company [14:24:10] potter2009: yup [14:24:14] Ysbq: lets discuss what is an SBU [14:24:19] Ysbq: so every one clear [14:24:24] lotte77: as I know JS&W do not recommend BCG matrix for product protfolio [14:24:29] lotte77: does not [14:25:04] savvy2012: strategic business unit - a separately identifiable business unit, division or a subsidiary or associate... [14:26:21] Ysbq: so u mean a product is not there# [14:29:04] Ysbq: well let me clarify, an SBU is termed as a Strategic Busniess Unit for which a strategy is set by corporate managers it could be a product, a division and a forirgn operated company [14:29:11] Ysbq: hope that help [14:29:31] lotte77: yes [14:29:48] Ysbq: ok lets get back to BCG [14:30:33] Ysbq: i have an SBU which has a high potential of growth but the market share is low , what should i do [14:31:49] savvy2012: {Ysbq} yeah thanks [14:31:50] lotte77: you should build or harvest [14:32:35] savvy2012: build or hold [14:32:48] savvy2012: and they are called Question Marks [14:33:06] savvy2012: *or leave the market [14:33:07] lotte77: if the competition is strong, you shoud harvest [14:33:22] Ysbq: ok [14:33:23] lotte77: if there is no competition, you should build [14:35:01] Ysbq: ok what u guys think abt products that have low market growth and high market share [14:35:35] savvy2012: harvest (cash cows) [14:36:08] lotte77: maintain the current position-Hold or Harvest [14:37:11] savvy2012: and its usually at mature or decline stage of life cycle [14:37:42] Ysbq: yeah these are the ones that provide finance to make and invent new products [14:38:21] Ysbq: or what abt DOGS [14:38:55] hellohowlowlow: there must be a good reason to keep dogs [14:39:06] nice_guy: {hellohowlowlow} yes [14:39:06] hellohowlowlow: they usually operate at a loss [14:39:15] savvy2012: they are low market share and low growth, they should be closed unless needed by other products or needed to complete a line of products [14:39:25] savvy2012: {hellohowlowlow} hello [14:39:38] lotte77: Divest or hold if the Dogs helps in completing a product range or in keeping the competitiors out [14:39:41] savvy2012: {nice_guy} hello [14:39:52] hellohowlowlow: {savvy2012} hi! [14:39:53] nice_guy: {savvy2012} hiiiiiiiiiiiiii hw r u [14:40:05] savvy2012: {hellohowlowlow} {nice_guy} good, nice to see you both here [14:40:43] nice_guy: {savvy2012} what do u mean? lol [14:40:52] Ysbq: yeah they should be held only if they provide a strategic advantage or a market leader position [14:40:52] savvy2012: {nice_guy} studying :) [14:41:11] nice_guy: {savvy2012} hmm trying toooo... [14:42:06] savvy2012: we havent discussed Stars [14:42:27] Ysbq: yeah lets talk abt star SBUs [14:43:08] Ysbq: usually these are inventions [14:43:09] savvy2012: they have high market share and high market growth [14:43:09] potter2009: who have a high market share and a high growth rate - we can hold or build [14:43:22] Ysbq: in products case [14:43:25] hellohowlowlow: stars give the competitive advantage of the co [14:43:34] Ysbq: ok [14:43:36] savvy2012: they usually exist at introduction or growth stage of life cycle [14:43:40] lotte77: Build, because promise high return in future [14:43:45] Ysbq: yeah [14:44:05] savvy2012: threat of competitots is high as prices mayb need to be kept low to keep market share [14:44:23] savvy2012: profits are high [14:44:55] Ysbq: yeah [14:45:09] Ysbq: i guess that sums up BCG [14:45:15] savvy2012: yeah [14:45:57] Ysbq: but i would like to add sth here that this model is based on cashflows and does not consider the innovative capabilty [14:46:16] Ysbq: lets move on [14:46:21] Ysbq: lets talk abt Public Sector Portfolio Matrix [14:47:28] Ysbq: what does the this model depicts [14:47:49] potter2009: it's like bcg except it look at the need of a product or sbu [14:48:16] potter2009: and how efficient it is? [14:48:49] Ysbq: yeah ability to serve the public at large [14:48:59] potter2009: oh thnks [14:49:38] Ysbq: do we need to discuss or i suggest we move forward to The Shell Directional Policy Matrix [14:49:57] potter2009: lets move on [14:51:47] Ysbq: ok what is The Shell Directional Policy Matrix [14:54:18] lotte77: it classifies the SBU's upon competitive capabilities and sector profitability [14:55:27] Ysbq: yeah it is detailed matrix that provide options for a parent [14:57:18] Ysbq: do we need to discuss , i think i could be understood while looking at it [14:57:38] lotte77: is this matrix very important for the exam? [14:57:52] potter2009: good question [14:58:31] Ysbq: ok lets dicuss the GE business screen then , we will get to it [14:58:40] Ysbq: The General Electric Business Screen [14:58:49] Ysbq: what does this matric suggest [14:59:56] savvy2012: is it about Business strenth / competitive position and Long term industry attractiveness? [15:00:04] lotte77: it is similar to BCG matrix based to business strenghts and market attactiveness [15:00:55] Ysbq: yeah but we are gonna discuss it so we can just fly over the Shell ones as it is quite similar [15:01:53] Ysbq: ok how the market attractiveness is determined [15:01:55] Ysbq: here [15:02:42] lotte77: by indicators like growth rate, profitability, inflation rate, environmental issues [15:03:51] Ysbq: {lotte77} yeah these are all the factors that are considered at strategic analysis phase, so u can also include porter 5 forces [15:04:19] Ysbq: what abt the business strenght indicators , what determine thse [15:04:51] lotte77: innovation, good market share, brand [15:05:52] Ysbq: infact these are all the primary activities in the value chain [15:05:53] Ysbq: :D [15:06:18] Ysbq: along with financial strenght and innovation [15:07:13] Ysbq: so u have got business strenght on one side and market attractiveness on other lets jump into it [15:07:31] Ysbq: average business strenght and average attractiveness [15:07:39] Ysbq: what should be done [15:08:27] lotte77: develop selectively [15:08:49] Ysbq: ok what does that mean [15:09:54] Ysbq: anyone wanna say here sth [15:11:15] Ysbq: well this means that u develop those busniess segments that yield most economic benefits [15:11:30] lotte77: ok [15:11:47] savvy2012: partually develop partually harvest [15:12:04] Ysbq: what if the market in this case becomes attractives , what should a business do [15:12:51] savvy2012: Hold leadership [15:13:11] savvy2012: increase strengths [15:13:19] savvy2012: improve* [15:13:39] lotte77: invest and build [15:13:56] Ysbq: invest and build selectively since the business strenght is average [15:16:09] Ysbq: so in which case the business should invest for growth [15:16:10] Ysbq: ? [15:16:45] lotte77: when the business strengh is strong and the market attractiveness is attractive [15:16:46] savvy2012: if strength is high and attractiveness is medium or high [15:17:12] Ysbq: {lotte77} {savvy2012} yeah [15:18:08] Ysbq: now look at the Shell matrix [15:18:17] Ysbq: the matrix diagram [15:19:10] Ysbq: it substitutes the General electric matric axis with competive capabilties and market attractiveness with sector profitability [15:19:26] Ysbq: rest is the same [15:19:46] Ysbq: i guess that would be no problem [15:20:34] Ysbq: guys??/ :? [15:20:39] savvy2012: yeah [15:20:59] Ysbq: do we need to discuss the shell matrix [15:21:05] savvy2012: no [15:21:47] Ysbq: ok [15:22:52] Ysbq: LETS MOVE to last topic of the day Ashridge Portfolio Display [15:23:00] savvy2012: ok [15:23:46] Ysbq: ok What does ashridge assess [15:24:17] savvy2012: which divisions are useful to keep and which should be closed off [15:24:31] potter2009: looks at the feel and beneit of sbu with corp parent [15:24:56] savvy2012: parent should build a portfolio of SBUs which they can develop effectively [15:25:03] Ysbq: {potter2009} {savvy2012} yeah [15:25:18] Ysbq: What is meant by Feel and benefit [15:26:33] savvy2012: feel is ability of parent to develop SBU, benefit - is opportunities to utilise that skill of ability [15:27:22] Ysbq: yeha [15:28:18] Ysbq: so we can say that the feel is about internal resources match between parent and SBU [15:28:50] Ysbq: while Benefit is external oppourtunity match between the parent and SBU [15:29:07] Ysbq: does that make it more meaning ful [15:29:20] savvy2012: yep [15:29:58] Ysbq: {savvy2012} so if i have low feel but high benefit , what should i do as a parent [15:30:32] savvy2012: let sBU exist on their own [15:31:03] savvy2012: as its a waste of our resources and competences [15:32:02] Ysbq: {savvy2012} whats are these businesses termed [15:32:13] savvy2012: Ballast [15:32:54] Ysbq: {savvy2012} i guess u r mistaken [15:33:12] savvy2012: sorry [15:33:19] Ysbq: once again low feel and high benefit [15:33:21] savvy2012: its value trap [15:33:28] Ysbq: yeah u got it [15:33:45] Ysbq: so what should we do for these businesses [15:34:27] savvy2012: for these parent should try and develop the skills to add value to SBU [15:34:34] lotte77: parent should acquire new skills and resources [15:34:57] Ysbq: {lotte77} {savvy2012} yeah [15:36:11] Ysbq: new skills should be acquired to become a good parent , so that they could be moved to Heartland category [15:36:28] Ysbq: ok what are alien SBUS [15:36:54] savvy2012: low feel , low benefit, these SBUs should be sold off [15:37:19] lotte77: the parent does not have the skills and the opportunities are low [15:37:46] Ysbq: {lotte77} {savvy2012} yeah [15:40:47] Ysbq: ok i would like to add sth here , that this model focuses on the value that a parent can add to SBUs unlike other models that focus on the value creation for Parent from SBUs inlcusion in its portfolio [15:41:09] unknown: hi all [15:41:10] savvy2012: ok [15:41:12] Ysbq: that is the ending comment for today from my side any one wanna add to this [15:41:24] savvy2012: no.. [15:41:42] savvy2012: {unknown} hey [15:41:43] Ysbq: that conclude the sesion [15:41:53] savvy2012: {Ysbq} great, thank you! [15:41:57] savvy2012: whats for tomorrow? [15:42:01] unknown: {savvy2012} sorry I am late [15:42:46] Ysbq: i want all of u guys to go thru the shoal Fish question ones again and see, it u feel benefit able to attempt it [15:43:04] savvy2012: {Ysbq} hmm ok.. [15:43:30] lotte77: ok [15:43:42] Ysbq: have we done dec-09 [15:43:46] Ysbq: ?? [15:43:50] savvy2012: i dont think so [15:44:19] Ysbq: {lotte77} {savvy2012} Bye the Thanks a lot to all for a wonderful session [15:44:43] lotte77: thank you very much for the session! Bye! [15:44:48] savvy2012: {Ysbq} nothats thanks to you for your prsistence :) i was blind with this topic and now i feel better about it :D [15:45:52] Ysbq: no problem ,we will be doing past paper tommow