Page 141 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Unit 7: Corporate Level Strategies

7.5.3 Consortia Notes

Consortia are defined as large interlocking relationships, cross holdings and equity stakes
between businesses of an industry. There could be two forms of consortia:
1. Multipartner Consortia: These are multi-partner alliances intended to share an underlying
technology. One of the most important European based consortiums to date is Air Bus
Industries. Airbus brings together four European aerospace firms from Britain, France,
Germany and Spain
2. Cross-holding Consortia: These include large Japanese Keiretsus (Sumitomo, Mitsubishi,
and Mitsui) and Korean Chaebols (Daewoo, LG, Hyundai, and Samsung). Two important
features of cross-holding consortia are building long-term focus and gaining technological
critical mass among affiliated member companies.

7.6 Restructuring

Restructuring is another means by which the corporate office can add substantial value to a
business. Here, the corporate office tries to find either poorly performing business units with
unrealized potential or businesses on the threshold of significant, positive change. The parent
intervenes, often selling off the whole or part of the businesses, changing the management,
reducing payroll and unnecessary expenses, changing strategies, and infusing the business with
new technologies, processes, reward systems, and so forth. When the restructuring is complete,
the company can either "sell high" and capture the added value or keep the business in the
corporate family and enjoy the financial and competitive benefits of the enhanced performance.

For the restructuring strategy to work, the corporate office must have insights to detect businesses
competing in industries with a high potential for transformation. Additionally, of course, they
must have the requisite skills and resources to turn the businesses around, even if they may be
in new and unfamiliar industries.

Restructuring can involve changes in assets, capital structure or management.
1. Assets restructuring involves the sale of unproductive assets, or even whole lines of
businesses, that are peripheral. In some cases, it may even involve acquisitions that
strengthen the core businesses.
2. Capital restructuring involves changing the debt-equity mix or the mix between different
classes of debt or equity.

3. Management restructuring involves changes in the composition of top management team,
organisational structure, and reporting relationships. Tight financial control, rewards
based strictly on meeting performance goals, reduction in the number of middle-level
managers are common steps in management restructuring. In some cases, parental
restructuring may even result in changes in strategy as well as infusion of new technologies
and processes.

7.7 Summary

Strategy is the direction and scope of an organisation over the long-term.
Strategies achieve advantages for the organisation through its configuration of resources
within a challenging environment, to meet the needs of markets and to fulfil stakeholder
expectations.
Strategies exist at several levels in any organisation – ranging from the overall business
through to individuals working in it.

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