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Corporate-Level Functional Strategies
Type
applied research project
Start Date
01 January 2009
End Date
31 December 2010
Status
completed
Keywords
Corporate Functions
Corporate Strategy
Value Added
Parenting Theory
Multi-Business Company
Description
In many companies there is a continuing discussion about the relationship between the corporate-level and the business divisions. The discussion often focuses on whether the corporate level adds value, what activities should be centralised, the size of the staff at the corporate level and how to avoid bureaucracy and interference. Since most of the staff at the corporate-level is part of corporate functions, it is through the development of functional strategies that these issues are resolved. We are interested in finding out how functional leaders make these strategic choices.
The theory of corporate groups states that the group levels must add value (ideally more value than other groups) in order to justify their existence. However, research (e.g. by the Ashridge Strategic Management Centre) suggests that many groups fail to add value (the break-up value of many groups is greater than their market value) and fail to define clearly the main sources of corporate added value. Moreover, many managers in business divisions complain that group functions are more of a hindrance than a help. How, then do heads of functions develop functional strategies? How do they link their functional strategy to group strategy? How do they avoid bureaucracy, empire building and interference? How do they measure added value? How do they decide what skills are needed at the group level?
To address these issues we will focus on recent changes that the leader of the function has made to corporate-level activities or role. We will try to understand how these decisions were made.
The theory of corporate groups states that the group levels must add value (ideally more value than other groups) in order to justify their existence. However, research (e.g. by the Ashridge Strategic Management Centre) suggests that many groups fail to add value (the break-up value of many groups is greater than their market value) and fail to define clearly the main sources of corporate added value. Moreover, many managers in business divisions complain that group functions are more of a hindrance than a help. How, then do heads of functions develop functional strategies? How do they link their functional strategy to group strategy? How do they avoid bureaucracy, empire building and interference? How do they measure added value? How do they decide what skills are needed at the group level?
To address these issues we will focus on recent changes that the leader of the function has made to corporate-level activities or role. We will try to understand how these decisions were made.
Member contributor(s)
Funder(s)
Topic(s)
Corporate Functions
Method(s)
qualitativ
Range
HSG Internal
Range (De)
HSG Intern
Division(s)
Eprints ID
222196
3 results
Now showing
1 - 3 of 3
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PublicationFunctional Strategies in Decentralized Corporations: Richemont's Group HR FunctionCompagnie Financière Richemont S.A. (Richemont) is the second largest luxury goods company in the world after LVMH (Louis Vuitton - Moët Hennessy S.A.). Offering a wide selection of brands, Richemont faces typical group company challenges. On the one hand, the autonomy of its individual brands called "Maisons" is crucial for the brands' and, thus, the group's success. On the other hand, despite its diversified brand portfolio, each of the Maisons carries out several more or less similar tasks which offer centralization and standardization potential at the group level. In 2000, Richemont's corporate management launched an initiative focused on this potential to create additional value. This led to a new group structure with several centralized group functions. Previously, the group had been completely decentralized. The new corporate functions were supposed to add value to the Maisons, which they could not achieve as stand-alone business divisions. This case study spotlights the development of Richemont as a group company, covering the timeline from 2000, when a new corporate structure was implemented, to 2012. The focus is on the group HR function as one of the corporate functions that was established during the introduction of the new corporate structure. The group HR's functional strategy, as well as the development of its value-adding efforts is provided. In addition, the case study describes the group HR's interfaces and the division of the responsibilities between corporate level and non-corporate level units. Finally, it describes two major initiatives that the group HR carried out in order to strengthen its position as a value source and its acceptance within the group. Using this specific function, the case study explores the role of corporate functions as a specific feature of Richemont's new corporate structure and an important means to create or destroy corporate value. The case can be used as teaching material for strategy classes on corporate strategy, corporate advantage, corporate parenting, and corporate functions. It provides insights into the success factors of corporate-level functional strategies and the levers of a corporate function's value creation. It can be used to discuss the following questions which touch on the fundamental issues of corporate strategy: What can be centralized and what cannot? What is the corporate function's role in setting policy, guiding decentralized activities, and supporting business divisions? How can heads of corporate functions link their functional strategy to the overall corporate strategy? How can they avoid bureaucracy, empire-building, and interference? How can they measure added value? How can they decide which skills are needed at the corporate level? By covering these questions, the case deals with how heads of corporate functions can develop strategies for their functions.Type: case study
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PublicationThe Value Traps Facing Corporate Functions(SMS Strategic Management Society, 2013-10-01)Campbell, AndrewCorporate functions are the headquarters functions in a divisionalised company. These functions, such as corporate Finance, HR, IT, Marketing, and Strategy, have been increasing in their numbers, size and influence. While they can add significant value as part of the ‘corporate parent', they also often subtract value, interfering in unhelpful ways and imposing bureaucracy and delays. Our research, with 30 European companies, exposed four typical value traps that are the root causes of subtracted value. These value traps appear to occur because of the different challenges that corporate functions face at different stages in their life cycle.Type: conference paper
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PublicationCEOs, Mind Your Own Business! : Why and How Corporate CEOs Should Pay More Attention to Corporate Functions(TEBR The European Business Review, 2013-03)
;Campbell, AndrewThe corporate office consists of the CEO and the corporate functions. It is the main vehicle for delivering corporate added value. Yet corporate functions often underperform and corporate offices often fail to add value. We argue that this is because CEOs focus most of their attention on portfolio strategy and business issues and give too little attention to guiding and leading their own business - the corporate office. --> http://www.europeanbusinessreview.com/?p=8459Type: journal articleJournal: The European Business ReviewIssue: March-April