There has always been a weak link in the study of strategic issues, that is, what elements should be included in a complete strategy. Strategists and consulting companies often construct their own strategic models from their own theoretical systems. Undoubtedly, these models are reasonable, but they often overemphasize one aspect of the strategy and intentionally or unintentionally ignore other equally important or even more important issues.
Professor Donald C. Hambrick of Columbia University Business School and Professor James W. Fredrickson of the University of Texas Business School realized this major flaw in strategic research, and published in the Executive on 200 1 entitled "Are you sure you have a strategy? This paper summarizes the competitive strategy at the business level into five elements: field, development path, differentiated positioning, development track and economic logic. The five-factor strategic model provides a very complete framework for strategic business units (SBU) to think about their own competitive strategies, which has strong practicability.
Company strategy mainly includes five closely related elements, which are:
Field: Where is our business?
-Development Path: How do we get to these areas?
-Differentiation: How does the parent company provide unique positive support for the business department?
-development track: at what speed and priority should all measures be carried out?
-Value Creation Logic: How does the parent company create value?
I. Field
The domain decision of diversified enterprises includes the following three questions: industry choice-what industry are we engaged in? Geographical location-what is the geographical coverage of our business? Core technologies-What core technologies do we enjoy in the business sector?
Industry choice
Industry selection is to solve the problem of what kind of enterprise combination is formed. At present, the business combination of diversified enterprises in China generally has two important sources. One is that they are driven by opportunities, and most private enterprises belong to this model; There is also the result of historical inheritance, and many state-owned enterprises belong to this model. The diversified enterprises formed by these two modes have more or less defects in business combination, lack of organic connection between businesses and poor coordination.
With the intensification of competition, domestic diversified enterprises also realize the importance of enterprise merger, and the research and practice on enterprise merger are gradually increasing. On the basis of statistical analysis, Lang Xianping, a Hong Kong scholar, pointed out that Cheung Kong's business portfolio has the characteristics of low correlation, complementary return cycle and stable profit. Because this result is only based on a case, its reference significance remains to be investigated.
For diversified enterprises, resource allocation is a very important and difficult decision. Diversified enterprises generally have the problem that business units compete for the resources of the parent company. The parent company must formulate clear resource allocation standards, and under this standard, determine the investment quota and asset scale of each industry.
territorial scope
An important feature of China enterprises in the geographical distribution of business is their preference for coverage, which is a mentality of "competing for the best". In fact, no matter how wide the geographical coverage of the business is, what really makes money is the region where you have established a leading position in the market. An important profit model of western enterprises is the regional leading model, which pursues the market leading position in the region entered, rather than the breadth of the geographical scope covered by the market. Wal-Mart, IKEA and other multinational retail enterprises adhere to this principle.
The distribution of corporate headquarters and management centers is also an important decision. In recent years, more mature enterprises in Jiangsu and Zhejiang have moved their headquarters to Shanghai, Beijing and other central cities, and some multinational companies have also moved their headquarters from Hongkong and other places to the mainland of China, which actually reflects the importance of the regional positioning of their headquarters. The positioning of the company headquarters should comprehensively consider the standardization of the political and legal environment, the availability of talents, the commercial and cultural atmosphere, the difficulty of maintaining customer relations, the closeness of the capital market, the level of informationization, the establishment of corporate image and other factors.
For enterprises with a particularly wide geographical coverage, it is also necessary to set up a series of local management centers to handle local fund settlement, government relations maintenance and other matters.
core technology
The core technology of diversified enterprises refers to the technology that can enjoy and significantly improve the competitiveness of related business units in business units. The decision-making of core technologies must take a dynamic view, such as: What are the existing core technologies? What new core technologies should be developed? What technology trends should be tracked?
In companies with strong correlation and diversification, there is often a core technology that is * * * exclusive, while in companies with low correlation, it is difficult to * * * exclusively enjoy the same core technology. Among Japanese companies, there are many companies with core technologies, such as Honda's engine technology and Sony's electronic product miniaturization technology.
If you have a general understanding of the core technology, you can also take some key skills as the core technology, such as the innovation mechanism and ability of 3M, the marketing and brand planning ability of P&G and so on.
Generally speaking, the performance of diversified enterprises in China is still quite different in core technologies. Haier, as the leader of China's home appliance industry, adopts a diversified development model, which is highly relevant. Although they are ambitious in core technology, it seems that they have not achieved their goal yet. The most talked about is their gold medal service. As a limited and diversified company, it is difficult for China Resources Group to cultivate core technologies that are universally applicable to all business units. However, China Resources Group recognizes the importance of core technology to the company's long-term development, and initially takes the comprehensive resource integration ability of learning team as the core technology.
Second, the road to development
The "field" in the company's strategy has made new plans for business combination, industry positioning, business geographical coverage and core technologies. There is a gap between the current situation and these new plans, and how to narrow these gaps is a problem to be solved on the road of development. The main development paths are listed in the figure.
China enterprises often don't pay enough attention to the development path, and the choice of development mode is very random and speculative, which leads to either missing opportunities or increasing business risks. For example, some enterprises now overuse the M&A development model, which leads to the lag of integration and indigestion. Enterprises not only can't enjoy the benefits brought by scale growth, but also may get into trouble because of unfavorable integration.
In the choice of development path, we should comprehensively consider factors such as cost, income, time and risk, and have long-term plans and certain flexibility.
Third, differentiation.
Differentiation is the customer value orientation, that is, how to win customers and avoid or defeat competitors in different ways, which is the core issue of competitive strategy. The classical value orientation put forward by Michael Porter includes three types: total cost leading, product leading and focusing.
The value orientation in competitive strategy must consider two factors: first, this value must be recognized by customers; Secondly, this value must be different from that provided by competitors. Therefore, the differentiation of competitive strategy is actually to solve the relationship among business units (competitors), competitors and customers. To study the differentiation of enterprise strategy, we also need to find out the competitors, customers and competitors of diversified enterprises.
Enterprise strategy is the strategy of the parent company, and the main body of competition should be the parent company. The parent company consists of the leaders of the parent company, managers of functional departments and service departments and all employees. The parent company is the maker and executor of the company strategy.
Now let's look at the second question. Who are the customers of the parent company? Different from business divisions, there are generally no direct external customers at the parent company level of diversified enterprises, and the customers of the parent company are actually business divisions.
Finally, does the parent company have direct competitors? In the daily operation of the parent company, there are generally no obvious direct competitors, but if we consider a specific scenario, the competitors faced by the parent company will be exposed. For example, let's assume that the parent company wants to acquire a company (strategic business unit) now, and its possible competitors in the acquisition process should include at least the following three categories: other diversified enterprises, investment funds and large specialized enterprises. Of course, institutions can also choose to operate independently, so they should also take the institutions themselves as competitors.
Based on the above analysis, we can define the differentiation of corporate strategy as: in what unique way does the parent company bring value to the division to actively support its development? In order to succeed, diversified enterprises must provide better value to business departments than other competitors, and better value than the value created by business departments operating alone.
Professional support means that the parent company can provide professional technology, professional management or professional services for business units. Business units benefit from these professional support.
For enterprises with strong correlation and diversification, the support for business units is generally professional technology, while the competition for business units by companies with weak correlation is more professional management and professional services.
Synergy means that the parent company realizes the profit or competitive advantage that a single business unit can't achieve by constructing the unique relationship between its own business units. There are several types of collaboration: * * Enjoy technical knowledge; Coordination strategy; * * * Enjoy physical resources; Promote internal transactions (or build a vertically integrated value chain); Concentrate negotiating power; Create new business together.
The aforementioned value orientations are all from the perspective of business units, without directly considering the value of the parent company to the managers of business units. In fact, the managers of business units have great influence on business units. If the parent company can't satisfy the managers of business units, it may greatly dampen the enthusiasm of managers, thus damaging the value of business units. The attraction of the parent company to the manager of the business department is often manifested in greater career development space, clear career planning, strict and efficient corporate governance structure, scientific and attractive incentive system, positive and influential corporate culture and value system.
Fourth, the development track.
The development trajectory includes the following two decisions: setting the overall development speed of the group; The sequence of major strategic actions.
The overall development speed of the group can be measured by the growth of investment scale, asset scale, turnover and profit during the strategic planning period. When setting the overall development speed, we must consider the affordability of resources, such as whether the talent team meets the needs of business growth and whether the capital chain is tight. A more rational approach is to set a series of control indicators on talent, asset structure and cash flow at the same time as setting the growth index. Commonly used indicators include the guarantee rate of key talents, asset-liability ratio, investment guarantee multiple of operating cash flow, etc.
A remarkable feature of the development of enterprises in China in the past 20 years is that many enterprises developed at a rocket-like speed and then disappeared at a faster speed. The reason is that we can't resist the temptation of the market, exceed our own ability in key resources such as talents and capital, and unilaterally emphasize speed, resulting in many bubbles. The early giants collapsed, and now Delong lost the game. The reason is very complicated, but the unrealistic setting of development speed is one of the important reasons for the failure.
The second issue to be decided in the development track is the sequence of major strategic actions, such as: the sequence of industry development; The order of entering different regions; The acquisition schedule of core technologies; Timetable for the formation of differentiated competitive advantage.
The decision of the sequence of major strategic actions is often related to the success or failure of strategic implementation. Taking the order of industry development as an example, it is impossible for any parent company to launch large-scale integration actions in all industries it is engaged in at the same time. One of the reasons is the parent company's integration ability and resource constraints; Secondly, the problem of risk control, the industry integration period often faces the pressure of unsatisfactory returns, and the simultaneous integration of all industries may bring unprecedented profit pressure to the parent company; In addition, any industry has the best opportunity to enter or integrate, and industry integration may be disastrous for some industries. Therefore, the group level must make a general industry development schedule on the basis of comprehensive analysis of its own capabilities, profit guarantee and industry characteristics. Without such a plan, it is very likely that all business units will blindly expand in order to compete for limited resources, regardless of the characteristics of industry development, which will eventually lead to disastrous consequences.
On the issue of development order, there is a principled order, that is, whoever becomes stronger first will become bigger first. This is a difficult question to judge. There are very good reasons to support those who want to be big first. They think that China is now facing the best opportunity of market integration, the withdrawal of state-owned capital in many fields, and many medium-sized private enterprises are facing development funds and management bottlenecks, which provide very favorable conditions for rapid expansion through mergers and acquisitions. The reasons for supporting getting stronger first are also very convincing. They think that the internal ability is not enough, the bigger the job, the greater the risk and the faster the bankruptcy. Being strong before being big is not an either-or choice, but a balance can be found between the two. As far as becoming stronger is concerned, most enterprises in China are indeed the strongest in the world. Obviously, we can't wait until the enterprise reaches the international level to consider becoming bigger, because when you are very strong, there may not be many opportunities in the market.
We believe that in the market where enterprises are located, as long as they are not weaker than local competitors and have certain advantages for the merged enterprises, they can be considered to be relatively strong and have a relatively large foundation. Of course, in the process of becoming bigger, enterprises must strengthen integration, and constantly strengthen their own capabilities through integration, thus forming positive feedback, that is, stronger capabilities-integration-stronger capabilities-greater integration, and enterprises will enter a virtuous circle, which will ensure that they become stronger and bigger. Some enterprises had a good foundation and had the conditions to grow bigger, but in the process of mergers and acquisitions, the integration was not enough. As a result, the enterprises grew bigger, but their profitability declined and they faced great risks.
Verb (abbreviation of verb) value creation logic
The rationality of the existence of the parent company must be that the business unit performs better under the unified ownership of the parent company than when it is an independent entity, and the parent company can create value sufficient to compensate its costs. We call the part where the value created by the parent company exceeds its cost net appreciation.
In the short term, if the net value-added is positive, the existence of the parent company is reasonable. But in the long run, if the net added value is less than the value created by other parent companies, the existence of the parent company is still unreasonable, because the parent company restricts the division from creating greater value. In this case, the parent company is not the best choice for the division, and the division may choose to enter a new parent company with stronger value creation ability. In addition, the net added value of the parent company is less than that of other companies, so the sustainable development ability of the parent company is weaker than that of its competitors, and it is in danger of being eliminated by the market in the long run.
Decision-making and management support is a basic value creation logic. In American enterprises in 1960s, many parent companies increased the value of their business departments by enjoying their general decision-making and management skills. The basis of this value creation method is that the overall management decision-making level of enterprises is generally not high and professional management decision-making talents are in short supply.
At present, China is at such a stage, and many low-related diversified enterprises mainly create value through management promotion. This is a relatively low-level way of value creation. Once the management level of enterprises is generally improved and the professional management talent team is no longer in short supply, it is difficult for this value creation method to play its role.
There has always been a debate about the rationality of the service department at the parent company level. Fundamentally speaking, the rationality of the parent company's service department is that it can give full play to professional experience and reduce costs through * * * services. If the parent company has the key skills for the success of the industry, it can create great value for the business department by exporting these skills.
The success of Royal Dutch Shell Group Company benefits from the excellent work of its headquarters service (function) department. These departments include finance department, legal department, human resources department, technology planning department (such as exploration and production department), manufacturing department and research department. Their task is to track professional technical knowledge and spread it to the functional departments at all levels of the group, promote the overall management promotion and technical progress of the whole group, and create value for business units.
Constructing the internal collaboration model of business units has always been a hot research topic, and collaboration is highly respected by theoretical circles. Some management authorities even regard collaboration as the only reason for the existence of diversified enterprises. But unfortunately, the enthusiasm for cooperation in the industry often ends in failure. The failure of coordination does not mean that coordination is infeasible, but proves the difficulty of implementing coordination. The difficulty of cooperation actually comes from the management mode of strategic business department widely adopted by diversified enterprises. Strictly speaking, it is precisely because of the emergence of the management mode of strategic division that diversified enterprises have achieved glory. However, the management mode of strategic division itself has delineated boundaries and interests within enterprises, which has caused great difficulties for borderless cooperation. Once enterprises have a way to break through these boundaries, collaboration will be easier and great value will be created.
Unilever's success benefits from its collaboration in four key areas within the group: first, functional areas such as research and marketing; Second, the supply relationship between the business units producing chemical products and other business units; Third, the diversified management of underdeveloped countries; The fourth is the development and enjoyment of management talents.
In an emerging market like China, capital, talents and other key resources are often in short supply. By providing financial support, the parent company builds a unified talent market within the group and creates great value for business units.
Western countries have entered the advanced stage of the information society-the era of knowledge economy. In the era of knowledge economy, intangible assets have replaced tangible assets as the main body of value creation. Therefore, the acquisition, processing and enjoyment of knowledge has become the most important competitiveness of enterprises. Diversified enterprises have unique advantages in the breadth of knowledge acquisition, the height of knowledge processing and the width of knowledge enjoyment, thus creating unique value for business units.
China's economy as a whole is still in the stage of industrial civilization, but economic globalization has made the forefront of China's economy touch the edge of knowledge economy. The work of diversified enterprises in knowledge management and inciting internal best experience sharing should be put on the agenda.