Portfolio Assessment

In this section, you will bring together insights from the previous sections and your prior analysis of the company’s industries and business strategies. Begin by reviewing your company’s portfolio: identify the relevant geographies and business units, and describe how your company’s corporate structure connects them. Then, develop a comprehensive explanation of the impact on customer willingness-to-pay and supplier opportunity cost. In essence, start by articulating a theory of portfolio-based value creation, where the portfolio includes multiple geographic or product markets. Finally, evaluate this theory of value creation using the three tests outlined in the “Corporate Strategy” reading.

Applying the Corporate Strategy Tests

As outlined in the “Corporate Strategy” reading, a successful corporate strategy enables a firm to improve the average competitiveness of its individual business units and create value that exceeds the sum of its parts. To analyze this in your chosen company, we will apply the following three critical tests:

  • The Better-Off Test: Are There Synergies? This test examines whether the company’s different business units create more value together than they would as independent entities. Consider the potential synergies arising from:
    • Increased Willingness-to-Pay (WTP): Does the combination of businesses allow the company to offer products or services that customers value more highly (e.g., through bundling, enhanced quality, or broader solutions)?
    • Reduced Supplier Opportunity Cost (SOC): Does the corporate portfolio enable the company to lower its costs (e.g., through shared resources, economies of scale or scope, or increased bargaining power with suppliers)?
    • Use NotebookLM to identify evidence of such synergies from your research. Look for examples of how different business units collaborate, share resources, or leverage each other’s strengths.
  • The Ownership Test: Why Is the Company the Best Owner? This test explores whether the company’s ownership of its various business units is the best way to realize the potential synergies identified in the better-off test. Consider whether:
    • Alternative Arrangements are Less Effective: Would these synergies be difficult or impossible to achieve through other means, such as strategic alliances, joint ventures, or long-term contracts?
    • Ownership Provides Unique Advantages: Does ownership offer benefits like greater control, better integration of activities, or the ability to protect proprietary knowledge more effectively?
    • Refer to your “Corporate Strategy” reading for a discussion on the trade-offs between ownership and other forms of exchange. Use NotebookLM to gather information supporting the rationale for your company’s ownership decisions.
  • The Organizational Test: Can the Company Manage the Portfolio Effectively? This test assesses whether the company has the appropriate organizational structure, management systems, and processes in place to effectively manage its diverse portfolio of businesses and capture the potential synergies. Consider:
    • Coordination and Control Mechanisms: How does the company coordinate activities and exercise control across its different business units? (Refer back to your Organizational Structure Analysis).
    • Resource Allocation: Does the company have effective processes for allocating capital and talent across its portfolio to maximize overall value?
    • Organizational Culture: Does the company culture support collaboration and knowledge sharing across business units?
    • Use NotebookLM to link your findings from the Organizational Structure Analysis to this test, evaluating the alignment between the company’s structure and its portfolio strategy.

Impact on Competitive Advantage (Revisited)

Building upon your previous analysis of competitive advantage, revisit the key willingness-to-pay (WTP) and supplier opportunity cost (SOC) drivers you identified for your company’s strategic business units (SBUs). Now, analyze the net effect of the company’s corporate portfolio, as understood through the lens of the better-off, ownership, and organizational tests, on these WTP and SOC drivers.

  • Does the corporate portfolio strengthen the company’s ability to increase WTP for its products or services? If so, how?
  • Does the corporate portfolio contribute to lowering the company’s SOC? If so, through what mechanisms?
  • Use NotebookLM to synthesize your findings from the application of the three tests and connect them directly to the WTP and SOC drivers you previously identified. Provide specific examples and evidence from your research to support your analysis.