Sesi 4 Strategi Diversifikasi JB11; CM4; Artikel#2 & Artikel#3

BJ11:Diversification Strategies

Levels and Types of Diversification SOURCE: Adapted from R. P. Rumelt, 1974, Strategy, Structure and Economic Performance, Boston: Harvard Business School.

Diversifying to Enhance Competitiveness Related Diversification Economies of scope Sharing activities Transferring core competencies Market power Vertical integration Unrelated Diversification Financial economies Efficient internal capital allocation Business restructuring

Reasons for Diversification Incentives and Resources with Neutral Effects on Strategic Competitiveness: Antitrust regulation Tax laws Low performance Uncertain future cash flows Risk reduction for firm Tangible resources Intangible resources

Reasons for Diversification (cont’d) Managerial Motives (Value Reduction) Diversifying managerial employment risk Increasing managerial compensation

Strategic Motives for Diversification To Enhance Strategic Competitiveness: • Economies of scope (related diversification) Sharing activities Transferring core competencies • Market power (related diversification) Blocking competitors through multipoint competition Vertical integration • Financial economies (unrelated diversification) Efficient internal capital allocation Business restructuring

Sharing Resources at Procter & Gamble Figure 10.3 Copyright © Houghton Mifflin Company. All rights reserved.

Transfer of Competencies at Philip Morris Figure 10.2 Copyright © Houghton Mifflin Company. All rights reserved.

Incentives and Resources for Diversification Incentives and Resources with Neutral Effects on Strategic Competitiveness • Antitrust regulation • Tax laws • Low performance • Uncertain future cash flows • Risk reduction for firm • Tangible resources • Intangible resources

Managerial Motives for Diversification Managerial Motives (Value Reduction) • Diversifying managerial employment risk • Increasing managerial compensation

Value-creating Strategies of Diversification: Operational and Corporate Relatedness

Related Diversification Firm creates value by building upon or extending its: Resources Capabilities Core competencies Economies of scope Cost savings that occur when a firm transfers capabilities and competencies developed in one of its businesses to another of its businesses

Related Diversification: Economies of Scope Value is created from economies of scope through: Operational relatedness in sharing activities Corporate relatedness in transferring skills or corporate core competencies among units The difference between sharing activities and transferring competencies is based on how the resources are jointly used to create economies of scope

Sharing Activities Operational Relatedness Created by sharing either a primary activity such as inventory delivery systems, or a support activity such as purchasing Activity sharing requires sharing strategic control over business units Activity sharing may create risk because business-unit ties create links between outcomes

Transferring Corporate Competencies Corporate Relatedness Using complex sets of resources and capabilities to link different businesses through managerial and technological knowledge, experience, and expertise

Corporate Relatedness Creates value in two ways: Eliminates resource duplication in the need to allocate resources for a second unit to develop a competence that already exists in another unit Provides intangible resources (resource intangibility) that are difficult for competitors to understand and imitate A transferred intangible resource gives the unit receiving it an immediate competitive advantage over its rivals

Related Diversification: Market Power Market power exists when a firm can: Sell its products above the existing competitive level and/or Reduce the costs of its primary and support activities below the competitive level

Related Diversification: Market Power Multipoint Competition Two or more diversified firms simultaneously compete in the same product areas or geographic markets Vertical Integration Backward integration—a firm produces its own inputs Forward integration—a firm operates its own distribution system for delivering its outputs

Related Diversification: Complexity Simultaneous Operational Relatedness and Corporate Relatedness Involves managing two sources of knowledge simultaneously: Operational forms of economies of scope Corporate forms of economies of scope Many such efforts often fail because of implementation difficulties

Unrelated Diversification Financial Economies Are cost savings realized through improved allocations of financial resources Based on investments inside or outside the firm Create value through two types of financial economies: Efficient internal capital allocations Purchasing other corporations and restructuring their assets

Unrelated Diversification (cont’d) Efficient Internal Capital Market Allocation Corporate office distributes capital to business divisions to create value for overall company Corporate office gains access to information about those businesses’ actual and prospective performance Conglomerates have a fairly short life cycle because financial economies are more easily duplicated by competitors than are gains from operational and corporate relatedness

Unrelated Diversification: Restructuring Restructuring creates financial economies A firm creates value by buying and selling other firms’ assets in the external market Resource allocation decisions may become complex, so success often requires: Focus on mature, low-technology businesses Focus on businesses not reliant on a client orientation

External Incentives to Diversify Anti-trust Legislation Antitrust laws in 1960s and 1970s discouraged mergers that created increased market power (vertical or horizontal integration Mergers in the 1960s and 1970s thus tended to be unrelated Relaxation of antitrust enforcement results in more and larger horizontal mergers Early 2000 antitrust concerns seem to be emerging and mergers now more closely scrutinized

External Incentives to Diversify (cont’d) Anti-trust Legislation High tax rates on dividends cause a corporate shift from dividends to buying and building companies in high-performance industries 1986 Tax Reform Act Reduced individual ordinary income tax rate from 50 to 28 percent Treated capital gains as ordinary income Thus created incentive for shareholders to prefer dividends to acquisition investments Tax Laws

Internal Incentives to Diversify Low Performance High performance eliminates the need for greater diversification Low performance acts as incentive for diversification Firms plagued by poor performance often take higher risks (diversification is risky)

The Curvilinear Relationship between Diversification and Performance

Internal Incentives to Diversify (cont’d) Low Performance Diversification may be defensive strategy if: Product line matures Product line is threatened. Firm is small and is in mature or maturing industry Uncertain Future Cash Flows

Internal Incentives to Diversify Low Performance Synergy exists when the value created by businesses working together exceeds the value created by them working independently … but synergy creates joint interdependence between business units A firm may become risk averse and constrain its level of activity sharing A firm may reduce level of technological change by operating in more certain environments Uncertain Future Cash Flows Synergy and Risk Reduction

Resources and Diversification A firm must have both: Incentives to diversify Resources required to create value through diversification Cash Tangible resources (e.g., plant and equipment) Value creation is determined more by appropriate use of resources than by incentives to diversify

Managerial Motives to Diversify Managerial risk reduction Desire for increased compensation

Summary Model of the Relationship between Firm Performance and Diversification SOURCE: R. E. Hoskisson & M. A. Hitt, 1990, Antecedents and performance outcomes of diversification: A review and critique of theoretical perspectives, Journal of Management, 16: 498.

CM4: Diversified Expansion Trend: kembali ke bisnis inti (downscoping) Bisnis inti Bisnis terkait Bisnis semakin tidak terkait

Alternative for growth and diversification Produk dan pasar sekarang Ekspansi geografis (domestik, internasional) Penetrasi pasar Pengembangan produk, pasar, dan cakupan geografis Produk sekarang ke pasar yang baru Perluasan penggunaan dan aplikasi Ekspansi ke bisnis sekarang Produk baru ke pasar sekarang Perluasan lini poduk Ke depan (forward): mendekat ke pelanggan Integrasi vertikal (Perluasan rantai nilai) Ke belakang (backward): mendekat ke pemasok Strategi Pertumbuhan Alternatif Teknologi produk Teknologi proses Pengadaan Terkait (Strategi Horizontal) Bahan mentah dasar Proses bahan pabrikan Komponen pabrikan Produk rakitan Diversifikasi ke bisnis baru Pengujian, distribusi Pemasaran dan penjualan Pengeceran dan layanan Tidak terkait (Konglomerasi)

Mengapa Melakukan Diversifikasi? Dorongan berkembang karena: Pertumbuhan External Kesempatan yg aktraktif maupun ancaman yang serius (offensif dan defensif) Pertumbuhan Internal Memanfaatkan dan mengekspoitasi secara penuh sumberdaya utama maupun pengembangan keahlian yg tidak sesuai lagi (offensif dan defensif)

Mengapa Melakukan Diversifikasi? Excess capacity Sumberdaya Berkembang baik dlm hal nilai dan kapasitas karena dipakai dengan baik Brand names Sumberdaya baru terbangun dengan dijalankannya proses operasi Perusahaan auditor sekaligus ahli sistem informasi Immobile SD yang idiosyncratic atau melekat pada perusahaan Leveraging SD kedalam bisnis baru Obstacle Dengan adanya hambatan eksternal ini justru mendorong perush untuk berekspansi

Vision (as guiding growth) Trade off Terlalu dini mengikatkan diri pada visi bisa mempersempit kesempatan perusahaan untuk berkembang dan belajar Membiarkan diri tidak mengikuti visi bisa menyebabkan keengganan untuk berkomitmen secara penuh pada bisnis

Memadukan SD dan Bisnis Lihat slide diversified expansion Mencari fit antara SD dan product markets (see BIC) SD yang berkontribusi dalam keunggulan kompetitif product markets Hati-hati dgn 2 systematic calculations Overestimate the transferability of specific resources Overestimate the value of very general resources in creating CA in a new market Untuk lolos sbg dasar diversified expansion, SD harus lolos test: Competitively superior Key success factors Competitive parity on the resource it does not posses Replicated in new business seetings

A Sequence of Steps Firms tend to diversify into industries that share similar resource characteristics and KSFs. Similarities in R&D intensity, distribution dan marketing channel are significant predictors To grow further, firms can balance the exploitation of existing resources with the development of new ones.

Resource as a Springboard The resources of a firm are at the heart of diversified expansion Be careful of the degree of specificity of resources Highly specific resources Yield high returns in initial settings, but Often lose value rapidly as they are applied in more distant market Less specific resources Transfer considerably further, but Usually generate lower returns because they are less critical to CA

Diversification and Firm Performance Extent of diversification

Faktor-faktor yang perlu di perhatikan Pengukuran ‘diversifikasi’ Pengukuran ‘performance’ across industries Moderating variables yang ada (e.g., the quality and quantity of resources) Business Opportunity set Resources & Capabilities Corporate Strategy Firm Profitability

Constrained dan Linked Diversification Constrained diversifiers, those that had grown by building on central strength or resource, consistently outperformed all other type of diversifications Stick to knitting not always true!

Mode of Expansion Mergers and Acquisitions Internal Development Speed, access to complementary assets, removal of potential competitor, upgrade corporate resources Cost of acquisition, unnecessary adjunct businesses, organizational clashes may impede integration, large commitment Internal Development Incremental, compatible with culture, encourages intrapreneurship, internal investment Slow, need to build new resources, adds to industry capacity; subscale entry, unsuccessful efforts are difficult to recoup Alliances Access to complementary assets, speed Lack of control, assisting potential competitor, questionable long-term viability, difficult to integrate learning

Artikle #2 Mengapa Mendiversifikasi Bisnis? Perhatikan Evolusi Pemikiran Strategi Korporat dan Diversifikasi pada slide berikut.

Alasan dibalik Evolusi Ide dan keyakinan bahwa manajer profesional memilikim skills yang bisa diterapkan untuk mengelola bisnis yang berbeda-beda. Atas dasar asumsi bisnis yang berbeda memerlukan managerial skills yang mirip. Selama tahun 1960-an, tumbuhnya konglomerasi dengan berbagai macam akuisisi bisnis yang unrelated ‘membenarkan’ keyakinan di atas. Lebih dari 20 tahun, keyakinan akan kemampuan managerial skills ditunjukkan dengan pertumbuhan korporasi dan diversifikasi.

Alasan dibalik Evolusi Namun belakangan beberapa korporasi mengalami penurunan kinerja Lalu, muncul pemikiran yang mendefinisikan strategi lebih dari long-range planning (atau objective setting), tetapi juga penentuan arah perusahaan dan persiapan untuk meraihnya. Portfolio planning membantu manajer menciptakan rerangka yang dapat membandingkan beberapa bisnis yang berbeda-beda yang ada dalam korporasi.

Alasan dibalik Evolusi Muncul banyak matriks GE industry attractiveness/business position BCG growth/share Kenyataannya tidak mudah mengelola balanced portfolios. Memang beberapa bisnis yg ada memenuhi kriteria ekonomi Tetapi, bisnis2 tersebut tidak dengan mudah fit dengan corporate family.

Alasan dibalik Evolusi Jadi, kesimpulan yang diambil adalah selama ini diversifikasi sudah ‘kebablasan’, terbukti dengan banyaknya masalah pada korporasi-korporasi tersebut. Solusi? Konsep kesuksesan korporasi berbasis core business (atau stick to knitting). Lihat buku In search of excellence Korporasi yang sukses tidak diversifikasi seluas-luasnya Fokus memperbaiki knowledge and skills pada area yang secara terbaik mereka kuasai

Alasan dibalik Evolusi Gelombang selanjutnya adalah upaya corporate restructuring. Back to core business Tugas manager adalah mengidentifikasi bisnis yang seharusnya ada dalam core portfolio dan mencari cara bagaimana bisnis2 tersebut menambah nilai.

Alasan dibalik Evolusi Ringkasnya: Diversifikasi harus dibatasi (bisnis yang menciptakan sinergi saja) Korporat harus berfokus mengeksploitasi core competence pada berbagai bisnis Kesuksesan diversifikasi tergantung pada pembangunan portfolio bisnis yang fit dengan managerial logic manajerial eksekutif puncak dan gaya manajemennya.

Alasan dibalik Evolusi Sinergi, salah satunya muncul karena exploitasi unique skills dan capabilities (atau dengan kata lain melalui pembangunan core competence). Managerial logic didefinisikan sebagai cara manajer mengkonsepkan bisnis dan membuat keputusan kritikal dalam mengalokasi sumberdaya.

Artikel#3: To Diversify or Not To Diversify Rewards dan risks yang luar biasa besar There is little conventional wisdom to guide managers Reduce the gamble by answering these 6 questions

Question#1 Apa yang membuat perush lebih baik dibanding pesaing di pasar sekarang? Identifikasi kekuatan kompetitif yg unik dan kokoh sebelum diaplikasikan di lain tempat (strategic assets) Identifikasi strategic assets berbasis pendekatan market-driven

Question#2 Strategic assets apa yg diperlukan untuk sukses di pasar yg baru? Asumsi yg salah (memiliki beberapa SA saja). Yg diperlukan adalah memiliki semua SA. Upaya Coca-Cola mengakuisis bisnis anggur 90% SA dikuasai (knowledge of consumers, distribution, marketing & branding), tetapi 10% SA tak dikuasai (the ability to make quality wine) BP dan Exxon gagal di mineral business yg mensyaratkan low-cost extraction capabilities dan access to deposits.

Question#3 Dapatkah kita mengejar atau melampau pesaing melalui area permainan mereka? Jika kita tdk memiliki 1 atau beberapa faktor kritis untuk sukses di pasar yg baru, dapatkah kita membelinya, mengembangkannya, atau membuatnya tidak penting dgn merubah aturan kompetitif industri? Dapatkah kita dapatkan dgn biaya yg masuk akal? The Walt Disney ekspansi ke theme parks, live entertainment, cruise lines, resorts, TV broadcasting dan retailing dgn cara membeli dan membangin SA seiring waktu. Canon menggunakan cara yg berbeda dalam bisnis fotocopy (dealer management, small and midsize businesses as target market, focusing on price and quality and not speed)

Question#4 Apakah diversifikasi akan menceraiberaikan SA yg harus dijaga keutuhannya? Apakah SA yg akan di ekspor ke pasar yg baru memang transportable? Apakah unbundling competencies tidak berisiko? Lingkungan yang kondusif harus diciptakan jika SA harus di pisahkan, di kombinasi kembali dan di relokasi lagi. SMH masuk ke Swatch

Question#5 Akankah kita sebagai pemain saja atau pemenang dalam pasar yg baru? Untuk mencapai keunggulan yg sustainable, perush harus menciptakan sesuatu yg unik Market leadership tercapai jika: SA yg dimiliki jarang (rare) SA yg dimiliki susah untuk diimitasi SA yg dimiliki susah untuk disubstitusi

Question#6 Apakah perush belajar dr diversifikasi dan apakah perush cukup terorganisasi mempelajarinya? Forward-thinking managers Memfasilitasi upaya masuk ke pasar baru yang ke-3 dan seterusnya dengan lebih cepat dan lebih murah

Sony’s Web of Corporate-Level Strategy Figure 10.6 Copyright © Houghton Mifflin Company. All rights reserved.