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“A ” Company, the new parent company of “B” Company, is a large multinational conglomerate. It is an extremely financially well-run company, with an emphasis on short-term, quarterly results. In fact, it is Walden’s key value proposition to its stockholders that each quarter’s sales and pretax profits will be greater than the prior year’s corresponding quarter. A Company has a 35-year record of consecutive quarterly increases and absolutely every other corporate objective is subordinate to extending this streak indefinitely. A Company works very quickly re-engineering and consolidating the common functions of its acquisitions into its own administrative services. These functions include accounting, legal, engineering, and customer service. The savings that are realized through the elimination of these common services are usually passed on to the bottom line. Sometimes, if a good case can be made, those funds are reinvested in the new subsidiary.
One of the biggest obstacles to the implementation of a successful business strategy is the clash of value systems between a parent and subsidiary. These differences often manifest themselves in conflicts between the various levels of strategy: corporate, business, functional, and operating.
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Check My Assignment!“A” Company is the new parent company of “B” Company. Below are a number of the sticking points between B Company and A Company. Discuss the steps you would take to address the issues.
? How would you reconcile B Company’s need for building market share (long-term strategic business objective) with A company’s drive for year-to year quarterly increases in sales and pretax profit (short-term, corporate objective)?
? A Company’s success metrics of head count control, inventory management, inventory turnover, and days sales outstanding can be inhibitors to growth vitally needed by B Company. What would you do to moderate these functional objectives and make them work for B Company?
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https://brainmass.com/business/business-management/parenting-business-strategy-57429
Solution Preview
This issue deals with parenting business strategy,
New Parent company must add more value to the company in order to maximize the stake holder’s wealth. The parent can therefore only justify itself if its influence leads to better performance by the businesses than they would otherwise achieve as independent, stand-alone entities. It must either carry out functions that the businesses would be unable to perform as cost-effectively for themselves or it must influence the businesses to make better decisions than they would have made on their own. In other words, the parent must add more value than cost to the businesses in the portfolio. The logic of the need to add value is now becoming …
