Cross-Business Synergies (eBook)

Dr. Sebastian Knoll ist wissenschaftlicher Mitarbeiter von Prof. Dr. Günter Müller-Stewens und Projektleiter am Institut für Betriebswirtschaft der Universität St. Gallen.

Foreword 6
Acknowledgements 8
Table of Contents (overview) 10
Table of Contents (detailed) 11
List of Figures 17
List of Abbreviations 21
Abstract 23
Introduction 24
Research objectives and guiding questions 24
Key results and contribution 29
Outline of dissertation 33
PART I: INTRODUCING AND CLASSIFYING CROSSBUSINESS SYNERGIES 36
Concept and Characteristics of Cross-business Synergies 37
The concept of synergy 37
Definition of cross-business synergies 38
The impact of cross-business synergies on corporate advantage 41
The existence of cross-business synergies 45
Summary and discussion 46
Types of Cross-business Synergies 47
Operative synergies 49
Market power synergies 57
Financial synergies 61
Corporate management synergies 70
Summary and Discussion of Part I 123
Summary 123
Implications for theory and managerial practice 126
PART II: REALIZING GROWTH SYNERGIES 130
Literature Review: Operative Synergies 132
Corporate Strategy Research 133
Corporate Design Research 139
Corporate Process Research 149
Summary and Discussion 155
Empirical Approach 159
Methodology and Research Approach 159
Research Design 165
Quality of research: Validity and reliability 178
Summary and Discussion 182
Exploratory Work: Strategies for Growth Synergies 183
Joint market penetration 184
Joint offering development 190
Joint market development 195
Joint diversification 197
Corporate Growth Path: Timing of growth synergy strategies 199
Summary and Discussion 201
Case Study: The continuous realization of growth synergies 203
Company Background 203
‘One ElectroCorp’ – Alignment for Growth Synergies 208
Strategic Concept for the continuous realization of growth synergies 213
Corporate Design for the continuous realization of growth synergies 225
Summary 253
Results: Key success factors for the continuous realization of growth synergies 254
Strategic Concept: Selective focus 255
Organization Design: Decentralized Collaboration 278
Corporate Management: Guided and balanced self-interest 307
Summary and Discussion of Part II 322
Key findings 322
Implications for theory 331
Implications for managerial practice 349
Limitations 353
Directions for future research 354
PART III: CONCLUSION 357
Appendices 359
References 379

3 Types of Cross-business Synergies (p. 24-25)

In the previous chapter, we provided a definition of cross-business synergies and identified conditions under which cross-business synergies contribute to corporate advantage. The purpose and contribution of this chapter is to derive various sources of crossbusiness synergies from the literature and categorize them into specific synergy types. This chapter seeks to answer our first research question and aims to generate further insights into the nature of the corporate effect. Furthermore, this chapter establishes a dedicated research perspective on cross-business synergies, which sets the stage for our in-depth investigation of growth synergies in the second part of this study.

Several streams of literature ranging from industrial economics to financial theory and strategic management refer to the concept of cross-business synergy. However, theoretically grounded typologies of cross-business synergies are largely absent from the literature. Most typologies are arbitrary. For instance, Ansoff (1965) differentiates sales synergy, operating synergy, investment synergy, and managerial synergy as types of cross-business synergies without providing proper definitions, classification criteria, or theoretical grounding.

Similarly, in a more recent typology, Goold and Campbell (2000) classify synergies randomly without a clear underlying logic into shared knowhow, shared tangible resources, pooled negotiation power, coordinated strategies, vertical integration, and combined new business generation.14 By providing a typology that clearly delineates different sources of cross-business synergies based on the latest research, we aim to address this shortcoming.

Our synergy typology is grounded in a resource-based perspective of the firm. Following Barney (1991), we employ a broad notion of resources, which we define as "(…) all assets, capabilities, organizational processes, firm attributes, information, knowledge, etc., controlled by a firm that enable the firm to conceive of and implement strategies that improve its efficiency and effectiveness" (Barney, 1991:101).

We posit that leveraging resources across businesses creates cross-business synergy and delineate different types of cross-business synergies based on four classes of resources (see exhibit 3-1 on the next page): operative resources, market power resources, financial resources and corporate management resources. Operative resources refer to the tangible and intangible business-level resources necessary for ongoing operations.

Market power resources entail all sources of the firm to reduce competition and increase prices. Financial resources include the firm’s risk capacity and all means of financing. Finally, corporate management resources refer to managerial capabilities at the corporate level. Based on these resources, we conceptualize four types of cross-business synergies: Operative synergies focus on advantages of MBFs from leveraging operative resources across their related businesses that increase efficiency and profitable growth.

Market power synergies center on advantages of MBFs from conglomerate power that reduce business-level competition. Financial synergies concentrate on financial advantages of MBFs that reduce capital costs and increase the firm’s financial flexibility. In addition to these three types, which we derive directly from the literature, we propose a fourth type of cross-business synergies, corporate management synergies. Corporate management synergies focus on advantages of MBFs from leveraging corporate management resources that improve the profitability of the individual businesses of the firm.