The Parenting Advantage model is a framework that describes how a parent
company can (help) create value. In their article, "From Corporate Strategy
to Parenting Advantage", Michael Goold and Andrew Campbell argue that the
parent company should not only add value to a business unit, but add more value than any other potential parent - they call this: "Parenting
Advantage". In their book: "Corporate-Level Strategy: Creating Value in
the Multibusiness Company", they mention four types of parental value creation:
Four types of parental value creation
Stand-alone influence. Each subsidiary is viewed as a separate
profit center. Using basic performance targets, the businesses are controlled
and monitored. Value creation is provided by making strategic decisions
such as the appointment of managers and approving major capital expenditures.
Linkage influence. Value is created by improved co-operation and
synergy benefits.
Central functions and services. Corporate value is created through
the provision of administrative and managerial services to the businesses.
Corporate development. Value creation through portfolio management.
Some authors have claimed the role of the corporate center should be minimal.
Hedley: The overarching role of the corporate level is that of portfolio manager:
to manage the allocation of scarce financial resources amongst the business
units. Others, such as Hamel & Prahalad,
have emphasized the importance of synergy: The corporate center should not
be just another layer of accounting, but must add value by enunciating the
strategic architecture.
Which type of influence is best to maximize value creation? The answer
is complex and can be determined upon a number of factors. These factors include,
but are not limited to: corporate purpose, history and culture. Furthermore
the answer depends upon the reconciliation of multiple paradoxes of parenting
advantage: Control versus Empowerment, Responsiveness versus Synergy, Portfolio
versus Core Competence.
Book: Michael Goold
and Andrew Campbell - Corporate-Level Strategy
Forum discussions about the Parenting Advantage. Below you can ask a question about this topic, share your experiences, report a new development, or explain something.
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Create or Destroy Values?
In Campbell, A. 2003. The Role of the Parent Company. The Oxford Handbook of Strategy:
Campbell presents stand-alone influence, linkage influence, central functions and services, and corporate develo...
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Managing from a far, that in a nutshell is what is required from MNCs. However, even with regional mangers and country managers, I believe the top management should seek to make random visits to their...
Parenting Value versus Diversification by Shareholders
Any parenting value add must be considered in the context that business units will have additional costs and ultimately shareholders are in most instances able to diversify on their own....
Relationship Parent and SBU's
The choice of parental value creation also determines what the relationship between the corporate centre and the SBU's will be like....
Parenting Best Practices, Corporate Strategy, Corporate Governance In their article “Corporate Strategy: The quest for parenting advantage”, Goold and Campbell suggest following ten place...
Things to Signal and Avoid when Diversifying Diversification of businesses has in many cases resulted in success. An example is General Electric, a very large compan...
Corporate Strategy, Parenting, Corporate Governance Please note that the 4 mentioned influences of a parent over its subsidiaries can all result in both a Creation of value...
Sizing the Corporate Center In the HBR of April 2005 on the added value of corporate headquarters, Michael Goold and David Young have investigated w...
Inside-out Corporate Strategy, Corporate Visioning According to Professor Todd Zenger, companies should focus less on competitive advantage (this isn't what really interes...
Corporate Strategy, Business Unit Strategy, Corporate Governance How can a Parent Company impact strategic decisions of its daughter companies? Some typical issues have been identified ...
Corporate Geographic Strategy, Corporate Governance A somewhat related issue is in what country the Corporate Center should be based.
In an article called: "The Rise of C...
Corporate Strategy, Parenting, Corporate Governance In HBR article named "Corporate strategy: the Quest for Parenting Advantage" (1995) Campbell and Goold extend their Corp...
Information Sources
Various sources of information regarding the Parenting Advantage. Here you will find powerpoints, videos, news, etc. to use in your own lectures and workshops.
Diversification, Corporate Strategy, Portfolio Management, Corporate Center Presentation about diversification including many graphs and figures for clarification. The presentation includes the fo...
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