38 Tyre Asia April/May 2018
MANAGEMENT
World-renowned for his expertise on global strategy,
emerging markets (including India and South Asia),
the energy sector, corporate governance, mergers
and acquisitions, Dr Kannan Ramaswamy is the
William D. Hacker Chair of Management Strategy at
Thunderbird School of Global Management at Arizona
State University. In a recent study on Indian business
groups responding to the pro-market reforms that
the government had initiated, he explored their
diversification choices at the group level and the
consequences of these choices as they adjust to the
rising competition unleashed by market reforms. His
research found that corporates that focused their
portfolios in the early stages of institutional reforms
tended to perform worse than their counterparts that
did not do so. However, as market reforms became more
established, business groups that made the transition
from an unfocused to a more focused portfolio
experienced superior performances. Changing strategy
by refocusing business portfolio too early or waiting too
long to refocus can hurt performance outcomes. In this
interview to Tyre Asia, he explains his views on how
CEOs should draw up strategies when the company is
compelled under market pressure to diversifyTA News Bureau
Challenge of
diversification
to be quite rare,” he says. “Although relatively more
common in countries like India, contextual factors such
as poor infrastructure or weak institutions do not drive
firms to diversify as much as they used to in the past.
Thus, diversification is more of a deliberate choice in
contemporary times.”
However, when a CEO is confronted with a diversified
portfolio, taming the negative effects of such moves requires
three key actions. First, the CEO ought to consider the true
areas of overlaps across the diversified portfolio. Often,
these overlaps are not necessarily limited to the product/
market sphere alone.
Some businesses might benefit from using the same or
similar technologies, same or similar business strategies that
can be used to position the offerings in the marketplace.
“Careful consideration of the overlaps is the first step
towards harvesting the real synergies in the portfolio,” he
says.Second, the CEO should emphasize the intangible elements
of competitive advantage ranging from the benefits of
using a common brand, leveraging corporate reputation
to help all business under the corporate umbrella, or the
pros associated with common systems and practices as it
relates to areas such as talent development. These common
elements then become the foundations that can help realize
intangible synergies across the diversified portfolio.
Third, the CEO should be quite ruthless in using the
right set of performance metrics to ensure that cross-G
lobal firms seek the advice of Dr Kannan
Ramaswamy, the William D. Hacker Chair of
Management Strategy at Thunderbird School of
Global Management at Arizona State University,
when they rework strategies and compelled to go for
diversification under market pressure. He works with senior
management levels to help firms design and implement
global strategy. He is sought by organisations to work with
them at the intersection of strategy and leadership. He
provides counsel to management teams and executive
committees. He has developed a range of tools and
techniques anchored in robust research with an eye on
relevance.In this interview to Tyre Asia, he explains how CEOs
should handle situations arising out of diversification that
is forced on companies under market pressure. “Value
enhancing diversification in the true sense is gettingDr. Kannan Ramaswamy