In plain English
Growth comes from selling more of what you have, selling it to new people, selling new things, or buying someone who already does.
The advanced view
Corporate strategy asks what makes the portfolio worth more than the sum of its parts: shared resources, transferable capabilities, or internal capital allocation. Ansoff frames product/market direction, BCG frames cash flow across the portfolio, and the build–buy–partner choice is a make-or-buy decision under uncertainty and speed constraints.
Porter's generic strategies — cost leadership, differentiation and focus — force a choice: being stuck in the middle means competing on price without the cost base to survive it. The Ansoff matrix maps growth along existing versus new products and existing versus new markets: market penetration, product development, market development, diversification, in ascending order of risk.
The BCG matrix classifies business units by market growth and relative share — stars, cash cows, question marks, dogs — and treats the portfolio as a cash-allocation problem. Blue Ocean Strategy argues the most profitable move is to create uncontested market space by changing what the industry competes on, rather than out-executing rivals on the same dimensions.
Frameworks
Generic strategies
Cost leadership, differentiation, focus. Pick one; stuck in the middle earns the worst of both.
Ansoff matrix
Penetration, product development, market development, diversification — growth options ranked by risk.
BCG matrix
Growth versus relative share. Cash cows fund stars; question marks need a decision; dogs need an exit.
Blue Ocean
Eliminate–reduce–raise–create: shift the value curve instead of fighting on the incumbent dimensions.
Why it works
The parenting-advantage test works because a diversified group must beat the alternative of shareholders diversifying themselves — which they can do for free. So a corporate move creates value only when the parent adds something the market cannot: synergy in cost, revenue or capital, net of integration cost and conglomerate discount.
Common pitfalls
- ×Counting revenue synergies at full value — they are slower and less certain than cost synergies.
- ×Ignoring integration cost and management attention, usually 1–2 years of the synergy.
- ×Treating adjacency as capability: adjacent markets often need different routes to market.
How it is used — is the acquisition worth the premium?
Step 1 of 4
- 1Target standalone value 800m, price 1,000m → premium 200m.
Deeper
Deeper: build, buy or partner, decided on numbers
The three routes differ in cost, speed and risk. Build is cheapest per unit of capability but slowest and carries execution risk. Buy is fastest but you pay a control premium and inherit integration risk. Partner is capital-light but gives away part of the economics and the customer relationship.
Decide it as an NPV comparison at the same risk-adjusted rate, then stress the assumption that differs most between routes — usually time to market. A two-year delay on a 100-a-year profit stream at 10% costs roughly 170 of present value; that is often larger than the acquisition premium.
Must know cold
- ✓Ansoff: existing/new product × existing/new market — four different risk levels.
- ✓Accretion/dilution is not value creation; NPV of synergies net of premium is.
- ✓Synergies: cost synergies are credible, revenue synergies rarely are.
- ✓Always price the option to wait when the market is uncertain.
Exercises
Try each one on paper before revealing the worked solution.
Exercise 1
Target: EBITDA 100, offered at 10× (EV 1,000) vs. standalone value of 850. Cost synergies 40 a year, achieved after one year, costing 60 to implement. Tax 25%, WACC 9%. Does the deal create value?
Exercise 2
Building the same capability costs 200 over three years and delays profit by two years. Compare with buying.