Mergers and acquisitions have undoubtedly resulted in more diversified companies. However, the larger the company, the bigger the challenge it is to plan and execute join strategic initiatives among business units.
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Cross-business initiatives

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Article

Ignacio Canales, J. and Adrián Caldart. “Encouraging emergence of cross-business strategic initiatives.” European Management Journal 35 (2016) 300-313.

Summary

The agricultural and food business industries have recently experienced several sizable and significant merger and acquisition deals. Dow-Dupont, Bayer-Monsanto and Syngenta-Chemchina are some examples in the converging crop protection and seed industries. Amazon’s acquisition of Whole Foods is another good example from the retail end of the food value chain. But what can we expect from them?

What this means for food and agribusiness

Mergers and acquisitions have undoubtedly resulted in more diversified companies. They also have created potentially stronger companies due to their numerous opportunities to wisely combine unique resources and competencies, and to find opportunities to have scope and scale gains.

However, the larger the company, the bigger the challenge it is to plan and execute joint strategic initiatives among the resulting business units of the newborn companies. The internal management costs, communication gaps, independent and sometimes even concurrent business units’ objectives are commonly mentioned as real challenges for successful cross-business strategic initiates.

The crop protection and seed industry convergence movement is an example. Integrating seed and crop protection sales and marketing into a new solution platform might initially seem reasonable. It might even appear to be an easy task from outside. However, in practice, it may face several challenges in terms of the companies’ integration of processes and people in the light of growers’ buying behaviors toward the new unified solution.

The above article addresses precisely this issue. How can a multi-business company foster cross-business strategic initiatives to reap the benefits of corporate advantage?

The authors suggest that the cross-business strategic initiatives that are initiated at the business unit level in the spirit of emergent strategy have better chances to be successful than the top-down corporate strategy development. The reasons for this are mainly summarized by the lack of understanding from top management of the context of different business units.

Three multi-business companies were selected out of 11 because of their successful implementation of cross-business strategic initiatives. The authors performed over 30 interviews with individuals in these companies, from top management to business leaders. The authors analyzed the companies’ documents and public data. Their approach was on identifying the cross-business initiatives that were initiated at the business level. They then summarized the components that were commonly present in these initiatives. The following results indicate there are four areas of attention when corporations want to foster cross-business strategic initiatives.

  1. Sense of Urgency—The impetus to find new opportunities that will trigger development of initiatives. For instance, the need to cut costs quickly and drastically will lead to one business unit leader to identify and ways to combine production efforts with another business unit leader.
  2. Setting clear corporate guidelines—The clear setting of corporate guidelines will lead to improved vertical coordination of actions, through the communication of priorities and boundary conditions for strategic initiatives. For example, the clear objective to reinforce the corporate image under the same brand or to be the only firm diversified around all the needs of the customer.
  3. Integration mechanisms—Horizontal coordination of action through forums for analysis and discussions and exchange of information. This empowers the development of initiatives and facilitates the process of exploration, negotiation and implementation. The simple action of clustering all (or the most related) business units into the same building will foment collaboration. The key is to increase the communication instances of related business units.
  4. Collaboration as a strong part of national or corporate value—The mission and vision statements, which are more than just statements, genuinely prioritize value of teamwork and knowledge sharing. Examples of how this priority unfolds into the organization are the bonus partially linked to overall firm performance or the informal expectations from corporate management that business unit leaders are well aware of their peer business units’ strategic initiatives.

The agribusiness industry is looking forward to the new possibilities that all the different deals may result. This real reorganization of ownership that has relocated the firms’ boundaries offers numerous chances to rethink products and services towards growers. With no doubt, the success of such novelties will depend more than ever on collaborative teamwork and efficient integration of different business units.

AUTHOR
Luciano Thomé Castro
Luciano Thomé Castro
January 26, 2018