Question

Explain what is meant by corporate parenting. Using the parenting-fit matrix, discuss how a corporate office could help its various SBU’s (strategic business units or subsidiaries) and how at times its help could have a negative impact.

 

Answer 1

Corporate parenting refers to controlling the small business units or subsidiaries by the larger business firms. Parenting fit matrix which is also known as Corporate fit matrix is the study of fit between the business units and the resources of Corporate parenting. Resources of Corporate parenting focus on protecting the interest of all the business units.

“Corporate parenting fit matrix has two dimensions –

• Fit among the resources of corporate parents and key success factors of SBU’s
• Fit between parenting characteristics and resources of SBU’s

These dimensions generates five positions –

1. Edge of Heartland Business
2. Heartland Businesses
3. Alien Territory Businesses
4. Ballast Businesses
5. Value Trap Business”

Based on the Corporate parenting fit matrix, corporate office could help its various SBU’s (strategic business units or subsidiaries) in following ways –

• Corporate office can covert the misfit characteristics as per the needs of SBUs to get them considered as heartland business. They provide knowledge and expertise to SBU’s to get proper attention of corporate parenting.
• Corporate offices by determining key success factors of SBU’s help them to resolve criticality in things and achieve them easily. They monitor their performance and take actions to improve the same.
• Corporate offices make investment and provide managing facilities to SBU’s.
• It provides directions, focus and guidelines to SBU’s for carrying on their operations.

Though corporate office help its various SBU’s (strategic business units or subsidiaries) in many ways, sometimes it also have negative impact in following ways -

• When parenting characteristics do not match with success factors of SBU’s and changing them is not beneficial, corporate offices close such units. So, in such cases SBU’s losses their value due to corporate parenting.
• It makes the SBU’s difficult to respond quickly on their own. They have to depend upon corporate offices for the same.

In spite of such negative impact, corporate parenting helps SBU’s.