546  Corporate Portfolio Strategy
Summary
To construct a portfolio of value-creating businesses, managers should put the 
question of best ownership front and center in any analysis of a company’s 
current business lineup. If another company would be a better owner for a 
business, then the business is a candidate for divestment. Conversely, if you 
identify businesses from which the company could create more value than 
their present owners can, those businesses are appropriate acquisition targets.
The owner that qualifies as best for a business may change over the course 
of the business’s life cycle and can vary with geography. A company in the 
United States, for instance, is likely to start up owned by its founders and 
may end its days in the portfolio of a company that specializes in extracting 
cash from businesses in declining sectors. In between, the business may have 
passed through a whole range of owners.
The following chapters build on these ideas to continue our study of how 
managers can contribute to a company’s value. Chapter 29 examines the ana-
lytical aspects of resource allocation and performance management; Chapter 
30 explores related behavioral and social aspects. Chapters 31 and 32 cover 
acquisitions and divestitures as tools to change a company’s portfolio of busi-
nesses. Chapter 33 explains a company’s need to have its strategy supported 
by the right financial underpinnings, including policies for capital structure, 
dividends, and share repurchases. Finally, Chapter 34 discusses some core 
principles of communicating with investors.
Exhibit 28.4  Hexa Corporation: Value Created through Restructuring
DCF value of 
momentum case, 
$ million
New corporate 
strategy, 
$ million
Difference, %
Actions
Consumerco
6,345
8,700
37
Operating improvements
Foodco
825
1,050
27
Divest
Woodco
1,800
2,400
33
Consolidate and divest
Newsco
600
600
–
Divest
Propco
450
480
7
Divest
Finco
105
135
29
Liquidate
Corporate overhead
(1,275)
(675)
n/a
Streamline
Total
8,850
12,690
43
Debt
(900)
(900)
–
Equity value
7,950
11,790
48
New growth opportunities
–
2,400+
–
Equity value with new 
growth opportunities
7,950
14,190+
78
 

547
29
Strategic Management: 
Analytics
The value that a company creates is the sum of the outcomes of innumer-
able business decisions that its managers and staff take at every level, from 
choosing when to open the door to customers to deciding whether to acquire 
a new business. Successful strategic management encompasses all the tasks a 
company undertakes to achieve its strategic goals and create long-term value.
At the company’s senior-management level, the following tasks are par-
ticularly important for creating value:
• Overseeing and developing corporate and business unit strategies
• Setting long-term targets for strategic and financial outcomes
• Allocating resources across the business portfolio (including mergers, 
acquisitions, and divestitures) and setting budgets to achieve strategic 
targets
• Managing performance by reviewing business unit results and deciding 
when and how to intervene
• Managing talent—in particular, creating effective incentives for managers
As value-minded managers navigate these tasks, traps abound. Primary 
among them is finding the right balance between generating profits in the 
short term and investing for value creation in the long term. This is one of 
management’s most difficult challenges. Especially in companies with many 
businesses, markets, and management layers, decisions tend to be biased to-
ward short-term profit, because it is the most readily available and widely 
understood performance measure. Investors, equity analysts, supervisory