Parenting Every business unit adds opportunities for the parent company because each unit may have inherent strengths in different segments or the business unit may be able to glean from the parent. A successful fit for parent-business unit according to Anthony Henry in his book „Understanding Strategic Management’ depends on a few critical success factors which determine its success in the marketplace. There are four ways that a corporate parent can create value for their businesses Stand-alone influence: This concerns the parent company‟s impact upon the strategies and performance of each business the parent owns. It is things such as setting performance targets and deciding capital expenditure direction. This can create value as long as the targets and strategies are realistic and recognises the need of the organisation. Linkage Influence: This works on increasing value through synergy, which is transfer of capabilities and knowledge between the parent and the business units. Tata- Corus deal is an example, Corus‟s abilities to produce high quality speciality products is used to enhance Tata‟s product portfolio. Functional and Services Influence: The parent can provide functional leadership and cost effectiveness for the businesses. Let‟s consider, Tata-Corus again, Tata‟s know-how of producing lost cost steel helps Corus to reduce costs. Corporate Development Activities: Value is created by changing the portfolio of the parent business. This involves actively investing, acquiring or divesting businesses. For example, Coke actively invests in bottling plants and also sells them off according to the situation. However, Porter has said that in reality, the parent company often destroys value through its acquisitions by paying a premium which it fails to recover Portfolio Decisions To decide the most suitable portfolio for parent, two questions should be answered Does the parenting opportunities in the business fit with value creating insights of the parent, such that parent can create a substantial amount of value? Do the critical success factors have any obvious misfit with the prospective parenting characteristics, such that the parent might influence the business in such a way that destroys value? The best fit would be the ones that create substantial value for the organisation and don‟t hamper the organisation‟s game plan. AOL Time Warner- Example of an unsuitable Parent- Business fit This was a deal that had synergy written all over it. The merging of media properties with distribution platforms (internet) was reported by The Wall Street Journal as 'the deal has potential synergies that make some observers drool''. The deal however is considered as one of the biggest disasters in the corporate world. Apart from the obvious reason of paying too much its worth, Rob Walker of New York Times, states a few others “The gap between the theory of far-flung businesses working in seamless concert and the reality of protecting corporate turf- Reports have detailed the intense lack of interest among various divisional chiefs at AOL Time Warner in consolidating ad- selling operations and cutting sweeping marketing deals across multiple units. The difference is generally a matter of hindsight, but either way, it's the opposite of synergy”. “Synergy is almost always thought of in a top-down way: Mix and match the corporate properties and consumers will fall in line. One of the more puzzling conundrums of synergy can be found in what one might call the money-to-stuff ratio. Basically, consumers want more stuff for less money; companies want to sell more stuff, but for more money. Synergy makes a vague promise to consumers that it will deliver the first scenario and to investors that it will deliver the second”. It clearly shows that the perceived value that was to be created was grossly overestimated and this played against the whole organisation.