corporate strategy tools-modif.ppt

7/25/2019 corporate strategy tools-modif.ppt

1/19

2000 The McGraw-HillIrwin/McGraw-Hill

1

Strategic Analysisand Choice in Multi-

business Companies


2/19


2

Balancing Financial Resources:Portolio !echni"ues

#ndustry

Attracti$eness-Business Strength

Matri%

BC& &ro'th-ShareMatri%

(ie Cycle-Competiti$eStrength Matri%


3/19


)

BC& &ro'th-Share Matri%

*igh

(o'Cash+se,&ro'thRate-

StarProblem

Child

Cash Co' .og

Cash &eneration ,Mar/et Share*igh (o'

Market Share:Sales relati$e tothose o other

competitors inmar/et ,di$idingpoint is usuallyselected to ha$eonly 2-) largestcompetitors in any

mar/et all intohigh mar/et shareregion

Growth Rate:#ndustry gro'thrate in constantdollars ,di$iding

.escription o.imensions


4/19


Strategies

Question Marks - Build Market Share

Star - Hold Market Share

Cash Cows - Harvest

Dogs Divest


5/19


3Factors Considered in Constructing an#ndustry Attracti$eness-Business

Strength Matri%

0ature oCompetiti$e

Ri$alry

0umber ocompetitors

Si4e ocompetitors

Strength ocompetitorscorporateparents

Price 'ars

Competition onmultiple

BargainingPo'er o

Suppliers5Customers

Relati$e si4e otypical players

0umbers oeach

#mportance opurchases romor dales to

Ability to$erticallyintegrate

!hreat oSubstitutes5 0e'

6ntrants

!echnologicalmaturity5stability

.i$ersity o themar/et

Barriers toentry

Fle%ibility odistributionsystem

#ndustry Attracti$eness Factors#ndustry Attracti$eness Factors


6/19



Strength Matri% ,continued

6conomicFactors

Sales$olatility

Cyclicality odemand

Mar/etgro'th

Capitalintensity

Financial 0orms

A$eragepro8tability

!ypicalle$erage

Creditpractices

SociopoliticalConsiderations

&o$ernmentregulation

Communitysupport

6thicalstandards

#ndustry Attracti$eness Factors#ndustry Attracti$eness Factors


7/19 2000 The McGraw-HillIrwin/McGraw-Hill


Strength Matri% ,continued

Cost Position

6conomies oscale

Manuacturingcosts

$erhead

Scrap5'aste5re'or/

6%periencee;ects

(abor rates

(e$el o.i;erentiation

Promotione;ecti$eness

Product "uality

Companyimage

Patentedproducts

Branda'areness

Response !ime

Manuacturing



=Factors Considered in Constructing an#ndustry Attracti$eness-Business

Strength Matri% ,concluded

FinancialStrength

Sol$ency

(i"uidity

Brea/-e$enpoint

Cash



>

#ndustry Attracti$eness-BusinessStrength Matri%

#n$estSelecti

$e

&ro'th

&ro' or(et

&o

Selecti$e

&ro'th

&ro' or(et &o

*ar$est

&ro' or(et &o

*ar$est .i$est(o'

*igh

Medium

Bu

sinessStre

ngth

Medium*igh (o'#ndustry Attracti$eness

In!str"

#ttracti$eness:Sub?ecti$e

assessment basedon broadest possiblerange o e%ternalopportunities andthreats beyondcontrol o

management

%!siness Stren&th:Sub?ect assessmento ho' strong acompetiti$e

ad$antage iscreated by a broad




1@



11



12Ad$antages o the #ndustryAttracti$eness-Business Strength Matri%

o$er the BC& Matri%

Terminology is less ofensive and moreunderstandale

Multi!le measures asso"iated with ea"h dimensionta! many #a"tors relevant to usiness strength andmarket attra"tiveness

$llows #or roader assessment during oth strategy#ormulation and im!lementation #or a multiusiness"om!any



1)

Market %i#e Cy"le-Com!etitive StrengthMatri&

Sta&e o' Market

(i'e C"cle:Seepage 1=

Competiti$e

Stren&th:$erallsub?ecti$e ratingbased on 'iderange o actorsregardingli/elihood ogaining and

maintaining acom etiti$e


(o'

*igh

Moderate

Compe

titi$eStre

ngth

&ro'th#ntroduction Maturity

Stage o Mar/et (ie Cycle.ecline

Push:

#n$e

stAgg

ressi$

ely

Cautio

n:

#n$es

tSelecti$

ely

.ang

er:

*ar$est



1

Contributions o PortolioApproaches

Con$ey large amounts o inormation aboutdi$erse businesses and corporate plans in asimpli8ed ormat

Con$ey large amounts o inormation aboutdi$erse businesses and corporate plans in asimpli8ed ormat

#lluminate similarities and di;erences amongbusinesses con$eying the logic behindcorporate strategies or each business

#lluminate similarities and di;erences among

businesses con$eying the logic behindcorporate strategies or each business

Simpliy priorities or sharing corporate

resources across di$erse businesses

Simpliy priorities or sharing corporate

resources across di$erse businesses

Pro$ide a simple prescription o 'hat should beaccomplished - a balanced portolio o

businesses

Pro$ide a simple prescription o 'hat should beaccomplished - a balanced portolio obusinesses



17

Beha$ioral Considerations A;ectingStrategic Choice

Role ocurrentstrategy

Attitudesto'ard ris/

.egree o8rms

e%ternaldependenc

eManagerialprioritiesdi;erent

romstoc/holder

s

#nternalpolitical

considerations

Competiti$e reaction



19

Beha$ioral Considerations A;ectingStrategic Choice

Role o' c!rrent strate&" 'hat is the amount o# time and resour"es

invested in !revious strategies(

How "lose are new strategies to the old(

How su""ess#ul were !revious strategies(

)e&ree o' *rm+s eternal epenence

How !ower#ul are )rm*s owners+ "ustomers+"om!etitors+ unions+ and its government(

How ,e&ile is )rm with its environment(



1=

Beha$ioral ConsiderationsA;ecting Strategic Choice

#ttit!es towar risk ndustry volatility and industry evolution afe"t

managerial attitudes

.isk-oriented managers !re#er ofensive+

o!!ortunisti" strategies .isk-averse managers !re#er de#ensive+

"onservative strategies

Mana&erial priorities ierent 'rom

stockholer interests $gen"y theory suggests managers #re/uently

!la"e their own interests aove those o# theirshareholders


19/19 2000 Th M G HillIrwin/McGraw Hill

1>

Beha$ioral ConsiderationsA;ecting Strategic Choice

Internal political consierations Ma0or sour"es o# "om!any !ower are C12+ key

suunits+ and key de!artments

3ower "an afe"t "or!orate de"isions over

analyti"al "onsiderations See 4ig5 6-7

Competiti$e reaction 3roale im!a"t o# "om!etitor res!onse must e

"onsidered during strategy design !ro"ess

Com!etitor res!onse "an alter strategy su""ess

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corporate strategy tools-modif.ppt