Portfolio AnalysisBCG Tool for Analyzing Opportunities & Ability to Compete
Types of Portfolio AnalysisGrowth Share Matrix (Boston Consulting Group)analyzes business opportunities according to market growth rate and market share. The comparison results in four possible business conditions, each with strategic implications
The Boston Consulting Groups Growth-Share Matrix
SARANGAPANI - can you explain the curve as per BCG matrix?
Star Strategieshigh-market share businesses in high growth-markets. (Leader expanding industry)produce large profits through expanding markets. The preferred strategy for stars is growth and further investments for growth (Increase sales e.g. new markets, new channels of distribution)
Question marks ?low-market share businesses in high-growth markets. (Low market share in expanding industry)
They do not produce much profit, but they compete in fast growing markets.
The preferred strategy is growth but the risk exists that further investment will not result in improved market share. (Needs more cash to improve its position)
Only promising question marks should be targeted for growth (Increase sales and limit to niche or follower); others are candidates for retrenchment by re-structuring or divestiture ( Leave the business)
Cash Cowsare high-market share businesses in low-growth markets or declining industryThey produce large profits and a strong cash flow. (Can generate funds for other units) Because the markets offer little growth opportunity, the preferred strategy is stability or light growth. Cows should be milked to generate cash that can be used to support investments in stars and question marks.
DogsLow market share business in a low growth market or declining industryThey do not produce much profit, and they show little potential for future improvement. The preferred strategy for dogs is retrenchment by divesting (leave business)
Significance of Environment Scanning: to identify the opportunities and threats prevailing. A firm can avail the opportunities and prepare to defend against the threats.Study of competitors position enables to frame strategies to improve the market standing. to improve the internal strengths pertaining to its resources so as to face the external challenges. helps to prepare for any change through alterations in internal factors.incorporates a culture of dynamic and pro-active organisation
Levels of Planning: StrategicTacticalOperationalStrategic Planning Features:Strategic planning is meant to be long-term in nature say, 1-3 yrsIt is the job of the top management-Set Objectives at the corporate (Group) and Business Level (Individual Business in the group) Resource mobilizationFinance, HR, Production, MarketingStrategic Partnerships and AlliancesCommitment on Information TechnologyMISEstablish Policies and Action plans in consultation with middle management
Levels of Planning: StrategicTacticalOperationalTactical Planning Features:It is for a period of 1 to 6 monthsJob of the Middle ManagementResource utilization is a key areaCommitment of funds, Creation of Facilities, R & D Activities, HR initiates and Market supportEstablish Time standards, Procedures and BudgetsOperational decisions like OutsourcingMake or Buy Benchmarking of operationsJIT, TQM, etc. Decisions related to Sourcing (Vendor Management or Supplier Relationship Management), Inventory, Logistics, Product/Service related StrategiesChannel Partners Management, Custromer Relationship Management (CRM). Preparation of reports for feedback to Top management
Levels of Planning: StrategicTacticalOperationalOperational Planning Features:Job of the lower management 1 week/1 monthDay-to Day ActivitiesRules and RegulationsScheduling the working of the company on daily/weekly basisDemand planning and forecastingboth market (Finished product) and production (Raw material)Inventory managementreceiving, storing, issuing, transport and delivery of Finished product to marketsTransaction processing, accounting, banking, employee salaries & Wages, WelfareCustomer Relationship Management-After Sales Service.