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7/25/2019 corporate strategy tools-modif.ppt
1/19
2000 The McGraw-HillIrwin/McGraw-Hill
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Strategic Analysisand Choice in Multi-
business Companies
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2000 The McGraw-HillIrwin/McGraw-Hill
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Balancing Financial Resources:Portolio !echni"ues
#ndustry
Attracti$eness-Business Strength
Matri%
BC& &ro'th-ShareMatri%
(ie Cycle-Competiti$eStrength Matri%
7/25/2019 corporate strategy tools-modif.ppt
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2000 The McGraw-HillIrwin/McGraw-Hill
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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
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2000 The McGraw-HillIrwin/McGraw-Hill
Strategies
Question Marks - Build Market Share
Star - Hold Market Share
Cash Cows - Harvest
Dogs Divest
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2000 The McGraw-HillIrwin/McGraw-Hill
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
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7Factors Considered in Constructing an#ndustry Attracti$eness-Business
Strength Matri% ,continued
6conomicFactors
Sales$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$eness Factors
7/25/2019 corporate strategy tools-modif.ppt
7/19 2000 The McGraw-HillIrwin/McGraw-Hill
9Factors Considered in Constructing an#ndustry Attracti$eness-Business
Strength Matri% ,continued
Cost Position
6conomies oscale
Manuacturingcosts
$erhead
Scrap5'aste5re'or/
6%periencee;ects
(abor rates
(e$el o.i;erentiation
Promotione;ecti$eness
Product "uality
Companyimage
Patentedproducts
Branda'areness
Response !ime
Manuacturing
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=Factors Considered in Constructing an#ndustry Attracti$eness-Business
Strength Matri% ,concluded
FinancialStrength
Sol$ency
(i"uidity
Brea/-e$enpoint
Cash
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#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
.escription o.imensions
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11/19 2000 The McGraw-HillIrwin/McGraw-Hill
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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
$llows #or roader assessment during oth strategy#ormulation and im!lementation #or a multiusiness"om!any
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1)
Market %i#e Cy"le-Com!etitive StrengthMatri&
Sta&e o' Market
(i'e C"cle:Seepage 1=
Competiti$e
Stren&th:$erallsub?ecti$e ratingbased on 'iderange o actorsregardingli/elihood ogaining and
maintaining acom etiti$e
.escription o.imensions
(o'
*igh
Moderate
Compe
titi$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$est
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Contributions o PortolioApproaches
Con$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$ide a simple prescription o 'hat should beaccomplished - a balanced portolio obusinesses
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Beha$ioral Considerations A;ectingStrategic Choice
Role ocurrentstrategy
Attitudesto'ard ris/
.egree o8rms
e%ternaldependenc
eManagerialprioritiesdi;erent
romstoc/holder
s
#nternalpolitical
considerations
Competiti$e reaction
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Beha$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(
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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 $gen"y theory suggests managers #re/uently
!la"e their own interests aove those o# theirshareholders
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Beha$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