Developing Strategies
Creating and Presenting Strategic Plans
• Opportunit
y
•Poor performance
•External: industry transformation
•Failure looming
•Internal: leadership, management
• New chief executive
Triggers
• Grow
•Harvest
•Divest
The Strategies
•Hold
•Recover
•Recover
•Early action•Change top
management•Increase the revenues
•Reduce the assets
•Reduce the costs
•Hold •Hope and monitor
•Harvest
•No investment - run down and milk
•Divest
•Sell for what you can get
The other Strategies
Grow
Organic
Concentric
Conglomerate
Acquisition
Concentric
Conglomerate
+
Slower but
safer
Quicker but
riskier
Grow
Markets NewExisting
DiversificationProduct development
Products
New
Existing Market development
Market penetration
Low
Risk
High
The Ansoff Growth Matrix
•Differentiation
•Focus
•HVLC
The Generic Strategies
1. Market Penetration
•HVLC using low price
•Differentiation using premium price
M&S: Net profit:
97/98: £815.9 Mn,
01/02 £2.8 Mn,
13/14 £525 Mn.
•Lowest risk
Amazon
Damned if you do and damned if you don’t
•Geography
•New segments
•IKEA: 278 stores in 36 countries
•Major high tech: Cloud computing
•Higher risk
2. Market Development
•Enhancement of existing
•New product
•Ford: Mondeo, Focus, Fiesta, Ka
•Apple Watch 2015
•Higher risk
3. Product Development
Two routes
•OrganicBuying another
firmOwn resources•Acquisition
Two types
•Concentric
•Unrelated
•Concentric
•Unrelated
Lenova ITTHitachiiPad
4. Diversification
4. Diversification: so tricky
•Gallaher Group
•Microsoft
Source: http://www.forbes.com/sites/adamhartung/2013/01/20/sell-microsoft-now-game-over-ballmer-loses/
1970: Diversify: retail distribution, housewares, optical goods,and distilling
1993: Back to tobacco
2007 Sold to Japan Tobacco
‘Microsoft needed a great Christmas season. After years of product stagnation, and a big market shift toward mobile devices from PCs, Microsoft’s future relied on the company
seeing customers demonstrate they were ready to jump in heavily for Windows8 products – including the new Surface tablet. But that did not happen. With the data now coming it, it is
clear the market movement away from Microsoft products, toward Apple and Android products, has not changed.’
Heuskel, D, Fechtel, A. and Beckman, P., ‘Managing for Value: How the World’s Top Diversified Companies Produce Superior Shareholder Returns, Boston Consulting Group, available at: http://
www.bcg.com/documents/file14912.pdf
4. Diversification: Does it Pay?
Diversifiedsunderperform: not true
Focus may add value
More focusmore returns: not true
Diversifieds better in US and Asia. Europe pressure to focus
Diversifiedshave fiveperformancelevers for
valuecreation
A Generic Strategy Template
• Assume: It will cover this year and the next two years.
•Two Levels: Overall and Product Market
Part 1 Overall
Mission: Words such as Leader, Quality, Service, Growth, Risk.
Strategy: Words such as Growth, High Volume Low Cost, Differentiation, Brand, Focus, Sales, Competitive Position, Customers, Asset utilisation, Productivity, Leadership, People, Market Penetration, Market Development, Product Development, Diversification, Profitability, Stakeholder Returns, Portfolio Balance, Leader, Quality, Service, Growth, Risk.
Projected Performance: Income Statements, Balance Sheets, Cash Flows, Ratios, Profitability, Stakeholder Returns, Risk.
Goals: Qualitative and quantitative.
Part 2: Product Market
Business Definition today and in 3 years.
Product market portfolio today and in 3 years: Words such as Build, Hold, Harvest, Divest, Balance and Risk
Competitive positions today and in 3 years: Words such as Leader, Follower, Superior, Quality, Customer Balance and and Risk.
Sales by product today and in 3 years: Words such as Relative Market Share, Quality, Growth, Geographical Spread, Life Cycle, Concentration, Strategy, Profitability and Risk
Leadership and People Development today and in 3 years: Words such as Skills, Succession, Training, Absenteeism.
Asset Utilisation today and in 3 years: Words such as Efficiency, Plant usage, Personal productivity
The End