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Copyright 2007 Prentice HallCh 6 -1
BCG Matrix
Boston Consulting Group Matrix
Enhances multi-divisional firm in formulating
strategies
Autonomous divisions = business portfolio
Divisions may compete in different industries
Focus on market-share position & industry
growth rate
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Copyright 2007 Prentice HallCh 6 -2
BCG Matrix
Relative Market Share Position
Ratio of a divisions own market share in anindustry to the market share held by the largest
rival firm in that industry
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Portfolio Analysis: BCG Matrix
Exhibit 5
11
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Copyright 2007 Prentice HallCh 6 -4
BCG Matrix
Question Marks
Low relative market share compete in high-
growth industry
Cash needs are high
Case generation is low
Decision to strengthen (intensive strategies) ordivest
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Copyright 2007 Prentice HallCh 6 -5
BCG Matrix
Stars
High relative market share and high growth rate
Best long-run opportunities for growth & profitability
Substantial investment to maintain or
strengthen dominant position
Integration strategies, intensive strategies, jointventures
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Copyright 2007 Prentice HallCh 6 -6
BCG Matrix
Cash Cows
High relative market share, competes in low-
growth industry
Generate cash in excess of their needs
Milked for other purposes
Maintain strong position as long as possible
Product development, concentric diversification
If weakensretrenchment or divestiture
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Copyright 2007 Prentice HallCh 6 -7
BCG Matrix
Dogs
Low relative market share & compete in slow or
no market growth
Weak internal & external position
Liquidation, divestiture, retrenchment
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Copyright 2007 Prentice HallCh 6 -8
Grand Strategy Matrix
Tool for formulating alternative strategies
Based on two dimensions
Competitive position
Market growth
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Copyright 2007 Prentice HallCh 6 -9
Quadrant IV
1. Concentric diversification
2. Horizontal diversification
3. Conglomerate
diversification
4. Joint ventures
Quadrant III
1. Retrenchment
2. Concentric diversification
3. Horizontal diversification
4. Conglomerate
diversification
5. Liquidation
Quadrant I
1. Market development
2. Market penetration
3. Product development
4. Forward integration
5. Backward integration
6. Horizontal integration
7. Concentric diversification
Quadrant II
1. Market development
2. Market penetration
3. Product development
4. Horizontal integration
5. Divestiture
6. Liquidation
RAPID MARKET GROWTH
SLOW MARKET GROWTH
WEAKCOMPETITIVE
POSITION
STRONGCOMPETITIVE
POSITION
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Copyright 2007 Prentice HallCh 6 -10
Grand Strategy Matrix
Excellent strategic positionConcentration on current markets/products
Take risks aggressively when necessary
Quadrant I
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Copyright 2007 Prentice HallCh 6 -11
Grand Strategy Matrix
Evaluate present approach
How to improve competitiveness
Rapid market growth requires intensive
strategy
Quadrant II
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Copyright 2007 Prentice HallCh 6 -12
Grand Strategy Matrix
Compete in slow-growth industries
Weak competitive position
Drastic changes quickly
Cost & asset reduction (retrenchment)
Quadrant III
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Copyright 2007 Prentice HallCh 6 -13
Grand Strategy Matrix
Strong competitive position
Slow-growth industry
Diversification to more promising growth areas
Quadrant IV
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Organizational Strategies occur on 3 levels: Grand,
Business, and Functional
A. Grand level strategies:
- 1. Growth (a. concentration; b.
diversification)
- 2. Retrenchment
- 3. Stability (status quo)
- 4. Combination (multiple strategies)
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1a. Growth through concentration
concentrating on your existing specialization
i. market penetration aggressively targeting
current markets with existing product specialties
ii. market development/geographic expansion
expanding into new marketsiii. market segmentation dividing existing
markets
iv. product development modify existing
products, or develop new but relatedproducts
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1b. Growth through diversification branchingout into new areas
i. horizontal integration expanding across thegeneral industry (e.g. Coke acquires Minutemaid).
ii. vertical integration expanding into industriespopulated by suppliers/buyers (e.g. Ford buys steel
plant).
iii. conglomerate diversification expanding intounrelated industries (e.g. GM buys Hersheyscandy).
iv. joint venture expanding together with anothercompany in order to diversity efficiently.
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2. Retrenchment
i. Turnaround downsizing existing
company/divisions
ii. Divestiture selling off existingdivisions/subdivisions
iii. Liquidation Chapter 11 bankruptcy
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3. Stability - maintain status quo (e.g.
continuous improvement)
4. Combination multiple use of strategies
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SKILLS
STAFF
SHARED
VALUES
STRATEGY
STRUCTURE
STYLE
SYSTEMS
Seven S Model of Implementation
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Seven S Model
1. StrategyPlan or course of action leading to the allocation of firmsresources to reach identified goals.
2. Structure The ways people and tasks relate to each other. The basicgrouping of reporting relationships and activities. The way separateentities of an organization are linked.
3. Shared Values The significant meanings or guiding concepts thatgive purpose and meaning to the organization.
4.
Systems Formal processes and procedures, including managementcontrol systems, performance measurement and reward systems, andplanning and budgeting systems, and the ways people relate to them.
5. Skills Organizational competencies, including the abilities ofindividuals as well as management practices, technological abilities, andother capabilities that reside in the organization.
6. Style The leadership style of management and the overall operatingstyle of the organization. A reflection of the norms people act upon andhow they work and interact with each other, vendors, and customers.
7. Staff Recruitment, selection, development, socialization, andadvancement of people in the organization.