Professional Documents
Culture Documents
Grand Strategies
◆ Grand strategies provide basic direction for strategic
actions.
◆ They are the basis for coordinated and sustained efforts
directed towards achieving long-term business
objectives.
◆ They indicate a time period over which long-term
objectives are to be achieved.
◆ Firms involved with multiple industries, businesses,
product lines or customer groups usually combine
several grand strategies.
The fifteen grand principles are:
1. Concentrated growth e.g. e-bay in online auction
2. Market development e.g. J&J catering to the adults, using sachets for market
penetration
3. Product development e.g. personal care products from HUL, newer version of books,
4. Innovation
5. Horizontal integration
6. Vertical integration
7. Concentric diversification
8. Conglomerate diversification
9. Turnaround
10. Divestiture e.g. Sale of TOMCO by Tata, selling of cement division by L&T
11. Liquidation
12. Bankruptcy
13. Joint ventures
14. Strategic alliances
15. Consortia e.g. Mitsubishi, LG
Innovation
◆ Innovation is needed since both consumer and industrial
markets expect periodic changes and improvements in the
products offered.
1. Cost reduction
✔ Changingthe
Leadership
Turnaround Strategy
The Main
Steps of Turnaround
✔ Asset
Sales and
Closures
Turnaround Strategy
The Main
Steps of Turnaround
✔ Improving
Profitability
Turnaround Strategy
The Main
Steps of Turnaround
✔ Acquisitions
BCG Matrix
&
GE Nine Cell Planning
Grid
BCG MATRIX
– A concept developed by the Boston Consulting
Group that evaluates SBUs with respect to the
dimension of business growth rate and market share.
– Mix of business units and product lines that fit
together in a logical way to provide synergy and
competitive advantage
– ALSO CALLED AS PORTFOLIO STRATEGY
Reviewing the Corporate
Portfolio
◆ Portfolio Planning
◆ Identifying SBUs
◆ Assessing and Comparing SBUs
• Relative Market Share
• Relative Growth Rate
Formulating Business-Level Strategy
◆ It is a strategy formulation within the strategic
business unit in which the concern is how to
compete.
◆ The same three GRAND strategies (growth,
stability, and retrenchment) apply at the business
level, but they are accomplished through
competitive actions rather than the acquisition or
divestment of business divisions.
Portfolio Strategy
BCG
Matrix
26
The BCG Matrix
High
Industry Growth Rate
Low
High Low
Relative Market Share
High Stars
Industry Growth Rate
Low
High Low
Relative Market Share
1. Stars
(=High growth, high market share)
◆ The business has high market share compared to competitors
and it is doing business in high-growth market
◆ Foundation of a company
The BCG Matrix
High
Industry Growth Rate
Dogs
Low
High Low
Relative Market Share
3. Dogs
(=low growth, low market share)
– This business has low market share and operates in low-
growth market.
?? ??
Industry Growth Rate
Low
High Low
Relative Market Share
Question Marks
(= high growth, low market share)
– The business unit has low market share compared
to competitors, however it is doing business in
high-growth market.
– Have the worst cash characteristics of all, because
high demands and low returns due to low market
share
◆ If nothing is done to change the market share,
question marks will simply absorb great amounts
of cash and later, as the growth stops, a dog.
◆ Either invest heavily or sell off or invest nothing
and generate Whatever cash it can. Increase
market share or deliver cash.
The BCG Matrix
High Stars Question Marks
?? ??
Industry Growth Rate
Dogs
✔ Strategic Implications
• Cash Surplus from Cash Cows Used to Support
Question Marks and Stars
• Question Marks Divested
• Exit Industry Where SBU is a Dog
• Firm with Insufficient Cash Cows, Stars, or
Question Marks Should Consider Acquisitions
and Divestments
Limitations of B C G Model:
◆ Defining a market, measuring share and growth rate difficult.
◆ In the matrix average growth rate & average market share not
recognized.
◆ The relationship between market share and profitability
underlying the BCG matrix – the experience curve effect
-varies across industries and market segments.
◆ The BCG matrix is not particularly helpful in comparing
relative investment opportunities across different business units
in the corporate portfolio.
◆ Strategic evaluation of a set of business requires examination
of more than relative market shares and market growth.
◆ It oversimplifies the four classifications.
G E nine cell planning grid
Introduction
◆ GE came up with the multifactor portfolio matrix in the
1970’s for the assessment of their SBU’s.
0
G E Nine cell planning grid
◆ This matrix calls for evaluating the business of a firm in
terms of two key uses:
◆ Business Strength : How strong is the firm vis-à-vis its
competitors ?
◆ Industry strength : What is the attractiveness or potential
of the industry ?
G E’s Nine-cell Planning Grid:
◆ Business Strength: Industry Attractiveness:
◆ And business which are placed in between quality for modest investment.
G E Nine cell planning grid
◆ More advanced than BCG matrix in three ways:
◆ MARKET SHARE
◆ CUSTOMER LOYALTY
◆ DISTRIBUTION STRENGTH
– average industries
– strong businesses in weak industries
– weak business in attractive industries.
– unattractive industries
– average business units in unattractive industries
– weak business units in average industries.
The McKinsey Matrix
Competitive Position
Good Medium Poor
High Winner Question
Industry Attractiveness
Winner
Mark
r
m
y Build selectively Manage for earnings Limited expansion
e
Invest heavily in most Protect existing
a d attractive segments business Rationalize operations
tt i Emphasize profitability by Concentrate
r u raising productivity investments in segments
a m with good profits, low
risk
ct
iv Protectand refocus Manage for earnings Divest
l
e Manage for current earnings - Protect position in Sell at time that will
o most profitable segments maximize cash value
n Defend strength
w cut fixed cost
e
Avoid investment
ss
competitive strength
Strategies for SBU at different
quadrants