Management Strategies
Częstochowa, January 2010
Content
Definition of Strategy
Basic Strategic Questions
Strategy at Different Levels
Portfolio Planning
Portfolio Analysis
BCG
Limitations
GE/McKinsey Analysis
Typical Factors
Arthur D. Little Matrix
Hofer Matrix
Shell Matrix
Zones
Sources & References
"Strategy is the direction and scope of an
organisation over the long-term, which
achieves advantage for the organisation
through its configuration of resources
within a challenging environment, to meet
the needs of markets and to fulfil
stakeholder expectations".
The definition of strategy (by Johnson and
Scholes):
Definition
•Where is the business trying to get to in the long-term?
(direction)
•Which markets should a business compete in and what kind of activities are
involved in such markets?
(markets; scope)
•How can the business perform better than the competition in those markets?
(advantage)
?
•What resources (skills, assets, finance, relationships, technical competence,
facilities) are required in order to be able to compete?
(resources)
•What external, environmental factors affect the businesses' ability to compete?
(environment)
• What are the values and expectations of those who have power in and around the
business?
(stakeholders)
Basic Strategic Questions
:
Definition…Basic Questions
Strategy at Different Levels of a
Business
• Corporate Strategy
-
the overall purpose and scope of the business to
meet stakeholder expectations. „Mission statement”
• Business Unit Strategy
-
how a business competes successfully in a
particular market (choice of products, needs of customers, advantage over
competitors, new opportunities etc.)
• Operational Strategy
-
how each part of the business is organised to
deliver the corporate and business-unit level strategic direction (issues of
resources, processes, people etc.)
Strategy at Different
Levels
Portfolio planning
A
business portfolio
is the collection of Strategic
Business Units that make up a corporation. The optimal business
portfolio is one that fits perfectly to the company's strengths and
helps to exploit the most attractive industries or markets.
A
Strategic Business Unit (SBU)
can either be an
entire mid-size company or a division of a large corporation, that
formulates its own business level strategy and has separate
objectives from the parent company.
Portfolio Planning
The aim of a portfolio
analysis
• Analyze its current business portfolio and
decide which SBU's should receive more or
less investment
• Develop growth strategies for adding new
products and businesses to the portfolio
• Decide which businesses or products
should no longer be retained
Portfolio Planning
Portfolio analysis:
• BCG Matrix
• GE/McKinsey Matrix
• ADL Matrix
• Hofer Matrix
• Shell Directional Policy Matrix
Portfolio analysis
The Boston Consulting Group Matrix
Portfolio analysis…BCG
Limitations of the Boston
Consulting Group Matrix:
• High market
share
is not the only success
factor
• Market
growth
is not the only indicator
for attractiveness of a market
• Sometimes Dogs can earn even
more
cash
as Cash Cows
Portfolio analysis…BCG…
Limitations
GE/McKinsey Matrix
Portfolio analysis…GE/McKinsey
Typical (external) factors that affect Market
Attractiveness (GE/McKinsey Matrix):
Market size
Market growth rate
Market profitability
Pricing trends
Competitive intensity / rivalry
Overall risk of returns in the industry
Entry barriers
Opportunity to differentiate products and services
Demand variability
Segmentation
Distribution structure
Technology development
Portfolio analysis…GE/McKinsey…Factors
Typical (internal) factors that affect Competitive
Strength of a Strategic Business Unit
(GE/McKinsey Matrix):
- Strength of assets and competencies
- Relative brand strength (marketing)
- Market share
- Market share growth
- Customer loyalty
- Relative cost position (cost structure compared with
competitors)
- Relative profit margins (compared to competitors)
- Distribution strength and production capacity
- Record of technological or other innovation
- Quality
- Access to financial and other investment resources
- Management strength
Portfolio analysis…GE/McKinsey…Factors
Arthur D. Little Matrix
Portfolio analysis…ADL Matrix
Based on product
life cycle
thinking
.
The industry life cycle stage
of each business:
•Business market
share,
•Investment, and
•Profitability and cash
flow.
Arthur D. Little Matrix
D - This SBU markets high
quality optical equipment
for use in laboratories,
mainly in schools in Europe
and the United States.
Answer: Favourable/Mature -
This SBU operates in a niche or
narrow segment. It should target
and defend educational sectors
within its traditional markets.
Portfolio analysis…ADL Matrix
Hofer Matrix
According to Hofer and Schendel,
"The Principal difficulty with
GE Business Screen is that it
does not depict as affectively
at it might the positions of
new businesses that are just
starting to grow in new
industries.”
Portfolio analysis…Hofer Matrix
A Nine Celled directional Policy Matrix
The Shell Directional Policy Matrix is another refinement upon
the Boston Matrix.
Portfolio analysis…Shell Matrix
Shell Matrix (zones)
• Leader
- major resources are focused upon the SBU.
• Try harder
- could be vulnerable over a longer period of time, but fine for now.
• Double or quit
- gamble on potential major SBU's for the future.
• Growth
- grow the market by focusing just enough resources here.
• Custodial
- just like a cash cow, milk it and do not commit any more resources.
• Cash Generator
- Even more like a cash cow, milk here for expansion
elsewhere.
• Phased withdrawal
- move cash to SBU's with greater potential.
• Divest
- liquidate or move these assets on a fast as you can.
Portfolio analysis…Shell Matrix…Zones
Sources & References
1) http://www.12manage.com/i_s.html
2) http://www.tutor2u.net/business/presentatio
ns/strategy/default.html
3) http://www.marketingteacher.com/Lessons/
exercise_a_d_little.htm
4) http://www.tools-and-
techniques.24xls.com/en112
5) Kotler Philip, Marketing : analiza,
planowanie, wdrażanie i kontrola, Warszawa
1994.
Author
Marketing Strategies…Author…
Thank You for Your
attention
.