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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

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.

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

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

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.

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