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Anna Rosinus

Strategic management Process (2)


Mission
Reason for
existence

Objectives
What resul t s t o
accompl i sh by
when
Strategies
Plan to achieve
the mission &
objectives
Policies
broad guidelines
for decision-
making



Environmental
Scanning
Strategy Formulation Strategy
Implementation
Evaluation
and Control
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Anna Rosinus
Strategy Formulation: Situation Analysis & Business Strategy
the SWOT Analysis
Vision, Mission and Objectives
generating alternative strategies (TOWS)
Business Strategies
Porters Generic Strategies
Competitive Tactics
Cooperation

what to expect?
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Anna Rosinus
Situation Analysis: SWOT Analysis
analysis of external opportunities and threats as well as internal
strengths and weaknesses
in order to
find a strategic fit between a company and its environment
= matching external opportunities and internal strengths while
working around external threats and internal weaknesses

how to analyse a companys environment?
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Anna Rosinus
SWOT-Matrix
opportunities threats
...
...
...
...
...
...
strengths
...
...
...

weaknesses
...
...
...

what are a companys strengths & weaknesses, opportunities & threats?
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Anna Rosinus
SWOT-Matrix Starbucks (1)
practical application: Starbucks
strengths
No1 coffee house worldwide (market
share & growth)
strong brand image
high quality of products
service level
atmosphere (Starbucks experience)
customer loyalty
prime locations
reliable, committed employees
corporate social responsibility (fair
trade products etc.)
weaknesses
high price level
American image (in some
international markets)
still strong US focus (~60%)
unhealthy products, rich in sugar and
fat
strong focus on adults
limited menu (small range of food,
few non-coffee beverages, no
alcoholic beverages)
dependency on franchisees
Anna Rosinus
SWOT-Matrix Starbucks (2)
practical application: Starbucks
Opportunities
globalisation leads to an
harmonisation of consumer tastes (in
particular Europe, but also Asia, Latin
America)
take away-trend (time is money)
trend towards outside office-work
(freelancers, self-employed people)
home consumption, supermarket
purchases of well-known brands,
familiar & trusted tastes
availability of strategic partnerships,
cross-selling opportunities
Threats
shortages in coffee supply
rising commodity prices and labour
cost (fluctuations in general)
insufficient purchasing power (crises,
slowing US economy, etc.)
increasing competition, in particular
from low-price competitors (with still
good quality level)
rising health awareness
Anna Rosinus
SWOT-Matrix
opportunities threats
...
...
...
...
...
...
strengths
...
...
...

weaknesses
...
...
...

group work: analyse S, W, O, and T for Fielmann
67 - 1
Anna Rosinus
SWOT-Matrix
opportunities threats
...
...
...
...
...
...
strengths
...
...
...

weaknesses
...
...
...

group work: analyse S, W, O, and T for Fielmann
Fielmann AG is a German optics company focusing on retail eyewear
as a producer, broker and service provider, Fielmann covers the entire
supply chain of the optometry branch
glasses, sunglasses and contact lenses but also hearing aids are offered
671 branches in Germany, Austria, Switzerland, Poland, Luxembourg and
the Netherlands (including franchises and industries)
1.29 billion in sales and 7.1 million glasses in 2012
With its 572 stores in Germany Fielmann enjoys a 50% unit market share
of the industry, a 20% sales market share, as well as 5% of all German
optometric stores
company is seen as the market leader in Germany and largest optical
chain in Europe
15,494 employees, 2,779 of whom were in training, Fielmann trains 37%
of all optometrist apprentices in Germany
still no webshop/eBusiness
67 - 2
Anna Rosinus
Vision, Mission and Objectives
what does a company want to achieve (today & tomorrow)?
mission
who are we? what do
we do (and why)?
strategies
how can we turn our vision into reality?
short-term objectives, milestones, actions & KPIs
how exactly do we proceed? what are our intermediate goals?
vision
what do we aim at?
values
what do we
stand for?
achievable,
tangible,
specific
long-term objectives
what do we want to achieve (performance targets)?
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Anna Rosinus
Vision, Mission and Objectives
what does a company want to achieve (today & tomorrow)?
mission
who are we? what do
we do (and why)?
strategies
how can we turn our vision into reality?
short-term objectives, milestones, actions & KPIs
how exactly do we proceed? what are our intermediate goals?
vision
what do we aim at?
values
what do we
stand for?
achievable,
tangible,
specific
long-term objectives
what do we want to achieve (performance targets)?
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Anna Rosinus
Mission and Vision Statement: Lego
practical application
Mission:
Inspire and develop the builders of tomorrow
Our ultimate purpose is to inspire and develop
children to think creatively, reason systematically
and release their potential to shape their own
future - experiencing the endless human
possibility.
Vision:
Inventing the future of play
We want to pioneer new ways of playing, play
materials and the business models of play -
leveraging globalisation and digitalisation...it is
not just about products, it is about realising the
human possibility.

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Anna Rosinus
Mission Statements: further Examples
McDonald's mission is to be our customers' favorite place and way to eat with
inspired people who delight each customer with unmatched quality, service,
cleanliness and value every time
our mission statement up to the year 2020 is clearly defined: the BMW Group is
the worlds leading provider of premium products and premium services for
individual mobility.
Facebooks mission is to give people the power to share and make the world more
open and connected.
Starbucks
Our mission: to inspire and nurture the human spirit one person, one cup and
one neighborhood at a time.
Audi
vision the premium brand (becoming the leading brand worldwide in the
premium car segment), mission: we delight customers worldwide
Nike
our mission: to bring inspiration and innovation to every athlete* in the world (*if
you have a body, you are an athlete)
Amazon
Corporate mission: We seek to be Earths most customer-centric company for
four primary customer sets: consumers, sellers, enterprises, and content creators.
practical application
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Anna Rosinus
Vision, Mission and Objectives
what does a company want to achieve (today & tomorrow)?
mission
who are we? what do
we do (and why)?
strategies
how can we turn our vision into reality?
short-term objectives, milestones, actions & KPIs
how exactly do we proceed? what are our intermediate goals?
vision
what do we aim at?
values
what do we
stand for?
achievable,
tangible,
specific
long-term objectives
what do we want to achieve (performance targets)?
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Anna Rosinus
Hierarchy of Strategy
what is the relationship between different types of strategies?
adapted from Wheelen, Hunger (2012)
Corporate Strategy:
what do we want to do? in which industries do we want to be?
overall
direction
industries &
markets to
target
Business Strategy
how can we outpace our competitors?
competitive
strategies
cooperative
strategies
Functional Strategies
which resources shall we use, where&how?
Resource
Allocation
Maximisation of
Productivity
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Anna Rosinus
Strategy Formulation
strategic planning or long-range planning
development of mission, objectives, strategies and policies
tools facilitating strategy formulation:
TOWS-model
Porters generic or competitive strategy model

what is strategy formulation - and how is it done?
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Anna Rosinus
Making Strengths even Stronger or Weaknesses at Least Competitive?
your team
the offenders
strongest = 5, weakest =1
strongest/most relevant
opposing team the wall
4 3
4 3
1 4
4 5
how would you react?
Anna Rosinus
TOWS Matrix
how to deal with strengths & weaknesses, opportunities & threats?

opportunities threats
generating strategies
that
...
...
...
...
...
...
strengths
SO strategies ST strategies
...
...
...
use strengths to take
advantage of
opportunities
use strengths to avoid
threats
weaknesses
WO strategies WT strategies
...
...
...
take advantage of
opportunities in order
to reduce weaknesses
minimise weaknesses
AND avoid threats
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Anna Rosinus
TOWS Matrix: Starbucks
practical application: Starbucks
opportunities threats
consumer tastes harmonisation
take away-trend
outside office-work
familiar & trusted tastes
strategic partnerships
coffee supply and price
purchasing power (crises etc.)
increasing competition
rising health awareness
strengths SO strategies ST strategies
No1 worldwide, strong brand
high quality of products,
service
atmosphere, locations
customer loyalty
reliable, committed
employees
corporate social responsibility
making use of customer loyalty
leveraging the strong brand by
introducing further take-away
products (home consumption,
supermarket)
strategic partnerships
free WiFi (combined with price
differentiation take away to sit)
increase number of strategic
partnerships ( coffe supply, fair
trade etc.)
home/office deliveries
brand development/stretching
towards sustainable, healthy
colour codes for sugar/fat
weaknesses WO strategies WT strategies
high price level
American image, US focus
unhealthy products
focus on adults, limited menu
dependency on franchisees
international expansion
shifting focus from stores to other
distribution channels, in-store,
supermarket, eCommerce
target younger customers
increase product portfolio more
healthy products, offerings for
children, after work drinks
Marketing: link fair trade coffee to
product price (policy)
Anna Rosinus
TOWS Matrix
group work: please use the TOWS approach to develop 2 strategies
of your choice (e.g. SW and OT ) for
opportunities threats
generating strategies
that
...
...
...
...
...
...
strengths
SO strategies ST strategies
...
...
...
use strengths to take
advantage of
opportunities
use strengths to avoid
threats
weaknesses
WO strategies WT strategies
...
...
...
take advantage of
opportunities in order
to reduce weaknesses
minimise weaknesses
AND avoid threats
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Anna Rosinus
Business Strategy/Competitive Strategy
low cost? differentiation?
how to formulate business level strategy?
compete in large
market?
focus on niche?
design, produce
and market more
efficiently than
competitors
(not necessarily low
price)
unique and
superior value in
terms of quality,
features, and/or
service
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Anna Rosinus
Porters Generic or Competitive Strategies (1)
cost
leadership
differentiation
cost focus
differentiation
focus
how to formulate business level strategy?
competitive advantage
c
o
m
p
e
t
i
t
i
v
e

s
c
o
p
e

quality,
features,
services
cost
b
r
o
a
d

n
a
r
r
o
w

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Anna Rosinus
Porters Generic or Competitive Strategies (2)
what means cost leadership? how to achieve?
targets broad mass market
aiming at lowest cost in the industry
focus on scale economies & efficiency
avoidance of overhead costs
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Anna Rosinus
Porters Generic or Competitive Strategies (3)
what means differentiation? how to achieve?
targets broad mass market
unique product with superior quality,
product features, technology or additional
services
aims at charging premiums
customers should have a lower sensitivity to price
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Anna Rosinus
Porters Generic or Competitive Strategies (4)
what means focus? how to achieve?
focus on a market niche, i.e. a particular buyer
group or market segment, region etc.
(segmentation Strategy, niche strategy)
aiming at expertise and advantage in the
target market
COST FOCUS
cost leadership in market niche
seeks cost advantage in target market
DIFFERENTIATION FOCUS
differentiation in targeted market segment
serves special needs in its narrow target market

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Anna Rosinus
Risks for the 3 Generic Strategies
COST LEADERSHIP DIFFERENTIATION FOCUS
competition over price
competitors imitate
cost advantages
image problems low
quality, unethical
behaviour (bad CSR)
low margins
cost leadership is no
longer sufficient to
attract customer
technological progress
( production
efficiency) or other
changes that erode
basis for cost
advantages
customers no longer
value the basis for
differentiation (e.g.
brand), lack of
willingness to pay the
premium
imitation by
competitors
high costs
no clear USP
external influences
might be more harmful
changes in segments,
in particular segments
are getting too small
or segments align to
broad market
copying
new segmentation,
which is better/more
appropriate
what are potential risks for the 3 generic strategies
Anna Rosinus
Porters Generic or Competitive Strategies (5)
what do we think about the generic strategies today?
* Porter (1980) Competitive Strategy: Techniques for Analyzing Industries and Competitors
Porter originally analysed 3 dimensions:
level of differentiation,
relative product cost, and
scope of target market
he combined these dimensions (and their
ranking: low, medium, or high) in a
3 dimensional matrix
most of the 27 combinations were not viable
=> reduction to cost leadership, differentiation, and focus*
conclusion: any other combination = stuck in the middle
today: combinations in the middle can be quite attractive
hybrid strategies
strategy clock
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Anna Rosinus
The Strategy Clock
what about newer concepts?
Johnson et al. (2011)
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Anna Rosinus
The Strategy Clock
what about newer concepts?
Johnson et al. (2011)
price higher
than average
price lower than
average
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Anna Rosinus
The Strategy Clock
what about newer concepts?
Johnson et al. (2011)
above average benefits
below average benefits
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Anna Rosinus
The Strategy Clock
what about newer concepts?
Johnson et al. (2011)
price higher
than average
above average benefits
price lower than
average
below average benefits
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Anna Rosinus
practical application
& gyms bookstores
practical application
Anna Rosinus
& gyms
practical application
bookstores
Anna Rosinus
practical application
& gyms
practical application
bookstores
Anna Rosinus
Porters Generic Strategies for Bookstores
cost
leadership
differentiation
cost focus
differentiation
focus
practical application
competitive advantage
c
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m
p
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t
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t
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v
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s
c
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Anna Rosinus
cost
leadership
differentiation
cost focus
differentiation
focus
competitive advantage
c
o
m
p
e
t
i
t
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v
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s
c
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p
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WHAT ABOUT AMAZON?
Anna Rosinus
cost
leadership
differentiation
cost focus
differentiation
focus
competitive advantage
c
o
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p
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t
i
t
i
v
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s
c
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Anna Rosinus
Industry Structure and Competitive Strategy
fragmented industries: many small- and medium-sized companies
compete for relatively small shares of the total market
products are typically in early stages of product life cycle
no industry standards (so far)
often focus strategies are used
consolidated industries: dominated by a few large companies
typically mature industries and/or products
knowledgeable buyers
regional, national or even international competitors fight for market share
emphasis on cost (economies of scale) OR
in case of slower growth, overcapacity, additional services are used (i.e.
differentiation)
how does the industry structure limit the range of viable business strategies?
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Anna Rosinus
Competitive Tactics (1)
tactics are specific operating plans that
detail how a strategy is going to be implemented, particularly in terms of
timing and location of actions (when and where)
are narrower in scope and shorter in time horizon than strategies
timing tactics: when a company implements a strategy
(often: enters/develops a market)
first movers/pioneers
early seconds
late movers/entrants
how can a strategy be detailed?
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Anna Rosinus
Innovation Adoption Curve
how fast do customers buy into innovations?
Moore und Rogers, via wikipedia.de
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successive groups of consumers adopting the
new technology
its market share
the chasm
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Anna Rosinus
Competitive Tactics (2) Market Location Tactics
offensive tactics
frontal assault
flanking maneuver
bypass attack
encirclement
guerrilla warfare
defensive tactics
raise structural barriers
increase expected retaliation
lower the inducement for
attack
where does a company implement a strategy?
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Anna Rosinus
Cooperative Strategies
gaining a competitive advantage within an industry by working
together with other firms
examples of cooperation types:
mutual service agreements
licensing arrangements, Joint Ventures
value-chain partnerships
strategic alliances: long-term cooperative arrangements
between at least two independent companies in order to:
acquire new capabilities
obtain access to specific markets
reduce financial and/or political risk
collusion: active cooperation of firms within an industry to reduce
output and/or raise prices, e.g. oil & gas, coffee etc.

is fighting other organisations the only viable option?
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Anna Rosinus
Strategic Groups
groups of organisations within an industry/sector with
similar characteristics,
following similar strategies, or
competing on similar bases
characteristics of organisations in
this group are different from those
in other strategic groups in the same
industry/sector
characteristics refer to the scope of
activities and the resource commitment
useful for the analysis of strategic groups
are two-dimensional charts/maps
criteria should be not/little correlated

what if competitors seem pretty similar regarding their strategies?
chart: example of strategic groups in the Indian
pharmaceutical industry, taken from Johnson et al. (2014)
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Anna Rosinus
Example Strategic Groups: Fast-food in Germany
group work
abc xyz
a
b
c

x
y
z

criterion 2
c
r
i
t
e
r
i
o
n

1

please analyse the German fast-
food market for strategic groups?
1. define appropriate criteria
upon which to base your
analysis
(e.g. breadth of menu/product
portfolio, price)
2. rate the 5-10 companies you
consider most important in
that market
(e.g. KFC, McDonalds,
Subways, Pizza Hut, Vapiano,
Pizza Pepe, Mensa etc.)
3. visualise your results and
search for clusters, i.e.
strategic groups
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Anna Rosinus
Example Strategic Groups: Fast-food in Germany
group work

Anna Rosinus
Hierarchy of Strategy
what is the relationship between different types of strategies?
adapted from Wheelen, Hunger (2012)
Corporate Strategy:
what do we want to do? in which industries do we want to be?
overall
direction
industries &
markets to
target
Business Strategy
how can we outpace our competitors?
competitive
strategies
cooperative
strategies
Functional Strategies
which resources shall we use, where&how?
Resource
Allocation
Maximisation of
Productivity
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Anna Rosinus
Corporate Strategy Dimensions
what has to be decided?
directional
strategy
growth
stability
retrenchment
portfolio
analysis
corporate
parenting
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Anna Rosinus
Directional Strategies
towards which alternative directions can a company orientate?
directional
strategy
growth
stability
retrenchment
pause/proceed with caution
no change
profit
turnaround
captive company
sell-out/divestment
bankruptcy/liquidation
concentration diversification
vertical
concentric
horizontal
conglomerate
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Anna Rosinus
Growth Strategies (1 how?)
how can a company achieve growth?
directional
strategy
growth
stability
retrenchment
internal
innovation,
creativity and
product
development
(R&D)
external
mergers
acquisitions
strategic
alliances

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Anna Rosinus
Growth Strategies (2 where?)
how can a company achieve growth?
directional
strategy
growth
stability
retrenchment
concentration
current
product lines
current
markets/
industries
diversification
other product
lines
new markets/
industries

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Anna Rosinus
Basic Concentration Strategies
what does concentration mean?
V
A
L
U
E

C
H
A
I
N
intermediate
product 1
distribution/retail
end/final
product A
intermediate
product 2
raw material
end/final
product B
vertically
backward
horizontal
vertically
forward
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Anna Rosinus
Example Horizontal Integration (Partnership): Star Alliance
practical application
Anna Rosinus
Basic Concentration & Diversification Strategies
V
A
L
U
E

C
H
A
I
N
intermediate
product 1
distribution/
retail
end/final
product
intermediate
product 2
raw material
Anna Rosinus
Example Full Vertical Integration: British Petroleum (BP)
practical application
Anna Rosinus
Example Full Vertical Integration: Wineries
practical application
planting and
maintenance of
grape-bearing
vines, harvesting
of grapes, etc.
winemaking, i.e.
primary
fermentation
(and bottling)
a second
alcoholic
fermentation in
bottle / tank
riddling,
disgorging,
dosage or
bottling (tank)
sales, marketing
& distribution
Anna Rosinus
Basic Diversification Strategies
concentric
diversification
= growth into related
industry
goal?
search for synergies
who? firms with a strong
competitive position
and outstanding,
transferable skills
conglomerate
diversification
growth into unrelated
industries
goal?
financial considerations
(cash flow/risk reduction)
who? current industry
lacking attractiveness
transferable skills
missing
how can companies diversify?
104 - 2
Anna Rosinus
risk reduction through diversification a classical example
0
200
400
total
turnover
0
200
400
umbrella
turnover
0
200
400
icecream
turnover
Jan 13 Mar 13 May 13 Jul 13 Sep 13 Nov 13
weather
(sunshine)
Anna Rosinus
Basic Diversification Strategies
concentric
diversification
= growth into related
industry
goal?
search for synergies
who? firms with a strong
competitive position
and outstanding,
transferable skills
conglomerate
diversification
growth into unrelated
industries
goal?
financial considerations
(cash flow/risk reduction)
who? current industry
lacking attractiveness
transferable skills
missing
how can companies diversify?
Anna Rosinus
Examples Concentric Diversification
practical application
Anna Rosinus
Examples Concentric Diversification
practical application
Anna Rosinus
Basic Diversification Strategies
concentric
diversification
= growth into related
industry
goal?
search for synergies
who? firms with a strong
competitive position
and outstanding,
transferable skills
conglomerate
diversification
growth into unrelated
industries
goal?
financial considerations
(cash flow/risk reduction)
who? current industry
lacking attractiveness
transferable skills
missing
how can companies diversify?
Anna Rosinus
Examples Conglomerate Diversification
practical application
further examples:

http://www.ge.com/products

http://en.wikipedia.org/wiki/Berks












Anna Rosinus
Examples Conglomerate Diversification
practical application












Anna Rosinus
Growth Strategies Ansoff Matrix
how can a company extend its activities?
adapted from Ansoff (1988)
Market
Penetration
Product
Development
Market
Development
Diversification
new existing
n
e
w

e
x
i
s
t
i
n
g

products
m
a
r
k
e
t
s

106 - 1
Anna Rosinus
Growth Strategies Ansoff Matrix
how can a company extend its activities?
adapted from Ansoff (1988)
Market
Penetration
Product
Development
Market
Development
Diversification
new existing
n
e
w

e
x
i
s
t
i
n
g

products
m
a
r
k
e
t
s

Anna Rosinus
Growth Strategies Ansoff Matrix
how can a company extend its activities?
adapted from Ansoff (1988)
Market
Penetration
Product
Development
Market
Development
Diversification
new existing
n
e
w

e
x
i
s
t
i
n
g

products
m
a
r
k
e
t
s

Anna Rosinus
3D-diversification: an Extension of Ansoff
how can a company extend its activities?
example:
Daimler sells the new E-
smart (new product/
technology) in the US
(international market),
whereby they tackle a)
the segment of small
cars & b) those of
electronically powered
vehicles (new use/value)
Anna Rosinus
Controversies in Directional Strategies
is concentric diversification better than conglomerate diversification?
Johnson et al. (2011)
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Anna Rosinus
Outsourcing
= opposite of vertical Integration (insourcing)
activities previously carried out internally are subcontracted to
external suppliers
examples:
subcontracting the production of components to a specialist supplier
Outsourcing of after-sales services to a cheaper location (e.g. call centres)
drivers/motivation:
cost reduction
quality improvements
focus on core competencies/ distinctive capabilities, externalising non-
core activities, e.g. (professor CEO = world-champion in typewriting,
nonetheless most writing is done by its secretary; having a housekeeper)
insourcing or outsourcing what should a company do?
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Anna Rosinus
Stability Strategies
in general: no significant changes in direction

is changing the status quo always the best solution?
pause/proceed
with caution
might be
followed by a
growth/
retrenchment
strategy
no change profit strategies
no change in strategic direction
despite a worsening situation
only changes: reduction of investment
and/or short-term expenditures
might be reasonable if environmental
challenges are only temporary
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Anna Rosinus
turnaround

when a corporations
problems are not yet
critical
improvement of
operational efficiency
(diet)
contraction: stop the
bleeding, general
cutback in size and
costs
consolidation:
streamlining,
reduction in overheads
in order to stabilise
the now leaner
corporation
captive
company
giving up
independence
in exchange
for security
sell-out/
divestment
selling the entire
company/
selected business
units to another
corporation
losses can be
minimised if the
buyers
resources/
capabilities can
improve the
companys/
selected business
units situation
bankruptcy

management
of the firm is
given to the
courts in
return for
some
settlement of
the
corporations
obligations
liquidation

turning
assets into
cash, settle
obligations
paying off
investors
Retrenchment Strategies
what to do when serious problems arise?
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Anna Rosinus
Corporate Strategy Dimensions
what has to be decided?
directional
strategy
growth
stability
retrenchment
portfolio
analysis
corporate
parenting
112
Anna Rosinus
Portfolio Analyses
categorisation of business units (SBUs) on portfolio matrices,
i.e. 2-dimensional charts/maps
prioritisation tool:
identification of business units that merit further investment (or not)
identification of further investment needs (e.g. product development)
popular examples are the BCG and the GEMcKinsey-matrix
BCG matrix:
developed by Boston Consulting Group in 1970 (Bruce D. Henderson, CEO)
also known as growth/share-matrix
GEMcKinsey-matrix
developed by McKinsey for GE in 1970
facing the main critics of the BCG-matrix
broader dimensions on the axes
directional policy
how to?

113
Anna Rosinus
Product Life-Cycle Theory
repetition
introduction growth decline maturity
as the product progresses through its life cycle, changes in the marketing mix usually are required
Theodore Levitt firstly
described the product
life cycle in 1965
Anna Rosinus
Learning/Experience Curve & Economies of Scale
repetition
HORIZONTAL AXIS:
experience curve:
accumulated
production
volume over time
economies of
scale: production
volume per
period
-10
-5
0
5
10
15
20
0 5 10 15 20

costs per unit price per unit profit per unit
Anna Rosinus
BCG Matrix
market growth (market
attractiveness)
product-life-cycle theory
the younger the product
the higher the growth
relative market share
(competitive position):
the SBUs market share
divided by the market
share of the biggest
competitor
experience curve
the higher the production
volume the lower the per
unit-cost
what does a Portfolio Matrix look like?

m
a
r
k
e
t

g
r
o
w
t
h

h
i
g
h

question
marks
stars
l
o
w

poor dogs cash cows
low high
market share
114
Anna Rosinus
BCG Matrix
implications:
cash generation
(highest for stars & cash
cows)
investment needs
(highest for question marks &
cash cows stars)
what does a Portfolio Matrix look like?

m
a
r
k
e
t

g
r
o
w
t
h

h
i
g
h

question
marks
stars
l
o
w

poor dogs cash cows
low high
market share
Anna Rosinus
Example BCG Matrix: Hewlett Packard
practical application
seven business
segments 2013:
1) Personal Systems
(here PCs)
2) Printing
3) the Enterprise
Group (EG)
4) Enterprise
Services (ES)
5) Software
6) HP Financial
Services (HPFS
7) Corporate
Investments
Anna Rosinus
Group Work BCG Matrix
1) Please illustrate the portfolio of Corporation ABCD with a BCG matrix







2) What are your recommendations?
practical application




















brands,
SBUs
revenues % of
corporate
revenues
largest
competitors
market share
your brands
market share
relative
market
share
market
growth rate
A $500,000 54% 25% 25% 1 3%
B $350,000 38% 30% 5% 0,17 12%
C $50,000 6% 45% 30% 0,67 13%
D $20,000 2% 10% 1% 0,1 15%
medium
growth
10%
m
a
r
k
e
t

g
r
o
w
t
h

h
i
g
h

question
marks
stars
l
o
w
poor dogs cash cows
low high
market share
Anna Rosinus
BCG Matrix
what does a Portfolio Matrix look like?

m
a
r
k
e
t

g
r
o
w
t
h

h
i
g
h

(
2
0
%
)

l
o
w

(
0
%
)







1
0
%

low (0) medium (~1) high
relative market share
brands,
SBUs
% of
corporate
revenues
relative
market
share
market
growth
rate
A 54% 1 3%
B 38% 0,17 12%
C 6% 0,67 13%
D 2% 0,1 15%
medium
growth
10%
A
B
C
D
Anna Rosinus
McKinsey-Matrix (1)
what does a Portfolio Matrix look like?
(long-term) industry
attractiveness:
market size & growth rate
demand variability
industry profitability & rivalry
global opportunities
macroenvironmental factors (PEST)
strength of the business unit /
competitive position:
market share + growth
brand equity
access to distribution channels
production capacity
profit margins relative to
competitors


A
winners winners
B
C
question
marks
D
F
average
businesses
E
winners
Losers
G
losers
H
losers

profit
producers
strong
weak
l
o
w

h
i
g
h

business strength
i
n
d
u
s
t
r
y

a
t
t
r
a
c
t
i
v
e
n
e
s
s

115
Anna Rosinus
McKinsey-Matrix (2): Implications
what does a Portfolio Matrix imply?

i
n
d
u
s
t
r
y

a
t
t
r
a
c
t
i
v
e
n
e
s
s

h
i
g
h

!
l
o
w

low high
business strength
116
Anna Rosinus
Portfolio Analysis Pros & Cons
ADVANTAGES
sound evaluation of a firms SBUs
(1: all of them, 2: definition of
SBUs needed)
management judgment as well as
externally oriented data is used
analysis of cash flow availability:
generation vs. consumption
one page overview facilitates
communication
DISADVANTAGES
definition of appropriate
product/market segments (in
order to compare SBUs with
competition)
standard strategies (implications)
can miss opportunities
illusion of scientific rigor
value-laden terms
how to rate portfolio analyses?
117
Anna Rosinus
Corporate Strategy Dimensions
what has to be decided?
directional
strategy
growth
stability
retrenchment
portfolio
analysis
corporate
parenting
118
Anna Rosinus
Corporate Parenting
value creation from the relationship between the parent and its
businesses ( core competencies of the parent corporation)
build/enhance business unit value
synergies across business units
possible corporate strategies acc. to Porter (1987)
portfolio management
restructuring
transferring skills
sharing activities
(listed in ascending order in terms of parental influence and use of synergies)
what are the different roles in diversified companies?
119

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