Starbucks strengths strong brand image high quality of products service level atmosphere ("starbucks experience") weaknesses high price level "american" image (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) trend towards outside office-work (freelancers, self-employed people) trend towards supermarket purchases of well-known brands, "familiar and trusted tastes"
Starbucks strengths strong brand image high quality of products service level atmosphere ("starbucks experience") weaknesses high price level "american" image (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) trend towards outside office-work (freelancers, self-employed people) trend towards supermarket purchases of well-known brands, "familiar and trusted tastes"
Starbucks strengths strong brand image high quality of products service level atmosphere ("starbucks experience") weaknesses high price level "american" image (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) trend towards outside office-work (freelancers, self-employed people) trend towards supermarket purchases of well-known brands, "familiar and trusted tastes"
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 63 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? 64 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? 65 Anna Rosinus SWOT-Matrix opportunities threats ... ... ... ... ... ... strengths ... ... ...
weaknesses ... ... ...
what are a companys strengths & weaknesses, opportunities & threats? 66 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)? 69 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)? 69 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.
72 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 73 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)? 69 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 76 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? 77 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 78 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 79 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 80 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
81 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 82 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 83 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
84 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 85 Anna Rosinus The Strategy Clock what about newer concepts? Johnson et al. (2011) 86 - 1 Anna Rosinus The Strategy Clock what about newer concepts? Johnson et al. (2011) price higher than average price lower than average 86 - 2 Anna Rosinus The Strategy Clock what about newer concepts? Johnson et al. (2011) above average benefits below average benefits 86 - 3 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 86 - 4 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 o m p e t i t i v e
s c o p e
Anna Rosinus cost leadership differentiation cost focus differentiation focus competitive advantage c o m p e t i t i v e
s c o p e
WHAT ABOUT AMAZON? Anna Rosinus cost leadership differentiation cost focus differentiation focus competitive advantage c o m p e t i t i v e
s c o p e
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? 88 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? 89 Anna Rosinus Innovation Adoption Curve how fast do customers buy into innovations? Moore und Rogers, via wikipedia.de 61 successive groups of consumers adopting the new technology its market share the chasm 90 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? 91 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? 92 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) 94 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 95 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 97 Anna Rosinus Corporate Strategy Dimensions what has to be decided? directional strategy growth stability retrenchment portfolio analysis corporate parenting 99 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 100 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
101 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
102 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 103 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) 107 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? 108 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 110 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? 111 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