Post on 05-Apr-2018
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What is Retrenchment?
To cut down or Reduce Something
Tighten Ones Belt
Use R
esources More Carefully
Retrenchment is a corporate-level strategy that seeks to
reduce the size or diversity of an organization's operations.
Retrenchment is also a reduction of expenditures in orderto become financially stable.
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What Drives Retrenchment?
Uncompetitive Cost Structure
Inadequate Return on Investment
Poor Competitive Position Financial Distress (e.g. High Debt)
Market Decline
Failed Takeover
Economic Downturn
Change of Ownership
All of which
indicatethe need for
Strategic
Change
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Significant reduction in output and capacity.
Significant job loses.
Product and market withdrawals.
Disposals of business unit.
De-mergers - A business strategy in which a single business
is broken into components, either to operate on theirown, or to be dissolved.
Methods of Retrenchment
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Starbucks Exits Australia
Coffee chain Starbucks says it plans to shut 61 of its 85 stores in
Australia.
Starbucks rationalizes its store portfolio in Australia 2008.
Poor competitive position there, Hard to compete with
existing coffee. shops operators.
Strategic decision to focus investment on the US market
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Boston Consulting Group Matrix
BCG Matrix is developed by a group known as Boston
Consulting Group. It seeks to place the different
products of an organization in different grids such as to
analyze them in a comparative manner in terms of
profitability or in terms of
a) Percentage growth in sale and
b) Market share position to be exact. Thus
It gives an opportunity of self assessment to theorganization to reassess its product positioning and
come out with alternative solution if the original
placement of the products in the market does not meet
the desired level of growth.
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Nesvita
Nestle Maggi pickles
Nescafe
Maggi noddle's
Nestle pure life
Ceralec Milky bar
Nestle dahi
Relative market share position in the industry
In
ygowhrae
H
M
L
Divestiture
Retrenchment
M L
BCG MATRIX - NESTLE
Stars Questionmarks
Cash cows Dogs
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Product: Maggi Pickles
Position: Question Mark
Intended placement: (Disinvest)
Reasons for present position:
Maggi pickles and, on account of its limited variety (especially
in this taste crazy country) and comparatively higher prices,
has been unable to acquire a market necessary for its bare
minimum existence.
The sales of Maggi pickles has never really trigged since its
launch.
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Product: Milky Bar
Position: Dogs
Intended placement: (Disinvest)
Reason for present position:
Milky Bar has been placed as a Dog on account of the
inherent lack of core quality which makes it generic with
chocolates. This was the main reason why it was never
considered a competitor by other chocolate manufactures
and the consumers also treated it so.
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Internal-External (IE) Matrix
The Internal-External (IE) matrix is another strategic
management tool used to analyze working conditions and
strategic position of a business. The Internal External Matrixor
IE matrix is based on an analysis of internal and external
business factors which are combined into one suggestive model.
How does the Internal-External IE matrix work?
The IE matrix is based on the following two criteria:
Score from the EFE matrix -- this score is plotted on the y-axis
Score from the IFE matrix -- plotted on the x-axis
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How do I create the EFE matrix?
List factors:The first step is to gather a list of external factors.
Divide factors into two groups: opportunities and threats.
Assign weights: Assign a weight to each factor. The value of
each weight should be between 0 and 1 (or alternatively
between 10 and 100 if you use the 10 to 100 scale). Zero
means the factor is not important. One or hundred means that
the factor is the most influential and critical one. The total
value of all weights together should equal 1 or 100.
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Rate factors:Assign a rating to each factor. Rating should bebetween 1 and 4. Rating indicates how effective the firmscurrent strategies respond to the factor. 1 = the response ispoor. 2 = the response is below average. 3 = above average. 4 =superior. Weights are industry-specific. Ratings are company-specific.
Multiply weights by ratings: Multiply each factor weight withits rating. This will calculate the weighted score for each factor.
Total all weighted scores:Add all weighted scores for each
factor. This will calculate the total weighted score for thecompany.
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List factors: Conduct internal audit and identify both strengths
and weaknesses in all your business areas.
Weights: Having identified strengths and weaknesses, the coreof the IFE matrix, assign a weight that ranges from 0.00 to 1.00to each factor. After you assign weight to individual factors,
make sure the sum of all weights equals 1.00 (or 100 if usingthe 0 to 100 scale weights).
Rating: Assign a 1 to X rating to each factor. Your rating scalecan be per your preference. Practitioners usually use rating on
the scale from 1 to 4. Rating captures whether the factorrepresents a major weakness (rating = 1), a minor weakness(rating = 2), a minor strength (rating = 3), or a major strength(rating = 4). If you use the rating scale 1 to 4, then strengthsmust receive a 4 or 3 rating and weaknesses must receive a 1or 2 rating.
How do I create the IFE matrix?
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Multiply: Now we can get to the IFE matrix math. Multiply
each factor's weight by its rating. This will give you a
weighted score for each factor.
Sum: The last step in constructing the IFE matrix is to sumthe weighted scores for each factor. This provides the total
weighted score for your business.
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Yahoo! Inc. (NASDAQ: YHOO) is an American multinationalinternet corporation headquartered in California, United States.The company is perhaps best known for its web portal, searchengine (Yahoo! Search), Yahoo! Directory, Yahoo! Mail, Yahoo!
News, Yahoo! Answers, advertising, online mapping, fantasysports and social media services.
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Yahoo! Posted a 78% first quarter 2009 profit decline and reacted byeliminating 675 jobs.
Yahoo! 360 was a blogging/social networking service was closed onJuly 13, 2009.
Yahoo! Go, a Java-based phone application with access to most ofYahoo! services, was closed down on January 12, 2010.
Yahoo! Buzz was closed down on April 21, 2011 with no officialannouncement by Yahoo!
In early 2012, after the appointment of Scott Thompson as the new CEO,
many rumors spread about large layoffs looming. On April 4, 2012Yahoo announced a cut of 2,000 jobs or about 14 percent of 14,100workers employed by Yahoo. The cut is expected to save around $375million annually after the layoffs are completed at end of 2012.
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Opportunities weight rate weighted score
Yahoo has huge potential in combining its services withsocial media platforms like Flickr with Facebook
15% 1 0.15
The number of mobile users are constantly increasing in
developing nations. Development of innovative mobileservices will improve the market share
13% 3 0.39
The international market is a huge opportunity for Yahoo!Microsoft and Google are busy carving niches and takingover businesses in and around the Greater China Regionwhich has over 1,200,000,000 citizens. Other economies,
such as India, also offer tremendous growth potential 10% 2 0.2
Threats
Economic downturn (2007) 10% 1 0.10
Yahoos presence in the search engine services is declining
very rapidly because of Google and Bings strong presence
(67% Google, 15.3% Bing) 18% 1 0.18
The advertising market is being slowly grabbed by the socialnetworking sites like Facebook, Myspace,Twitter etc.
20% 2 0.4
Intense competition in every division (Google, Microsoft)14% 2 0.28
Total weighted score 100% 1.7
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Strengths weight rate weighted score
Strong brand recognition worldwide
15% 3 0.45
Ad revenuesworld's largest market share in online display advertising (US
market share for display ads at 17% in 2010)
25% 4 1
Huge product portfolio beside search engine ( yahoo finance,yahoo answers, yahoo mail, yahoo directory, yahoomessenger, yahoo personals, Flickr, yahoo shopping, yahooreal estate, yahoo next, yahoo boss, yahoo meme etc.)
10% 3 0.3
WeaknessesLack of innovative products resulting in fading brand image(Mail services, news, shopping, financial data are providedby many others like MSN, CNN etc.)
15% 1 0.15
Huge layoffs -> staff demotivation (On April 4, 2012 Yahooannounced to cut 2,000 jobs)
10% 1 1.10
Bad financial health (The companys assets both in terms of
intangible and tangible are on the declining side)
25% 2 0.5
Total weighted score 100% 2.5
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IE MATRIX - YAHOO!Inc.
Where asGreen zone - Grow and buildOrange zone - HoldRed zone - Retrenchment / Divestiture
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If Yahoo can't bounce back, morepeople are likely to lose their jobs
and more services could be closed.
In a more extreme scenario, the
company could be sold in its
entirety.