portfolio-analysis-1219369917628523-9

8/7/2019 portfolio-analysis-1219369917628523-9

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Multi-Business Strategy

Multi-regional strategy


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Portfolio Management

enable strategic planners to select the

optimal strategies for the individual

products whilst achieving overallcorporate objectives

(Mcnamee, 1985)

Multi-business And/or multi-location


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Portfolio Analysis

the strategic units that make up the companyand the attempts to evaluate current

effectiveness and vulnerabilities (McDonald

et al, 1992)

How much of our time and money should we

spend on our best products to ensure that

they continue to be successful?

How much of our time and money should we

spend developing new costly products, most

of which will never be successful?


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Examples of Portfolios

Unilever: ice cream, tea, spreads,

Proctor& Gamble: Detergents, nappies,

Gillette: batteries, Shaving products Virgin; trains, planes, cola, music stores


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Hold Strategy

To enjoy continued

strong cashflow.

Relatively high

market share / lowmarket growth rate

Cash Cow

opportunities

should be able to

maintain market

share at or around

existing levels


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Harvest Strategy

To develop short

term cashflow

irrespective of the

long term

damaging effect tothe product or

business. This

strategy is

appropriate for any

weak products

where disposal inthe form of a sale

is unavailable or

not preferred due

to high exit barriers


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Divest Strategy

To change

the capital

of the

businessand allow

resources

to be used

elsewhere


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Boston Box - Uses

Simplifies complex situations

Target setting tool

Encourages strategists to view theirbusiness as a collection of diversified cash

flows and investments

Success sequences Disaster Sequences


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Disadvantages

Uses 2 factors only

Many businesses are Average

Dogs -10% mkt share most fall into thiscategory

Can use dogs as a tactical tool- barrier to

entry Cash flow? Why not ROI?


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GE Business Screen

Long-term industry attractiveness

Business strength/competitive position


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General Electrics Business Screen

AWinners Winners

B

C

QuestionMarks

D

F

Average

Businesses

EWinners

Losers

GLosers

H

LosersProfit

Producers

Strong Average Weak

Low

Medium

High

Business Strength/Competitive Position

Source: Adapted from StrategicManagement in GE, Corporate Planningand Development, General ElectricCorporation. Used by permission ofGeneral Electric Company.


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GE Matrix- uses

More sophisticated than BCG uses more

variables

Condenses much information into 2variables?


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Limitations

Complex and Weighty

The numerical estimates can be

objective What about new products or business

units in growth industries.


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Uses

The power of the Life-cycle matrix is the

story it tells about the distribution of the

firms businesses across the stages of the

industry evolution


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Limitations

Limited strategic prescription

Once defined prescription is limited

Some businesses skip cycles Go from Growth to Decline in a short time.

Duration of cycles

Eg. Mars (1930)


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International Portfolio Analysis2 Factors:

Countrys attractiveness Market size, rate of growth, regulation

Competitive strength Market share, product fit, contributionmargin, market support


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Portfolio Matrix for Plotting Products by Country

Harvest/DivestCombine/License

Invest/GrowDominate/Divest

Joint Venture

High Low

Competitive Strengths

SelectiveStrategies


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Portfolio Analysis

Advantages:

Top management evaluates each of

firms businesses individuallyUse of externally-oriented data to

supplement management judgment

Raises issue of cash flow availability

Facilitates communication


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Portfolio Analysis

Disadvantages:

Difficult to define product/market

segments Standard strategies can miss

opportunities

Illusion of scientific rigor

Value-laden terms

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