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Multi-Business Strategy
Multi-regional strategy
Lecture Outline
• What is Portfolio Management
• What is Portfolio Analysis
• Boston Box
• McKinsey/GE Matrix
• AD Little ...
Portfolio Management
• “enable strategic planners to select the
optimal strategies for the individual
products whilst achi...
Portfolio Analysis
“ the strategic units that make up the company
and the attempts to evaluate current
effectiveness and v...
Examples of Portfolios
• Unilever: ice cream, tea, spreads,
• Proctor & Gamble: Detergents, nappies,
• Gillette: batteries...
Hold Strategy
To enjoy continued
strong cashflow.
Relatively high
market share / low
market growth rate
‘Cash Cow’
opportu...
Build Strategy
To grow the
business.
Relatively low
relative market
share / high market
growth rate
‘Question Mark’
opport...
Harvest Strategy
To develop short
term cashflow
irrespective of the
long term
damaging effect to
the product or
business. ...
Divest Strategy
To change
the capital
of the
business
and allow
resources
to be used
elsewhere
Boston Box - Uses
• Simplifies complex situations
• Target setting tool
• Encourages strategists to view their
business as...
Disadvantages
• Uses 2 factors only
• Many businesses are “Average”
• Dogs -10% mkt share –most fall into this
category
• ...
GE Business Screen
Long-term industry attractiveness
Business strength/competitive position
General Electric’s Business Screen
A
Winners Winners
B
C
Question
Marks
D
F
Average
Businesses
E
Winners
Losers
G
Losers
H...
GE Matrix- uses
• More sophisticated than BCG – uses more
variables
• Condenses much information into 2
variables?
Limitations
• Complex and Weighty
• The numerical estimates can be
“objective”
• What about new products or business
units...
Uses
• The power of the Life-cycle matrix is the
story it tells about the distribution of the
firm’s businesses across the...
Limitations
• Limited strategic prescription
• Once defined prescription is limited
• Some businesses “skip” cycles
• Go f...
International Portfolio Analysis
2 Factors:
• Country’s attractiveness
• Market size, rate of growth, regulation
• Competi...
Portfolio Matrix for Plotting Products by Country
Harvest/Divest
Combine/License
Invest/Grow Dominate/Divest
Joint Venture...
Portfolio Analysis
Advantages:
– Top management evaluates each of
firm’s businesses individually
– Use of externally-orien...
Portfolio Analysis
Disadvantages:
– Difficult to define product/market
segments
– Standard strategies can miss
opportuniti...
Portfolio analysis
Portfolio analysis
Portfolio analysis
Portfolio analysis
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Portfolio analysis

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Portfolio analysis

  1. 1. Multi-Business Strategy Multi-regional strategy
  2. 2. Lecture Outline • What is Portfolio Management • What is Portfolio Analysis • Boston Box • McKinsey/GE Matrix • AD Little Life-Cycle Matrix
  3. 3. Portfolio Management • “enable strategic planners to select the optimal strategies for the individual products whilst achieving overall corporate objectives” (Mcnamee, 1985) • Multi-business • And/or multi-location
  4. 4. Portfolio Analysis “ the strategic units that make up the company and 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?
  5. 5. Examples of Portfolios • Unilever: ice cream, tea, spreads, • Proctor & Gamble: Detergents, nappies, • Gillette: batteries, Shaving products • Virgin; trains, planes, cola, music stores
  6. 6. Hold Strategy To enjoy continued strong cashflow. Relatively high market share / low market growth rate ‘Cash Cow’ opportunities should be able to maintain market share at or around existing levels
  7. 7. Build Strategy To grow the business. Relatively low relative market share / high market growth rate ‘Question Mark’ opportunities need investment in order to grow.
  8. 8. Harvest Strategy To develop short term cashflow irrespective of the long term damaging effect to the product or business. This strategy is appropriate for any weak products where disposal in the form of a sale is unavailable or not preferred due to high exit barriers
  9. 9. Divest Strategy To change the capital of the business and allow resources to be used elsewhere
  10. 10. Boston Box - Uses • Simplifies complex situations • Target setting tool • Encourages strategists to view their business as a collection of diversified cash flows and investments • Success sequences • Disaster Sequences
  11. 11. Disadvantages • Uses 2 factors only • Many businesses are “Average” • Dogs -10% mkt share –most fall into this category • Can use dogs as a tactical tool- barrier to entry • Cash flow? – Why not ROI?
  12. 12. GE Business Screen Long-term industry attractiveness Business strength/competitive position
  13. 13. General Electric’s Business Screen A Winners Winners B C Question Marks D F Average Businesses E Winners Losers G Losers H Losers Profit Producers Strong Average Weak Low Medium High Business Strength/Competitive Position IndustryAttractiveness Source: Adapted from Strategic Management in GE, Corporate Planning and Development, General Electric Corporation. Used by permission of General Electric Company.
  14. 14. GE Matrix- uses • More sophisticated than BCG – uses more variables • Condenses much information into 2 variables?
  15. 15. Limitations • Complex and Weighty • The numerical estimates can be “objective” • What about new products or business units in growth industries.
  16. 16. Uses • The power of the Life-cycle matrix is the story it tells about the distribution of the firm’s businesses across the stages of the industry evolution
  17. 17. 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)
  18. 18. International Portfolio Analysis 2 Factors: • Country’s attractiveness • Market size, rate of growth, regulation • Competitive strength • Market share, product fit, contribution margin, market support
  19. 19. Portfolio Matrix for Plotting Products by Country Harvest/Divest Combine/License Invest/Grow Dominate/Divest Joint Venture LowHigh High Low Competitive Strengths CountryAttractiveness Selective Strategies
  20. 20. Portfolio Analysis Advantages: – Top management evaluates each of firm’s businesses individually – Use of externally-oriented data to supplement management judgment – Raises issue of cash flow availability – Facilitates communication
  21. 21. 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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