5. portfolio analysis

8/6/2019 5. Portfolio Analysis

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5. Portfolio Analysis5. Portfolio Analysis

A B Raju A B Raju



Portfolio Analysis



The Formulation of Strategy

New planning perspective is based on three centralpremises -

A need to view and manage the company·s

businesses in similar way to an investmentportfolio

An emphasis upon each business·s futureprofit potential

The adoption of strategic perspective to themanagement of each business



Strategic Business Unit

The starting point for portfolio analysis involvesidentifying the organization·s Strategic Business

Units (SBU), being an element of the business as awhole which -

Offers scope for independent planning

Has its own set of competitors

Has a manager with direct profit

responsibility who also has control over theprofit influencing factors



BCG Matrix

GE Matrix Shell Directional Policy Matrix

Arthur D.Little Strategic Condition Matrix

Approaches to Portfolio Analysis

A variety of approaches to portfolio analysis andplanning have been developed, the best are -



Approaches to Portfolio Analysis

The conceptual underpinnings in each case arebroadly similar, i.e. S.B.U.·s competitive position

and market attractiveness/potential. Each modelhas separate guidelines. These models have helped

managers to think strategically and to considereconomies of their business in greater detail. Butcritics have argued that the models are oversimplistic in their structure and often require data

inputs which are complex and difficult to obtain.Because of this there usage level is low



Porter¶s 5 Forces Model

The bargaining power of suppliers

The bargaining power of customers

The threat of new entrants

The threat of substitute products The intensity of competitive rivalry

Marketing Strateg y i s t o be based on detailedunderstanding of corporate capability andcompetitive advantage. PORTER suggests toconsider the following for deciding the strategy -



The generic strategies that P

ORTER

identifies asbeing open to an organization are -

Porter¶s Generic Strategies

Cost leadership

Differentiation Focus



The failure to pursue one of the generic strategypositions is likely to lead to a confused strategic

message both internally and externally and to theorganization being stuck in the middle. Any

strategy needs to be based on a firm of corporatecapability and particularly its competitiveadvantage

Porter¶s Generic Strategies



Porter¶s Value Chain

In formulating the strategy one should keep inmind to include Porter's value chain -

Primary Activities

Marketing audit Inbound logistics ² Operations

Outbound logistics ² Marketing and Sales andService

Support Activities Procurement

Technology development

Human r esour ce and Financial management

The firm¶s infrastructur e



So organization·s have choice between thefollowing -

Market leader strategy

Market follower strategy Market challenger strategy

Marker nicher strategy

Porter¶s Value Chain



Marketing Objective

An important marketing objective for manyprivate sector organization is the pursuit of themarket share. The attraction of market share wasexplored and the findings of a research were as

follows - Market share and profitability are strongly

related

In the long run the single most factor

affecting performance is the organization·srelative product/ service quality

Most of the strategic factors that boost ROIalso contribute to long term value



Marketing Strategy based on PLC

Marketing strategy needs also to take account ofthe stage of market evolution and the positionreached on the product life cycle (PLC) by theproduct or brand. It h a s been concluded that

excellence comes from - A bias for action

Autonomy and entrepreneurship

A closeness to the customers

Productivity through people

Sticking to the knitting



Hands on value driven

Simple form, lean staff Simultaneous loose-tight properties

Marketing Strategy based on PLC

Use all the method discussed so far, we can give a

strategic direction and strategic formulation for¶·Where do you want to be?µ



How might we get there? ± StrategicChoice

I

n developing a product strategy, recognitionneeds to be given to the three interrelated elementsof the product -

The product·s physical attributes including

the performance, style and quality

The benefits or the bundle of satisfactionthat it delivers to buyers

The marketing support services i.e. deliver,installation and after sales service



How might we get there? ± StrategicChoice

T

he relative importance of the elements can varyconsiderably from one product to another withbuyers in some instances being concerned with theproducts physical or objective elements, while in

other cases their concern is predominantly withthe products image and subjective elements.Effective product policy is based on theunderstanding of -

Product life cycle

Portfolio analysis



Product Strategy Development

I

n developing product strategy, one has toconsider -

Environmental factors

Past performance Organizational objectives

Resource availability

Corporate capability



T

he elements discussed in the earlier slide, helps indeciding whether to follow -


Market leadership

Market challenging Product following

Me too




W

ithin the general frame work of the productstrategy, consideration also needs to be given tothe nature of the brand strategy that is to bepursued. Four main alternatives are available -

Corporate umbrella branding Family umbrella branding

Range branding

Individual brandingRegardless of which approach is adapted attentionneeds also to be paid to the various ways in whichbrand can be developed or stretched

5. portfolio analysis

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