fm : anis gunawan,mm [email protected]
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Portfolio models. FM : Anis Gunawan,MM [email protected]. Portfolio models. Portfolio models are a visual tool used to : Compare all SBUs within a company on specific criteria. - PowerPoint PPT PresentationTRANSCRIPT
FM : Anis Gunawan,[email protected]
Portfolio models
Topic Suggested reading
1.The strategic planning processIntro to the Integrating case study
Chapter 1-2
Case 1 :The ABC Cheese Factory2.Portfolio model Page 202-209
Chapter 3
Case 2 :Abbotsleigh Citrus3.The growth strategies
Page 209-212Chapter 4
Case 3 :Degrees South4.Five forces model
Page 212-217Chapter 5
Case 4 : A retail meat market Question No 15.Competitive generic strategies
Page 228-237Chapter 6
Case 5 : A retail meat market Question no 26.Competitive market position and related strategies
Page 228-237Chapter 8
Case 6 : A retail meat market Question No 37.Strategic alliance and network
Page 228-237Chapter 9
Exam -
3
Portfolio models
Portfolio models are a visual tool used to:1. Compare all SBUs within a company on specific
criteria. 2. Give an indication of the most logical strategic
direction to take each SBU, and to what extent, i.e., the level of resources to commit.
3. They provide some of the supporting evidence needed to validate strategic decisions.
Strategic business unit (SBU)
1. operates in a different industry or market, each of which has
different market conditions and potential;2. has its own set of customers; 3. has its own set of competitors; 4. has a range of product/service offerings;
1. at different stages of the product/market life cycle; and 2. each with different resource needs based on potential and
growth direction.
4
A part of a larger business that operates as a small, separate business. Each SBU:
Product Strategy
Product-Mix Width
Prod
uct-L
ine
Stre
ngth
Jet
Product StrategyProduct-Mix Width
Prod
uct-L
ine
Stre
ngth
Production closed in 1991
Production closed in 1984
787
Airbus Industrie
Multinational Consortium of two-stated-owned enterprises:
• France Aerospatiale (37,9 %) and Spain’s CASA (4,2%)
• Deutsche Airbus (37,9%) and British Aerospace (20%)
Airbus IndustrieA 380, Airbus’ latest product
Airbus
9
The GE/McKinsey model
1. Developed by McKinsey for General Electric in the 1970s to overcome some of the limits of the BCG Model.
2. Uses several factors combined and compared to calculate business strength and market attractiveness.
3. Is calculated using management assessment.
4. Contains nine sectors with different strategy implications suggested for each sector.
GE
Harvest or divest
Manage selectively or for earnings
Invest / Grow
Business strength
High Medium Low
5 4 3 2 1
5High
4
Medium 3
Low 2
1
B
A
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The GE/McKinsey Model for Airbus
Airbus380
Airbus 319
Airbus 340
Airbus 330-300
380
Harvest or divest
Manage selectively or for earnings
Invest / Grow
Business strength
High Medium Low
5 4 3 2 1
5High
4
Medium 3
Low 2
1
B
A
C D
Mar
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ess
The GE/McKinsey Model for Boeing
B727
B787-400
B717-200
B787
12
Parts of the GE Model1. Market/industry attractiveness indicates how easy it is for
the business to achieve its objectives given the opportunities within the particular market or industry.
2. Business strength is a comparative factor indicating how successful the business is likely to be compared to its direct competitors.
3. Circles represent the comparative size of the overall market.
4. Shaded sectors indicate the market share of the particular business or SBU.
5. Sectors indicate a range of strategy directions suggested for SBUs located in each sector.
6. Arrows indicate the future position of the SBU over the next 3 to 5 years if current strategies remain in place.
13
Calculating market attractiveness and business strength
1. Decide what factors are most relevant.
2. Decide how many factors need to be included to create a balance between completeness and functionality.
3. Decide the relative weighting to be attributed to each factor.
4. Allocate a score for the company’s SBUs representing performance against each factor.
Market Attractiveness Analysis, 2009
Weight Rating( 1 – 5 )
ValueDescription
1. Overall market size
2. Annual market growth rate
3. Historical profit margin
4. Competitive intensity
5. Technological requirements
6. Inflationary vulnerable
7. Energy requirement
8. Environment impact
9. Social/political/legal
0.20
0.20
0.15
0.15
0.15
0.05
0.05
0.05
Must be
acceptable
1.00
4.00
5.00
4.00
2.00
4.00
3.00
2.00
3.00
0.80
1.00
0.60
0.30
0.60
0.15
0.10
0.15
3.70
Business Strength Analysis, 2000
Weight Rating( 1 – 5 )
ValueDescription
1. Market share2. Share growth3. Product quality4. Brand reputation5. Distribution network6. Promotional effectiveness7. Productive capacity8. Productive eficiency9. Unit costs10. Material supplies11. R & D performance12. Managerial personnel
0.100.150.100.100.050.050.050.050.150.050.100.05
1.00
4.002.004.005.004.003.003.002.003.005.003.004.00
0.400.300.400.500.200.150.150.100.450.250.300.20
3.40
GE port folio strategy
Mar
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ess
Business strength5.00 1.003.67
2.33
5.00
3.67
2.33
1.00
1.Protectposition
2.Invest tobuild
3. Build selectively
4. Build selectively
5. Selectively manage
for earning
6. LimitedExpansionOr divest
7. Protect& refocus
8. ManageFor earning 9.Divest
Strong Medium Weak
High
Medium
Low
G.E. Port Folio Strategy
1. Protect position Invest to growth at maximum digestible rate. Concentrate effort on maintaining strength
2. Invest to build Challenge for leadership Build selectively on strengths Reinforce vulnerable areas
3.Build selectively
Specialize around limited strengths Seek way to overcome weaknesses Withdraw if indications of sustainable growth are lacking
4. Build selectively
Invest heavily in most attractive segments Build up ability to counter competition Emphasize profitable by raising productivity
5. Selectively/Manage for earnings Protect existing program Concentrate investments in segments where profitable is good and risk are relatively low
6. Limited expansionOr Harvest
Look for way to expand without high risk, otherwise, minimize investment and rationalize operations
7.Protect andrefocus
Manage for current earnings Concentrate on attractive segments. Defend strengths
8. Manage for Earning
Protect position in most profitable segments. Upgrade product line Minimize investment
9. Divest
Sell at time that will maximize cash value Cut fixed costs avoid investment meanwhile
G.E. Port Folio Strategy
Business Strength
Mar
ket
Attra
ctiv
enes
s
1.00
2.33
3.67
5.00
1.003.67 2.335.00
Low
Medium
High
Strong Medium Weak
2014
2011
BuildSelectively
Cars