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STRATEGIC MANAGEMENTModule-II
(Strategic choice)
Prof. Ayesha Farooq
https://professorayeshafarooq.com
FMSR ,AMU
Introduction to Strategic Management: Understanding Strategy; Defining and Explaining Strategy; Levels at which Strategy Operates;
Strategic Decision-making; The Process of Strategic Management; Strategies and their Role in Strategic Management
Strategic Intent: Hierarchy of Strategic Intent; Vision; Mission; Business Definition; Goals and Objectives
Business Strategy Formulation: Business Level Strategy; The Concept of Competitive Advantage; SWOT Analysis; Key Success Factors;
The Value Chain
External Analysis: Industry Structure; Pest Analysis; Defining the Scope of the Industry; Dynamics of Competition
Corporate Strategy Formulation: Typology of Corporate Strategy; Single-business Firms; Diversification; Portfolio Techniques for
Corporate Strategic Planning; Mergers and Acquisitions; Joint Ventures, Strategic Alliances and Inter-Organizational Relations; Value
through Corporate Strategy
International Strategies: Opportunities and Challenges from Globalizations; Impact of National Conditions on Competitive Advantage;
Strategies in Geographical Expansion
Strategic Organizational Design: Organizational Structure and Design; Organizational Structure and Its Competitors; Basic
Organizational Configurations; Relationship between Strategy and Structure
Learning and Knowledge Organization Strategy: Dynamic Capabilities; Organizational Learning; A Model for Knowledge Organizations
Family and Micro Business Strategy: Family Business as s System; Strategic Concerns of the Family Business; Corporate Strategy in
Family Business; Strategic Decision-Maker in a Micro Business; Global Linkages of Micro Business; Local Linkages for Micro Business
Internetworking and E-Business Strategy: Value Proposition of the Internet working Strategy; Types of Internetworking Business
Models; Level and Form of Internetworking Models
Strategic Leadership: Significance of Strategic Leadership; Models of Strategic Leadership
Corporate Governance and Business Ethics: Corporate Governance Mechanisms; Corporate Governance in India; Corporate
Governance: Shareholder Versus Stakeholder Theory; Corporate Social Responsibility Strategic Planning and Change Management:
Triggers for change; Strategic Planning; Types of Changes in Organizations; Managing Strategic Change; Internal Changes as Firms
Privatize
Strategic Control: Context for Strategic Control; Criteria for Strategic Control; Mechanisms for Strategic Control
Strategic Decision-Making: Planning Process; Programming System; Performing Modalities; Profitability Factor; Development Growth
DGM14 - STRATEGIC MANAGEMENT AND ETHICS
StrategyFormulation
StrategyImplementation
Concept of Strategy
&
Strategic Intent
2
Corporate- Level Strategic Analysis
Corporate Portfolio Analysis
A set of techniques that help strategists in taking strategic decisions with regard to
individual products or businesses in a firm’s portfolio.
THE BCG MATRIX
BOSTON CONSULTING GROUP (BCG) MATRIX is developed by BRUCE
HENDERSON of the BOSTON CONSULTING GROUP IN THE EARLY 1970’s.
A means of analysing the product portfolio and informing decision making
about possible marketing strategies
According to this technique, businesses or products are classified as low or
high performers depending upon their market growth rate and relative
market share.
MARKET SHARE• Market share is the percentage of the total market that is being
serviced by the company, measured either in revenue terms or unit
volume terms.
• RELATIVE MARKET SHARE
• RMS = Business unit sales this year
Leading rival sales this year
• The higher your market share, the higher proportion of the market
you control.
MARKET GROWTH RATE
Market growth is used as a measure of a market’s attractiveness.
MGR = Industry sales - industry sales
this year last year
Industry sales last year
Markets experiencing high growth are ones where the total market share
available is expanding, and there ’ s plenty of opportunity for
everyone to make money.
THE BCG GROWTH-SHARE MATRIX
It is a portfolio planning model which is based on the observation that a
company’s business units can be classified in to four categories:
Stars
Question marks
Cash cows
Dogs
It is based on the combination of market growth and market share
relative to the next best competitor.
BCG MATRIX
STARS: HIGH GROWTH, HIGH MARKET SHARE
Stars are leaders in business.
They also require heavy investment, to maintain its large market share.
It leads to large amount of cash consumption and cash generation.
Attempts should be made to hold the market share otherwise the star
will become a CASH COW.
CASH COWS: Low growth , High market share
They are foundation of the company and often the stars of yesterday.
They generate more cash than required.
They extract the profits by investing as little cash as possible
High market share
Low growth markets – maturity stage of PLC
Low cost support
QUESTION MARKS/PROBLEM CHILD
High growth , Low market share
Most businesses start of as question marks.
They absorb great amounts of cash if the market share remains
unchanged, (low).
Products having a low market share in a high growth market
Question marks have potential to become star and eventually cash cow
but can also become a dog.
Investments should be high for question marks.
May produce negative cash flow
Potential for the future.
DOGS: Low growth, Low market share
Dogs are the cash traps.
Dogs do not have potential to bring in much cash.
Number of dogs in the company should be minimized.
Business is situated at a declining stage.
Have low or declining market share (decline stage of PLC)
Associated with negative cash flow
May require large sums of money to support
Is your product starting to embarrass your company?
PORTFOLIO ANALYSIS
© Boston Consulting Group
WHY BCG MATRIX ?
To assess :
Profiles of products/businesses
The cash demands of products
The development cycles of products
Resource allocation and divestment decisions
MAIN STEPS OF BCG MATRIX
Identifying and dividing a company into SBU.
Assessing and comparing the prospects of each SBU according to
two criteria :
1. SBU’S relative market share.
2. Growth rate of SBU’S industry.
Classifying the SBU’S on the basis of BCG matrix.
Developing strategic objectives for each SBU.
BENEFITS
BCG MATRIX is simple and easy to understand.
It helps to quickly and simply screen the opportunities open , and
helps think about how you can make the most of them.
It is used to identify how corporate cash resources can best be used
to maximize a company’s future growth and profitability.
LIMITATIONS
BCG MATRIX uses only two dimensions, Relative market share and
market growth rate.
Problems of getting data on market share and market growth.
High market share does not mean profits all the time.
Business with low market share can be profitable too.
GE NINE- CELL
HIGH
MEDIUM
LOW
STRONG AVERAGE WEAK
BUSINESS STRENGTH/ COMPETITIVE POSITON
I
N
D
U
S
T
R
Y
A
T
T
R
A
C
T
I
V
E
N
E
S
S
GREEN
YELLOW
RED
INVEST/ EXPAND
SELECT/ EARN
HARVEST/ DIVEST
IMPROVE
OR QUIT
GENERATE
CASH
PROCEED
WITH CARE
ZONESTRATEGIC
SIGNAL
STRATEGIC IMPLICATIONS OF THE G.E. 9-CELL
MATRIX
SBUs in 3 upper left cells get top investment priority
SBUs in 3 middle diagonal cells merit steady investment to maintain &
protect their industry positions
SBUs in 3 lower right cells are candidates for harvesting or divestiture
Advantages of G.E. 9-Cell Matrix
Allows for intermediate rankings between high & low and between
strong & weak
Incorporates a wider variety of strategically relevant variables than the
BCG matrix
Stresses the channeling of corporate resources to SBUs with the
greatest potential for competitive advantage & superior performance
PRODUCT LIFE CYCLES
Product Life Cycle – shows the stages that products go through from
development to withdrawal from the market:
Each product may have a different life cycle
PLC determines revenue earned
Contributes to strategic marketing planning
May help the firm to identify when a product needs support, redesign,
reinvigorating, withdrawal, etc.
May help in new product development planning
May help in forecasting and managing cash flow
PRODUCT LIFE CYCLES
The Stages of the Product Life Cycle:Development
Introduction/Launch
Growth
Maturity
Saturation
Decline
Withdrawal
PRODUCT LIFE CYCLES
The Development Stage:
Initial Ideas – possibly large number
May come from any of the following –Market research – identifies gaps in the market
Monitoring competitors
Planned research and development (R&D)
Luck or intuition – stumble across ideas?
Creative thinking – inventions, hunches?
Futures thinking – what will people be using/wanting/needing 5,10,20 years hence?
PRODUCT LIFE CYCLES
Product Development: StagesNew ideas/possible inventionsMarket analysis – is it wanted? Can it be produced at a
profit? Who is it likely to be aimed at?Product Development and refinementTest Marketing – possibly local/regionalAnalysis of test marketing results and amendment of
product/production processPreparations for launch – publicity, marketing
campaign
PRODUCT LIFE CYCLES
Introduction/Launch:
Advertising and promotion campaigns
Target campaign at specific audience?
Monitor initial sales
Maximise publicity
High cost/low sales
PRODUCT LIFE CYCLES
Growth: Increased consumer awareness
Sales rise
Revenues increase
Costs - fixed costs/variable costs, profits may be made
Monitor market – competitors reaction?
PRODUCT LIFE CYCLES
Maturity:
Sales reach peak
Cost of supporting the product declines
Ratio of revenue to cost high
Sales growth likely to be low
Market share may be high
Competition likely to be greater
Monitor market – changes/amendments/new strategies?
PRODUCT LIFE CYCLES
Saturation:New entrants likely to mean market is ‘flooded’
Necessity to develop new strategies becomes more pressing: Searching out new markets: Linking to changing fashions Seeking new or exploiting market segments Linking to joint ventures – media/music, etc.
Developing new uses Focus on adapting the product Re-packaging or format Improving the standard or quality Developing the product range
PRODUCT LIFE CYCLES
Decline and Withdrawal:Product outlives/outgrows its usefulness/value
Fashions change
Technology changes
Sales decline
Cost of supporting starts to rise too far
Decision to withdraw may be dependent on availability of new products and whether fashions/trends will come around again?
PRODUCT LIFE CYCLES
Sales
Time
Development Introduction Growth Maturity Saturation Decline
Product Life Cycles
Sales
Time
Effects of ExtensionStrategies
Product Life Cycles
Sales/Profits
Time
PLC and Profits
PLC
Losses
Break Even
Profits