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Corporate Strategy

1. Directional Strategy-orientation

towards growth, stability or retrenchment

2. Parenting Strategy-coordination ofactivities, transfer of resources

3. Portfolio Strategy-industries or markets

in which firm competes

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Directional Strategy

Growth Concentration-

vertical growthintegration into buyers or sellers

horizontal growth- merger, acquisition

Diversification-

. concentric- strong competitive position but low industryattractiveness (related business)

- conglomerateunattractive industry unrelated business

Stabilityno change

Retrenchmentsell out, divest, bankruptcy

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Portfolio StrategyThe BCG Growth Matrix for

Evaluating DiversifiedCompanies

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BCG Matrix

Stars

Question

Marks

CashCows Dogs

Relative Market Share

Industry

Growth

High Low

High

Low

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BCG Growth Matrix

Questions Marks

-New products with potential for success

Stars

- market leaders at the peak of the product cycleCash Cows

- declining stage of the life cycle bringing a lot of

cash for investing in new question marks

Dogs

-low market share and low growthhence sell off

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Characteristics of Cash Cows

A cash cow business generates cash surpluses over

and above what is needed to sustain its present

market position

Such businesses are valuable because surplus cash canbe used to

Pay corporate dividends

Finance new acquisitions Invest in promising Dogs

Strategic objective: Fortify and defend present market

position--keep the business healthy!!!

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Characteristics of DOGS

A business is a DOGwhen its internal cashflows are inadequate to fully fund its need forworking capital and new capital investment

the parent company has to con t inual ly pumpin capital to feed the DOG

Strategic options

Aggressively invest in

attract iveDOGS Divest DOGS lacking

long-term potential

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GE Nine-Cell Matrix

Low

High

Medium

AverageStrong Weak

Market Size

Growth Rate

Profit Margin

Intensity of CompetitionSeasonality

Cyclicality

Resource Requirements

Social Impact

Regulation

EnvironmentOpportunities & Threats

Relative Market Share

Reputation/ Image

Bargaining Leverage

Ability to Match

Quality/Service

Relative Costs

Profit Margins

Fit with KSFs

IndustryAttract iveness

Rating Scale: 1 = Weak ; 10 = Strong

6.7

3.3

10.0

1.0

1.03.36.7

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Strategy Implications of

Attractiveness/Strength Matrix

Businesses in upper left corner

Accorded top investment priority

Strategic prescription is grow and bui ld Businesses in three diagonal cells

Given medium investment priority

Invest to maintain pos i t ion

Businesses in lower right corner

Candidates for harvest ing or divest i ture

May be candidates for an overhaul and reposi t ion

strategy

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The Attractiveness/Strength

Matrix Allows for intermediate rankings between high and

low and between strong and weak

Incorporates a wide variety of strategically relevant

variables

Stresses allocating corporate resources to

businesses with greatest potential for

Competitive advantage and Superior performance

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Decide Resource Allocation

Priorities and Strategic

Direction Objective:

Get the biggest bang for the buck

in allocating corporate resources

Procedure:

Rank each business from highest to lowest priorityfor corporate resource support and new investment(steer resources to high opportunity areas and limitsupport to low opportunity areas)

Develop a general strategic direction for eachbusiness

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