Download - Corporate Strategy-4 2003
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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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