module grand startegies

7/29/2019 Module Grand Startegies

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Copyright 2007 Prentice HallCh 6 -1

BCG Matrix

Boston Consulting Group Matrix

Enhances multi-divisional firm in formulating

strategies

Autonomous divisions = business portfolio

Divisions may compete in different industries

Focus on market-share position & industry

growth rate


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BCG Matrix

Relative Market Share Position

Ratio of a divisions own market share in anindustry to the market share held by the largest

rival firm in that industry


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Portfolio Analysis: BCG Matrix

Exhibit 5

11


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BCG Matrix

Question Marks

Low relative market share compete in high-

growth industry

Cash needs are high

Case generation is low

Decision to strengthen (intensive strategies) ordivest


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BCG Matrix

Stars

High relative market share and high growth rate

Best long-run opportunities for growth & profitability

Substantial investment to maintain or

strengthen dominant position

Integration strategies, intensive strategies, jointventures


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BCG Matrix

Cash Cows

High relative market share, competes in low-

growth industry

Generate cash in excess of their needs

Milked for other purposes

Maintain strong position as long as possible

Product development, concentric diversification

If weakensretrenchment or divestiture


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BCG Matrix

Dogs

Low relative market share & compete in slow or

no market growth

Weak internal & external position

Liquidation, divestiture, retrenchment


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Grand Strategy Matrix

Tool for formulating alternative strategies

Based on two dimensions

Competitive position

Market growth


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Quadrant IV

1. Concentric diversification

2. Horizontal diversification

3. Conglomerate

diversification

4. Joint ventures

Quadrant III

1. Retrenchment


3. Horizontal diversification

4. Conglomerate

diversification

5. Liquidation

Quadrant I

1. Market development

2. Market penetration

3. Product development

4. Forward integration

5. Backward integration

6. Horizontal integration


Quadrant II

1. Market development

2. Market penetration

3. Product development

4. Horizontal integration

5. Divestiture

6. Liquidation

RAPID MARKET GROWTH

SLOW MARKET GROWTH

WEAKCOMPETITIVE

POSITION

STRONGCOMPETITIVE

POSITION


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Excellent strategic positionConcentration on current markets/products

Take risks aggressively when necessary

Quadrant I


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Evaluate present approach

How to improve competitiveness

Rapid market growth requires intensive

strategy

Quadrant II


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Compete in slow-growth industries

Weak competitive position

Drastic changes quickly

Cost & asset reduction (retrenchment)

Quadrant III


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Strong competitive position

Slow-growth industry

Diversification to more promising growth areas

Quadrant IV


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Organizational Strategies occur on 3 levels: Grand,

Business, and Functional

A. Grand level strategies:

- 1. Growth (a. concentration; b.

diversification)

- 2. Retrenchment

- 3. Stability (status quo)

- 4. Combination (multiple strategies)


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1a. Growth through concentration

concentrating on your existing specialization

i. market penetration aggressively targeting

current markets with existing product specialties

ii. market development/geographic expansion

expanding into new marketsiii. market segmentation dividing existing

markets

iv. product development modify existing

products, or develop new but relatedproducts


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1b. Growth through diversification branchingout into new areas

i. horizontal integration expanding across thegeneral industry (e.g. Coke acquires Minutemaid).

ii. vertical integration expanding into industriespopulated by suppliers/buyers (e.g. Ford buys steel

plant).

iii. conglomerate diversification expanding intounrelated industries (e.g. GM buys Hersheyscandy).

iv. joint venture expanding together with anothercompany in order to diversity efficiently.


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2. Retrenchment

i. Turnaround downsizing existing

company/divisions

ii. Divestiture selling off existingdivisions/subdivisions

iii. Liquidation Chapter 11 bankruptcy


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3. Stability - maintain status quo (e.g.

continuous improvement)

4. Combination multiple use of strategies


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SKILLS

STAFF

SHARED

VALUES

STRATEGY

STRUCTURE

STYLE

SYSTEMS

Seven S Model of Implementation


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Seven S Model

1. StrategyPlan or course of action leading to the allocation of firmsresources to reach identified goals.

2. Structure The ways people and tasks relate to each other. The basicgrouping of reporting relationships and activities. The way separateentities of an organization are linked.

3. Shared Values The significant meanings or guiding concepts thatgive purpose and meaning to the organization.

4.

Systems Formal processes and procedures, including managementcontrol systems, performance measurement and reward systems, andplanning and budgeting systems, and the ways people relate to them.

5. Skills Organizational competencies, including the abilities ofindividuals as well as management practices, technological abilities, andother capabilities that reside in the organization.

6. Style The leadership style of management and the overall operatingstyle of the organization. A reflection of the norms people act upon andhow they work and interact with each other, vendors, and customers.

7. Staff Recruitment, selection, development, socialization, andadvancement of people in the organization.

module grand startegies

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