By Prof. Rajkamal .

1. ByProf. Rajkamal. Unit II: Portfolio Approach & Analysis

2. Syllabus: Components of External environment b) Components of Internal environment c) Environmental scanning. Industry Analysis a) A Framework for industry analysis b) Michael Porter‟s Analysis c) Usefulness of industry analysis; Portfolio Approach & analysis - a) Portfolio analysis, advantages & disadvantages, b) BCG Matrix c) General Electric‟s Business Screen, d) Life cycle or Arthur D Little matrix, e) Balance scorecard. 7s Framework, Strategic Business Unit (SBUS), Merits & Demerits of SBU; Leadership, Power & organisation culture

3. BCG matrixMarket Growth / Market share matrix 20 Market Growth Rate (%) Question Marks STARS 10 Dogs Cash cow 0 x 10x 0.1 x Relative Market share

4. BCG MatrixMarket Growth / Market Share Matrix

5. Protect Position Invest to grow Concentrate effort on maintaining strength Invest to build Challenge for leadership Build selectively Reinforce vulnerable areas Build Selectively Specialize around limited strengths Seeks ways to overcome weakness Withdraw if indications of sustain growth is lacking GE MODEL Business Strength M A R K E T A T T R A C T I V E N E S S Build Selectively Invest heavily in most attractive segments Build up ability to counter competition Emphasize profitability by raising productivity Selectivity/Manage for earnings Protect existing program Concentrate investments in segments where profitability is good and risks are relatively low Limited Expansion or Harvest Look for ways to expand without high risk ,Otherwise minimize investment and rationalize operations Protect and Refocus Manage for current earnings Concentrate on attractive segments Defend strengths Manage for earnings Protect position in most profitable segments Upgrade product line Minimize investment Divest Sell at time that will maximize value Cut fixed costs and avoid investment meanwhile High Medium Low Strong Medium Weak

6. GE Model (General Electric’s) • Market Attractiveness: Overall Market size Annual Market growth rate Historical profit margin Competitive intensity Technological requirements Energy requirements Inflationary vulnerability Social/ political / legal

7. Arthur D. Little Portfolio Matrix (ADL) Industry Maturity Compitative Position

8. McKinsey’s 7’s Frameworks Structure Strategy Shared Values Style Systems Skills Staff

9. What Is a Balanced Scorecard? A Measurement System? A Management System? A Management Philosophy? The balanced scorecard was first introduced by accounting academic Dr. Robert Kaplan and business executive and theorist Dr. David Norton. It was first published in 1992 in a Harvard Business Review article. Dr. Kaplan and Dr. Norton took previous metric performance measures and adapted them to include nonfinancial information.

10. Four perspective of the Balanced Score card EVA (Economic value added) Profitability Growth Differentiation Cost Quick response Product development Demand management Order fulfillment Leadership Organizational learning Ability to change

11. Translating Vision and Strategy: Four Perspectives FINANCIAL “To succeed financially, how should we appear to our shareholders?” Measures Targets Initiatives Objectives CUSTOMER INTERNAL BUSINESS PROCESS “To achieve our vision, how should we appear to our customers?” “To satisfy our shareholders and customers, what business processes must we excel at?” Measures Targets Initiatives Measures Targets Initiatives Objectives Objectives Vision and Strategy LEARNING AND GROWTH “To achieve our vision, how will we sustain our ability to change and improve?” Measures Targets Initiatives Objectives

12. Balanced Score Card • Perspectives • Financial perspective • How do we look to shareholders? • Customer perspective • How do customers see us? • Internal Business perspective (BPR) • What must we excel at? • Innovation & Learning perspective • Can we continue to improve & create value?

13. Example: anonymous semiconductor company • FINANCIAL perspective Finland 2010

14. CUSTOMER perspective Finland 2010

15. INTERNAL BUSINESS perspective Finland 2010

16. INNOVATION & LEARNING perspective Finland 2010

17. Grand Strategies Strategies Alternative Growth / Expansion Stability Retrenchment Combination Market penetration Market Development Product development Diversification Horizontal Concentric Conglomerate Vertical Forward Backward Incremental / growth Profit Sustainable growth Pause strategy Divestment Turnaround Liquidation Bankruptcy Joint Venture Strategic alliance Consortia

18. IGOR Ansoff Matrix

19. PORTER’S GENERIC STRATEGIES Competitive Advantage Lower Cost Differentiation Broad Target 1. Cost Leadership 2. Differentiation Competitive Score 3 B. Differentiation Focus 3 A. Cost Focus Narrow Target

20. REQUIREMENTS FOR GENERIC COMPETITIVE STRATEGIES Generic Commodity Required Common Organizational Strategy Skills and Resources Requirements Overall cost  Sustained capital investment  Tight cost control leadership access to capital  Frequent, detailed control reports  Process engineering skills  Structured organization and responsibilities  Intense supervision of labour  Incentives based on  Products designed for ease meeting strict quantitative  Low-cost distribution system targets in manufacture Differentiation  Strong marketing abilities  Strong coordination  Product engineering among functions in R&D,  Creative flare product development, and marketing Prof.Sushil\IITD\Session-VI

21. REQUIREMENTS FOR GENERIC COMPETITIVE STRATEGIESCONTD…  Strong capability in basic  Subjective measurement and research incentives instead of quantitative measures  Corporate reputation for  Amenities to attract highly quality or technological skilled labour, scientists, or leadership creative people  Long tradition in the industry or unique combination of skills drawn from other businesses  Strong cooperation from channels Focus  Combination of the above  Combination of the above policies policies directed at the directed at the regular strategic particular strategic target target

22. STAGE OF `INDUSTRY’ DEVELOPMENT Maturity Decline Growth Redefine scope Divest peripherals Encourage departures Cost leadership Raise barriers Deter competitors Keeping ahead of the field Leader Strategic position of organization Imitation at lower cost Joint ventures Differentiation Focus Differentiation New opportunities Follower

23. Types of Grand Strategies Concentrated Growth Conglomerate Diversification Market Development Turnaround Product Development Divestiture Innovation Liquidation Horizontal Integration Bankruptcy Vertical Integration Joint Ventures Concentric Diversification Strategic Alliances Consortia

24. Porters Five Forces