Forretning og Ledelse – Lektion 7

1. Forretning og Ledelse – Lektion 7 Business Portfolio Management

2. Forretning og Ledelse – Lektion 7 Diversification Reasons • Economies of Scope • Corporate managerial capabilities • Increased market power • Environmental change • Risc spreading • Expectation of powerful stakeholders

3. Forretning og Ledelse – Lektion 7 Growth Related Diversification • Vertical Integration • Backward Integration • Forward Integration Horizontal Integration Unrelated Diversification Conglomerate – Dominant Management Logic Underdeveloped Markets

4. Forretning og Ledelse – Lektion 7 Ansoff’s Growth Matrix Products Existing New Market Penetration Consolidation Product Development Existing Markets New Market Development Diversification

5. Forretning og Ledelse – Lektion 7 Related Diversification Backward integration Raw materials supply Component Supply Financing Transport Horizontal integration Competitive Products Manufacturer Complementary Products Forward integration Distribution outlets Repair Servicing Transport

6. Forretning og Ledelse – Lektion 7 High Performance Low Related limited diversification Unrelated extensively diversified Undiversified

7. Forretning og Ledelse – Lektion 7 Reasons for international diversity • Globalization of markets and competition • Follow customers • Bypass limitations in home market • Differencies between countries and geographical regions • Broader size of the market • Internationaliation of value added activities (outsourcing)

8. Forretning og Ledelse – Lektion 7 The International Network • Cost Advantages • Unique Capabilities • Characteristics of national locations

9. Forretning og Ledelse – Lektion 7 Value Creation and the corporate parent Value adding activities • Corporate strategic intent • Intervening within business to improve performance • Own expertise Value destroying activities • Bureaucratic fog • Financial safety net • Focus for managerial ambition

10. Forretning og Ledelse – Lektion 7 The role of the corporate parent • Portfolio manager • Synergy manager • Parental Developer

11. Forretning og Ledelse – Lektion 7 The parenting matrix: The Ashridge Portfolio Display High Ballast Businesses Heartland Businesses Fit between business units CSF and parent skills (Parent´s feel) Alien Businesses Value Trap Businesses Low Fit between business unit parenting opportunities and the parents skills (how will business benefit) High Low

12. SBU SBU SBU SBU Forretning og Ledelse – Lektion 7 Core Competencies Core Competencies Sell?? SBU Competence Buy??

13. Forretning og Ledelse – Lektion 7 • A company's core competency is the one thing that it can do better than its competitors. A core competency can be anything from product development to employee dedication. Modern business theories suggest that most activities that are not part of a company's core competency should be outsourced. • IThe concept of core competencies was developed in the management field • C.K. Prahalad and Gary Hamel introduced the concept in a 1990 Harvard Business Review article. They wrote that a core competency is "an area of specialized expertise that is the result of harmonizing complex streams of technology and work activity." • As an example they gave Honda's expertise in engines. Honda was able to exploit this core competency to develop a variety of quality products from lawn mowers and snow blowers to trucks and automobiles. To take an example from the automotive industry, it has been claimed that Volvo’s core competence is safety. • According to Prahalad and Hamel a core competence has three characteristics: • it provides potential access to a wide variety of markets, • it increases perceived customer benefits and • it is hard for competitors to imitate. • For example, Black and Decker's core technological competency is in 200 to 600 W electric motors. All of their products are modifications of this basic technology (with the exception of their work benches, flash lights, battery charging systems, toaster ovens, and coffee percolators).

14. SBU SBU SBU SBU SBU Divisions Divisions Core Products Core Products Core Products Core Competencies Forretning og Ledelse – Lektion 7

15. Market Growth Rate High Question Mark Star 10% Cash Cow Dogs Low 1.0 High Low Relative Market Share Forretning og Ledelse – Lektion 7 The Growth Share Matrix

16. Business Strength Strong • Protect Position • Invest to grow at maximum digestible rate • Concetrate effort on maintaining strength Medium • Invest to Build • Challenge for leadership • Build selectively on strength • Reinforce vulnerable areas Weak • Build Selectively • Specialize around limited strengths • Seek ways to overcome weaknesses • Withdraw if indication of sustainable growth are lacking High • Build Selectively • Harvest 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 profiitabiity is good and risks are relatively low • Limited Expansion or Harvest • Look for ways to expand without high risk; otherwiise minimize investment and rationalize operations Market Attractiveness Medium • Protect and Refocus • Manage for current earnings • Concentrate on attractive segments • Defend strength • Manage for Earnings • Protect position in most profitable segments • Upgrade product line • Minimize investment • Divest • Sell at time that will maximize cash value • Cut fixed costs and avoid investments meanwhile Low Forretning og Ledelse – Lektion 7

17. High Question Mark Star 10% Cash Cow Dogs Low 1.0 High Low Relative Market Share Forretning og Ledelse – Lektion 7 Opgave Lav en vækststrategi for SAS