Strategy levels Top Management Business Unit #1 Business Unit #2 Business Unit #3 R&D, Marketing & Sales, Finance, Information Systems, Human Resources Procurement, Marketing & Sales, Manufacturing, Information Systems, Human Resources R&D, Manufacturing, Marketing & Sales, Logistics, Human Resources Functional (secure effective & efficient operations in each area) Corporate-level (define the overall scope & direction of the company) Business-level (secure competitive advantage for each business unit)
This guides decisions on which business to expand, maintain or exit:
STARS are businesses with a high market share in a fast-growing market. They can generate significant cash flows but may also need a lot of resources to sustain their growth.
QUESTION MARKS are businesses with little market share but a high growth potential. These businesses are cash users and can be risky.
CASH COWS are businesses that have a high market share in a slow-growth market. They generate dependable cash flows to fund business units with better growth. Invest just to maintain their market positions.
DOGS are businesses with a low market share in a slow-growth market. Such businesses can still be profitable but the company will not invest in them any further and may even consider selling them.
DOGS CASH COWS Low QUESTION MARKS STARS High Market Growth Low High Market Share Boston Consulting Group (BCG) Matrix:
Level : Vertical integration vs. horizontal integration
Geographic Location : International growth vs. domestic growth
Pause, digest, and consolidate after rapid growth or some turbulent events
Turnaround through cost cutting, downsizing, divestment, or spin-off
Bankruptcy and restructuring
Liquidation (last resort)
Corporate growth strategies Vertical Integration Forward or Backward International Global or Multi-domestic Horizontal Integration Diversification Related or Unrelated Corporate Growth Concentration
Diversify into related businesses under some coherent strategic theme
Examples : Johnson & Johnson, Pepsico, Time Warner, Citigroup
Potential benefits of related diversification
Cross-business sharing of expertise, capabilities and technology
Exploit economics of scope and capture synergy benefits from combining similar operations (e.g., manufacturing, sales and marketing, distribution, R&D, information systems, and managerial support) of different businesses
Enable collaboration to develop new strengths and create mew competitive capabilities (including new products and new services)
Leverage use of a company’s brand name
Increase market power
Drawbacks of related diversification
Difficulties of integrating the operations of businesses with different cultures
Direct investment (joint ventures or wholly-owned subsidiaries)
These alternative options vary in their degree of speed, control, and risk, as well as the required level of investment and market knowledge.
Types of cross-border market differences
Differences in consumer tastes and preferences
Differences in buying habits
Differences in infrastructure and distribution channels
Differences in government regulations
Potential benefits from international growth Gain access to new markets with attractive growth Capitalize on resource strengths and competencies Enable cost reduction Diversify business risks across a wider market base Get access to valuable natural resources and raw materials
Basic strategic alternatives for international growth Global Strategy Transnational Strategy Multi-domestic Strategy High Low Pressures for Local Responsiveness Cost Pressures Low High
It deemphasizes national differences, having products standardized across national markets. This works best when buyer tastes and preferences are similar across countries or can be standardized through marketing efforts.