Specifies actions a firm
takes “ to gain a competitive
advantage by selecting and
managing a group of different
businesses competing in
different product markets.”
Those strategies concerned
with the broad and long-term
what business(es) the
organization is in or wants to
be in & what it wants to do
with those businesses
The scope of the markets and
industries the firm competes in.
How the firm manages their
portfolio of businesses
Mode of entry into new businesses
Level and type of diversification
Capturing synergies between
Allocating corporate resources
An organization substantially broadens
the scope of one or more of its
business in terms of their respective
customer group, customer functions
and alternative technologies to
improve its overall performance.
BASIC GROWTH STRATEGIES:
• Company’s product lines have real
• And concentration of those product
lines makes sense as a strategy for
• Achieved by taking over a
function previously provided
by a supplier or by a
• Achieved by expanding its
operations into other
geographic locations and /or
by increasing the range of
products and services offered
to current makers
• Diversification is a corporate
strategy to increase sales volume
from new products and new
• Diversification can be expanding
into a new segment of an industry
that the business is already in, or
investing in a promising business
outside of the scope of the
• Diversification is part of the four
main growth strategies defined by
Igor Ansoff's Product/Market
• Into a related industry,
when a firm has a
position but industry
attractiveness is low.
• Into an industry
unrelated to its current
• Corporation continues its current
activities without any significant change
• Are useful in short run, but can be
dangerous if followed for too long.
• Incremental improvements are
made until a particular
environment situation changes.
• A decision to do nothing new-a
choice to continue current
operations and policies for the
• An attempt to artificially support
profits when a company ‘s sales
are declining by reducing
investment and short-term
Strategy reduced by the
corporations to reduce
diversity or the overall
size of the operations of
When a company has weak
Companies try to become
more financially stable.
Have problems bur aren’t
Backing out or retreating from
Cutting expenses or selling
Great for catching problem
PHASES OF TURNAROUND
Sony corp. eliminated 10,000 jobs
Closed 11 of 65 plants.
Implements a program to stabilize new
Crucial because if not conducted right
could loose good employees.
• Giving up independence for security
• Management searches for an angel
• Weaker company offers to be captive
company to its largest customer in
order to guarantee that the company
Example: to become a sole supplier of an
auto part to GENERAL MOTORS.
SIMPSON INDUSTRIES of
Brimingham agreed to let a special
team from GM to inspect its engine
parts facilities and imterview its
• Sell company to another firm.
• Have resources that will return its
corporation to profitability.
• Weak competitive position.
• Example: Northwest Airline
Multi-unit corporation sells off units
that don’t fit into their new strategy
• Example: Lego’s turnaround
strategy when management decided
to divest its theme parks to
concentrate more on its core
business of making toys.
When a company finds it self in
No one wants to buy a weak
company in an unattractive
Give up to the courts in
exchange for settlement
Sell all assets for cash
Pay off shareholders
Better than bankruptcy but still
• “ the strategic units that make up the company and
the attempts to evaluate current effectiveness and
vulnerabilities” (McDonald et al, 1992)
• Requires the continual evaluation of a firms
portfolio of business units
• This involves:
– Assessing the attractiveness of the industries
the firm competes in
– Assessing the competitive strength of a firm's
– Checking the competitive advantage potential
of sharing activities and/or transferring
competencies across business units
– Checking the potential for capturing financial
Examples of Portfolios
• Unilever: ice cream, tea, spreads,
• Proctor & Gamble: Detergents,
• Gillette: batteries, Shaving products
• Virgin; trains, planes, cola, music
• Useful Tools for Portfolio
– Nine cell industry attractiveness
and competitive strength matrix
– BCG growth share matrix
• Simplest way to portray a corporation’s
portfolio of investments.
RELEVANCE & IMPORTANCE OF BCG
• To ensure long-term value
creation, a company should have
a portfolio of products that
contains both High-growth
products in need of cash inputs
and Low-growth products that
generate a lot of cash.
• Used to determine what
priorities should be given in the
product portfolio of a business
• The BCG Matrix has 2
dimensions : Relative Market
share and Market growth. The
basic idea behind it is : if a
product has a bigger market
share or if the product's market
grows faster, it is better for the
ADVANTAGES AND LIMITATIONS
OF PORTFOLIO ANALYSIS
• Encourages top management to evaluate each of the
corporations businesses individually and to set
objectives and allocate resources for each.
• Stimulates the use of externally oriented data to
supplement management’s judgment.
• Raises the issue of cash flow availability for use in
expansion and growth.
• Its graphic depiction facilitates communication.
• Defining product/market segments is
• It suggest the use of standard strategies
that can miss opportunities or be
• It provides an illusion of scientific rigor
when in reality positions are based on
• It is not always clear what makes an
industry attractive or where a product is
in its life cycle.
• Views a corporation in terms of
resources and capabilities that can be
used to build business unit value as
well as generate synergies across
• Corporate parenting generates
corporate strategy by focusing on the
core competencies of the parent
corporation and on the value created
from the relationship between the
parent and its businesses.
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