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01 - MBA 501 - Dynamic Strategy and Disruptive Innovation.pptx
- 1. MBA 501 - Dynamic Strategy and Disruptive Innovation Business Portfolio and Dynamic Capability Slide Presentation
- 2. Contents Introduction – Company Profile Business Portfolio Analysis Business Portfolio Recommendations Dynamic Capability Analysis Dynamic Capability Recommendations
- 3. Introduction Company Profile of MHS (Millennium Health Services) Incorporated in 1968 by 2 scientist focusing to develop skin care products Current revenue exceeding $4.3 billion and employs more than 4500 across Australia 4 major business Neutrino – Vitamins and Nutritional supplements Dermatech – Skin care products LOOKS – Cosmetic products Energino – Energy drinks
- 4. Top-down management style Managerial decisions taken by General manager and executive management team Approach of the board Competitive, Secretive and enhance the growth
- 5. Business Portfolio Analysis BCG matrix of Neutrion – Stars STARS (Neutrion) QUESTION MARKS CASH COWS DOGS
- 6. BCG matrix of Dermatech – Cash Cows STARS QUESTION MARKS CASH COWS (Dermatech) DOGS
- 7. BCG matrix of LOOKS – Dogs STARS QUESTION MARKS CASH COWS DOGS (LOOKS)
- 8. BCG matrix of Energino – Question marks STARS QUESTION MARKS (Energino) CASH COWS DOGS
- 9. GE – McKinsey Matrix
- 10. GE – McKinsey Matrix of NHS Based on the case analysis, the business unit strength of Dermatech is high and the market attractiveness is also high. From the information provided in the case study the business unit strength of Neutrino is medium and the market attractiveness is high, hence the business will grow in the future mainly in other markets Also, the business unit strength of LOOKS is medium and the market attractiveness is also medium, therefore the management need to revamp the strategy of the business Whereas, the business strength is low and the market attractiveness is also low for Energino, hence the business can be sold or harvested
- 11. Synergy matrix Neutrino has low incoming and high outgoing hence it is termed as givers for the business Energino has very less incoming and outgoing hence it is the misfit in the product portfolio
- 13. Synergy Matrix Dermatech possess major incoming and outgoing hence they are categorised as fit LOOKS take high incoming benefits to the business and provide very less hence they are stated as takers
- 15. Business Portfolio Recommendations The following is the detailed findings of the report
- 16. The company need to expand the business of Dermatech as it possess high potential to increase the income and profitability The management can consider to sell of the non profitable unit Energino as the market is highly competitive and it is considered as misfit for the company product portfolio Furthermore, the company can look to merge the two divisions Dermatech and LOOKS which will enable in reducing the operating cost and utilise the resources in a more competitive manner
- 17. The growth and attractiveness of cosmetics is very high and this is providing a huge potential of nearly 4 billion, hence the company can focus on this area to enhance its product offerings Though the energy drinks market provides attractive market share, the growth and attractiveness is very low, hence the company can looks to sell off the division
- 18. Dynamic Capability Analysis Dynamic capability is considered as the ability of the business enterprise to integrate, build and reconfigure various competencies so as to address the dynamic environment . The dynamic assessment is made on three major areas Mobilising the resources Identify and assess resources Transforming and reconfiguring the strategic assets
- 19. Identify and assess resources R&D of the company is highly effective There were overlaps in the research with unnecessary duplication The management has spent nearly $8 million on the project of developing skin cream from seaweed
- 20. Mobilising the resources The management need to integrate the cash reserves and R&D resources Each division is being run on its own and there is no transparency on the activities The executive committee members need to integrate the R&D, employees and other resources for sustainable growth and development
- 21. Transforming and reconfiguring the strategic assets Integrating the human resources Combining the capital for R&D investment Having an integrated and open environment to discuss on new projects and initiatives Exports and identification of new markets can be managed from a single department
- 22. Dynamic Capability Recommendations Application lean production model will enable the organisation to utilise the resources in an effective manner The management can implement quality tools like six sigma, kaizen etc. which will enable in enhancing the productivity and reduce the operational cost
- 23. Integration of assets In the fast changing dynamic environment the assets and resources needs to be integrated The company can implement strategic alliances and provide autonomy to the business to implement the desired projects
Editor's Notes
- BCG matrix is a framework created by Boston Consulting Group to evaluate the strategic position of the business brand portfolio and its potential. It classifies business portfolio into four categories based on industry attractiveness (growth rate of that industry) and competitive position (relative market share). These two dimensions reveal likely profitability of the business portfolio in terms of cash needed to support that unit and cash generated by it. The general purpose of the analysis is to help understand, which brands the firm should invest in and which ones should be divested.
- Relative market share. One of the dimensions used to evaluate business portfolio is relative market share. Higher corporate’s market share results in higher cash returns. This is because a firm that produces more, benefits from higher economies of scale and experience curve, which results in higher profits. Nonetheless, it is worth to note that some firms may experience the same benefits with lower production outputs and lower market share. Market growth rate. High market growth rate means higher earnings and sometimes profits but it also consumes lots of cash, which is used as investment to stimulate further growth. Therefore, business units that operate in rapid growth industries are cash users and are worth investing in only when they are expected to grow or maintain market share in the future.
- Dogs. Dogs hold low market share compared to competitors and operate in a slowly growing market. In general, they are not worth investing in because they generate low or negative cash returns. But this is not always the truth. Some dogs may be profitable for long period of time, they may provide synergies for other brands or SBUs or simple act as a defense to counter competitors moves. Therefore, it is always important to perform deeper analysis of each brand or SBU to make sure they are not worth investing in or have to be divested. Strategic choices: Retrenchment, divestiture, liquidation Cash cows. Cash cows are the most profitable brands and should be “milked” to provide as much cash as possible. The cash gained from “cows” should be invested into stars to support their further growth. According to growth-share matrix, corporates should not invest into cash cows to induce growth but only to support them so they can maintain their current market share. Again, this is not always the truth. Cash cows are usually large corporations or SBUs that are capable of innovating new products or processes, which may become new stars. If there would be no support for cash cows, they would not be capable of such innovations. Strategic choices: Product development, diversification, divestiture, retrenchment
- Stars. Stars operate in high growth industries and maintain high market share. Stars are both cash generators and cash users. They are the primary units in which the company should invest its money, because stars are expected to become cash cows and generate positive cash flows. Yet, not all stars become cash flows. This is especially true in rapidly changing industries, where new innovative products can soon be outcompeted by new technological advancements, so a star instead of becoming a cash cow, becomes a dog. Strategic choices: Vertical integration, horizontal integration, market penetration, market development, product development Question marks. Question marks are the brands that require much closer consideration. They hold low market share in fast growing markets consuming large amount of cash and incurring losses. It has potential to gain market share and become a star, which would later become cash cow. Question marks do not always succeed and even after large amount of investments they struggle to gain market share and eventually become dogs. Therefore, they require very close consideration to decide if they are worth investing in or not. Strategic choices: Market penetration, market development, product development, divestiture
- In the business world, much like anywhere else, the problem of resource scarcity is affecting the decisions the companies make. With limited resources, but many opportunities of using them, the businesses need to choose how to use their cash best. The fight for investments takes place in every level of the company: between teams, functional departments, divisions or business units. The question of where and how much to invest is an ever going headache for those who allocate the resources.
- Industry attractiveness indicates how hard or easy it will be for a company to compete in the market and earn profits. The more profitable the industry is the more attractive it becomes. When evaluating the industry attractiveness, analysts should look how an industry will change in the long run rather than in the near future, because the investments needed for the product usually require long lasting commitment. The following factors determine the competitive strength of a business unit: Total market share Market share growth compared to rivals Brand strength (use brand value for this) Profitability of the company Customer loyalty
- • A synergistic portfolio analysis charts the benefits businesses receive by virtue of being in a portfolio versus out of it (“incoming benefit”) • It also examines the net impact businesses have on the rest of the portfolio (“outgoing benefit”)
- Organisations and their employees need the capability to learn quickly and to build strategic assets New strategic assets such as capability, technology, and customer feedback have to be integrated within the organisation