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Abhishek Amarnani
Pooja Rawat
Dilip Sridhar Koty
Kuldeep
Ankit singh
•Corporate level strategy may Strategic planning for Multiproduct Companies is a complex problem & is
deliberately impair the usually handled by forming Strategic Business units (SBU).
performance of one unit to
optimize the performance of Corporate
the other. Parent level
•BCG argues, without an Organisation
integrated strategy, a strategy
multiproduct company is not
even as good as the sum of its SBU 1 SBU 2 SBU 3
parts.
•The BCG approach assigns a
role to each product & division
& integrates these roles into a Business level strategy 3
portfolio strategy. Business level strategy 2
•Product roles are assigned on Business level strategy 1
the basis of cash flow potential
& cost position relative to
competition. Example, the Parent
•Above factors will determine Organisation may decide to
products for investment slow the growth of SBU 1 in
opportunities & elimination. order to fund SBU 3.
Competitive Portfolio Analysis
A typical Growth/ Market Share Matrix of a strong diversified company
Profitability
hinges upon the know relationship
between market share and High market share,
profitability. higher profitability
• In high growth markets, market
dominance is the apt competitive
strategy.
• In low growth markets, the apt
strategy is to maximize cash flow, Market share
even while losing market share.
• The strategy depends upon Low Growth market
competitive strength, cost of
gaining market share, funds
available etc.
•Portfolio chart helps in assessing High market share,
Profitability
Market Share
• A business with range of products
Product Portfolio
External factors
1. Stars
MARKET GROWTH
2. Cows
3. Question mark
4. Dogs
MARKET SHARE
Assumptions of Growth /Share Matrix
• High
• Market share generates cash revenues
• Need substantial
investment to grow market
share.
• Slow progress in
experience curve.
• Products with low market
share in low growth markets
Segment 2
Segment 1
Different
Segments Segment 3
Wrong
Method
Portfolio Analysis
Right Method Of Portfolio Analysis
• The Portfolio Analysis must be done of the products which
compete in same segment of the market
Product 2
Product 1
Same
Segment
Product 3
Right
Method
Portfolio Analysis
Basis of Segmentation???
• BCG has found from experience that most effective basis is
the functional differentiation rather than product or user
characteristics
• For example, ‘Philips lighting solutions’ have functional
segmentation.
Philips Industrial
Philips Healthcare Solutions
Solutions
Five Step Competitive Analysis
Internal
Balance
Financial
Trends
Balance
Industry Competitive
Position Evaluation
1. Internal Balance
• Appropriate
distribution of
products
• Proper
Categorization
into Cows, Stars,
Question Marks
and Dogs
A typical Growth/ Market Share Matrix of a strong diversified company
20%
Product
market
growth
rate
10%
Cash use
(market
growth)
Large positive cash Modest positive or
flow negative cash flow
Low
• One product at
a time
• Avoid low D & D Candidates Products Share
Maintenance
growth
segments
• Tentative
division of Depletion
Products
products
4. Industry Position
• Portfolio Strategy
4. Industry Position
• Maximum sustainable growth rate
G = D/E (R-i)p + R(p)
Where
G = maximum sustainable long term asset growth rate
D/E= debt Equity ratio
R = desired return on assets
P = earnings retention rate
I = current cost of debt
5. Financial Balance
• Cash flow analysis
• Cash flow chart
• Dogs and Question
marks are milked for
cash
• Stars and cash cows
produce the internally
generated funds
• Reclassification of
products
• Dogs and question
marks may have to be
abandoned
Some application considerations