1. Directional Strategy- orientation towards growth, stability or retrenchment 2. Parenting Strategy- coordination of activities, transfer of resources 3. Portfolio Strategy- industries or markets in which firm competes
Directional Strategy
Growth
Concentration vertical growth integration into buyers or sellers horizontal growth- merger, acquisition
Diversification. concentric- strong competitive position but low industry attractiveness (related business) - conglomerate unattractive industry unrelated business
Stability no change
Retrenchment sell out, divest, bankruptcy
Portfolio Strategy
The BCG Growth Matrix for Evaluating Diversified Companies
BCG Matrix
High
Stars
Industry Growth
Question Marks
Cash Cows
Low High
Dogs
A cash cow business generates cash surpluses over and above what is needed to sustain its present market position Such businesses are valuable because surplus cash can be used to
Pay corporate dividends Finance new acquisitions Invest in promising Dogs Strategic objective: Fortify and defend present market position--keep the business healthy!!!
Characteristics of DOGS
A business is a DOG when its internal cash flows are inadequate to fully fund its need for working capital and new capital investment the parent company has to continually pump in capital to feed the DOG Strategic options Aggressively invest in attractive DOGS Divest DOGS lacking long-term potential
GE Nine-Cell Matrix
Industry Attractiveness
Market Size Growth Rate Profit Margin Intensity of Competition Seasonality Cyclicality Resource Requirements Social Impact Regulation Environment Opportunities & Threats Relative Market Share Reputation/ Image Bargaining Leverage Ability to Match Quality/Service Relative Costs Profit Margins Fit with KSFs
10.0
Strong
6.7
Average
3.3
Weak
1.0
High
6.7
Medium
3.3
Low
1.0
Accorded top investment priority Strategic prescription is grow and build Businesses in three diagonal cells Given medium investment priority Invest to maintain position Businesses in lower right corner Candidates for harvesting or divestiture May be candidates for an overhaul and reposition strategy
Allows for intermediate rankings between high and low and between strong and weak Incorporates a wide variety of strategically relevant variables Stresses allocating corporate resources to businesses with greatest potential for