Designing the Business Portfolio

The third step in the strategic planning process is designing the business portfolio.

1). The business portfolio is a collection of businesses and products that make up

the company.

2). The best business portfolio is the one that best fits the company’s strengths

and weaknesses to opportunities in the environment.

Analyzing the Current Business Portfolio

c. In order to analyze the current business portfolio, the company must conduct

portfolio analysis (a tool by which management identifies and evaluates the various businesses that make up the company). Two steps are important in this analysis:

1). The first step is to identify the key businesses (SBUs). The strategic business

unit (SBU) is a unit of the company that has a separate mission and objectives

and which can be planned independently from other company businesses.

2). The SBU can be a company division, a product line within a division, or even

a single product or brand.

3). The second step is to assess the attractiveness of its various SBUs and decide

how much support each deserves.

d. The best known portfolio planning method is the Boston Consulting Group (BCG)

matrix:

1). Using the BCG approach, where a company classifies all its SBUs according to

the growth-share matrix.

a). The vertical axis, market growth rate, provides a measure of market

attractiveness.

b). The horizontal axis, relative market share, serves as a measure of company

strength in the market.

2). Using the matrix, four types of SBUs can be identified:

a). Stars are high-growth, high-share businesses or products (they need heavy

investment to finance their rapid growth potential).

b). Cash Cows are low-growth, high-share businesses or products (they are

established, successful, and need less investment to hold share).

c). Question Marks are low-share business units in high-growth markets

(they require a lot of cash to hold their share).

d). Dogs are low-growth, low-share businesses and products (they may

generate enough cash to maintain themselves, but do not have much

future).

e. Once it has classified its SBUs, a company must determine what role each will play

in the future. The four strategies that can be pursued for each SBU are:

1). The company can invest more in the business unit in order to build its share.

2). The company can invest enough just to hold at the current level.

3). The company can harvest the SBU.

4). The company can divest the SBU.

f. As time passes, SBUs change their positions in the growth-share matrix. Each has

its own life-cycle.

g. The growth-share matrix has done much to help strategic planning study; however,

there are problems and limitations with the method.

1). They can be difficult, time-consuming, and costly to implement.

2). Management may find it difficult to define SBUs and measure market share and

growth.
3). They focus on classifying current businesses but provide little advice for future
planning.

4). They can lead the company to placing too much emphasis on market-share

growth or growth through entry into attractive new markets. This can cause

unwise expansion into hot, new, risky ventures or giving up on established units too quickly.

h. In spite of the drawbacks, most firms are still committed to strategic planning.

Developing Growth Strategies

i. Companies should always be looking to the future. One useful device for identifying

growth opportunities for the future is the product/market expansion grid. The

product/market expansion grid is a portfolio planning tool for identifying company

growth opportunities through:

1). Market Penetration —making more sales to present customers without changing

products in any way.

2). Market Development —a strategy for company growth by identifying and

developing new markets for current company products (example, demographic

markets).

3). Product Development —a strategy for company growth by offering modified or

new products to current markets.

4). Diversification —a strategy for company growth by starting up or acquiring

businesses outside the company’s current products and markets.

Planning Cross-Functional Strategies

j. The final step in the strategic planning process is planning functional strategies.

1). Once the strategic plan is in place, more detailed planning must take place

within each business unit.

2). Each department (such as marketing, finance, et cetera) provides information for

strategic planning.

k. Marketing plays a key role in the company’s strategic planning process by:

1). Providing a guiding philosophy.

2). Providing inputs to strategic planners by helping to identify attractive market

opportunities and by assessing the firm’s potential to take advantage of them.

3). Within individual business units, marketing designs strategies for reaching the

unit’s objectives.

l. The relationship to marketing to the other business functions is often misunderstood.

1). Marketing alone cannot produce superior value for the consumer. All company

departments must work together to accomplish this.

2). Each department is a link in the value chain (a major tool for identifying ways

to create value for the customer).

3). A company’s value chain is only as strong as the weakest link.

4).Marketers are challenged to find ways to get all departments to “think customer.”

m. In its search for competitive advantage, the firm needs to look beyond its own value

chain and into the value chains of its suppliers, distributors, and ultimately

customers. This “partnering” will produce a value delivery network.

Value Delivery Network:

Дата добавления: 2015-10-30