Strategy Analysis and Choice

Strategic Choice
Choice of Strategy
Deciding the acceptable
alternatives among the several
which fits with the organisational
objectives.
4/16/2015
kanishgeorge@gmail.com
Factors influencing Strategic

choice
Mintzberg
Dynamic Environment
Operating systems of the
Organisation
The Role of Leadership
4/16/2015
Process of Strategic
Choice
4/16/2015
Focusing on strategic alternatives

Analysing the strategic alternatives
Evaluating the strategic alternatives
Choosing from among the strategic
alternatives
Focusing on Strategic
Alternatives
Limit the choice to few alternatives
Gap Analysis
4/16/2015
5
Analysing the Strategic Alternatives

Few feasible alternatives
Analysis has to rely on selection
factors.
Objective factors- based on data
For Eg: Market share
Subjective factors- on Personal
judgement
Eg: Perception of Companys top
management
4/16/2015
6
Evaluating the Strategic Alternatives

Bringing together the analysis
done on the basis of the objective
and subjective factors.
4/16/2015
7
Making the Strategic

Choice
One or two strategies have to
be chosen for implementation.
A blueprint has to be made
(Strategic plan)
Contingency strategies also
needed
4/16/2015
8
Strategic Analysis
Investigation of objective factors

Which industries to enter?
Which industries to leave?
Which businesses to
create/acquire/divest?
Which products and markets to
retain/ grow/divest?
4/16/2015
Tools and Techniques for

Strategic Analysis
Corporate Portfolio Analysis
GE Matrix
BCG Matrix
Hofers Matrix
SWOT
Experience Curve Analysis
Life Cycle Analysis
Industry Analysis
5 Force Matrix
Strategic Group Analysis

Competitor Analysis
4/16/2015
10
Corporate Portfolio Analysis

Set of techniques that help
strategists in taking strategic
decisions with regard to individual
products or businesses in a firms
portfolio.
Used for competitive analysis in
multi business firm.
Can decide on how to utilise the
resources at corporate level.
4/16/2015
11
GE Nine-cell Matrix
General Electric Company &
McKinsey &Co.
GE is a model to perform business
portfolio analysis on the SBUs.
GE is rated in terms of Market
Attractiveness & Business Strength
The matrix is divided into 9 cells, it
has 3 zones, one at the upper left,
one at the lower right and one
central-diagonal
4/16/2015
12
Parts
The upper left zone represents
business that are most
important to the company:
The lower right zone
represents business that are
least important: and
The central diagonal zone
represents businesses that are
medium in their importance.
4/16/2015
13
About GE matrix
Two main parameters- (1) Industry attractiveness,
and (2) Companys Business Strength.
When the industry concerned is highly attractive
and the company has the best of strengths for
excelling in that industry, the business is rated as
the most important one to the company.
When the industry concerned is least attractive and
the company's strength for excelling in that
industry is also very low, the business is rated as
the least important one.
The other businesses will occupy a position
somewhere between the two extremes.
4/16/2015
14
Business Strength
4/16/2015
Size
Growth rate
Market share
Profitability
Profit margins
Technology position
Image
People
15
Industry attractiveness
Market size and growth

Industry profit margin
Competitive structure
Market diversity
Seasonality and
cyclicality
Macro environmental
factors (PEST)
Economies of scale
4/16/2015
16
GE Matrix also known as...
4/16/2015
GE Multi-factor Portfolio Matrix

GE Nine-Cell Planning Grid
Business Attractiveness Screen
Stop-light Strategy Model
17
GE Nine Cell Matrix

Industry
Attractiveness
Business Unit Strength
Strong
Average
High
Grow
Grow
Hold
Medium
Grow
Hold
Harvest
Low
Hold
Harvest
Harvest
4/16/2015
Weak
18
GE Nine Cell Matrix

Grow Business units that fall under grow attract high
investment. Firms may go for product differentiation or Cost
leadership. Huge cash is generated in this phase. Market leaders
exist in this phase.
Hold Business units that fall under hold phase attract moderate
investment. Market segmentation, Market penetration, imitation
strategies are adopted in this phase. Followers exist in this phase.
Harvest - Business units that fall under this phase are

unattractive. Low priority is given in these business units.
Strategies like divestment, Diversification, mergers are adopted in
this phase.
4/16/2015
19
4/16/2015
20
Experience Curve Analysis

Efficiency increase
gained by workers
through repetitive
productive work.
Labour productivity
increases over time and
unit costs fall.
The more the company
produces, the more
experience it
accumulates.
4/16/2015
Company A
21
Larger firms will have lower unit

cost; and there by competitive cost
advantage.
Better products- Quality and costs.
Economies of scale
Learning effects
Product re-design
Technological improvements
4/16/2015
22
Life Cycle Analysis

Strategic consideration changes according to
levels of PLC
Portfolio of products
Expansion feasible for the businesses in
introductory and growth stage.
4/16/2015
23
Industry Analysis
Group of companies offering
products or services that are close
substitutes of each other.
Structural analysis of industries can
be made to identify the strength
and weaknesses.
4/16/2015
24
Five Force Matrix
4/16/2015
25
Rivalry Among Existing Competitors

Intense rivalry often plays out in the following
ways:
Using price competition
Advertising battles
Increasing consumer warranties or service

Making new product introductions
Occurs when a firm is pressured or sees an

opportunity
Price competition often leaves the entire industry worse off
Advertising battles may increase total industry demand, but may
be costly to smaller competitors
4/16/2015
26
Threat of New Entrants

Economies of Scale
Barriers to
Entry
Product Differentiation
Capital Requirements
Customer Switching Costs
Access to Distribution Channels
Government Policy
Expected Retaliation
4/16/2015
27
Threat of Substitute Products

Keys to evaluate substitute products:
Products with
similar
function limit
the prices
firms can
charge
Products
with
improving
price/performance
tradeoffs
relative to present industry
products
4/16/2015
28
Bargaining Power of Suppliers

Suppliers exert
power in the
industry by:
* Threatening to raise
prices or to reduce
quality
Powerful suppliers
can squeeze
industry
profitability if
firms are unable
to recover cost
increases
Suppliers are likely to be powerful if:

Supplier industry is dominated by a few
firms
Suppliers products have few substitutes

Buyer is not an important customer to
supplier
Suppliers product is an important input
to buyers product
Suppliers products are differentiated
Suppliers products have high
switching costs
4/16/2015
29
Bargaining Power of Buyers

Buyer groups are likely to be powerful if:
Buyers are concentrated
Purchase accounts for a significant fraction
of suppliers sales
Products are undifferentiated
Buyers face few switching costs
Buyer presents a credible threat of

backward integration
Buyer has full information
Buyers compete with

the supplying industry
by:
* Bargaining down prices
* Forcing higher quality

* Playing firms off
each other
4/16/2015
30
5 Forces
Analysis
Rivalry among the competitor
Reliance Retail, Aditya Birla Group , Vishal Retails,

Bharti and Walmart, etc
Threat of entrants
FDI policy not favorable for international players.
Domestic conglomerates looking to start retail chains.
International players looking to foray India.
Bargaining power of supplier
The bargaining power of suppliers varies depending

upon the target segment.
The unorganised sector has a dominant position.
There are few players who have a slight edge over
others on account of being established players and
enjoying brand distinction.
Bargaining power of buyers
Consumers are price sensitive..

Availability of more choice.
Unorganized retail
Threat of substitutes
4/16/2015
31
Strategic Group Analysis

Conceptually defined clusters of
competitors that share similar
strategies and therefore, compete
more directly with one another than
with other firms in the same industry.
Technological leadership
Degree of product quality
Pricing policies
Choice of distribution channels
Degree and type of customer service
4/16/2015
32
Within an industry, firms with

similar asset configurations will
pursue similar competitive
strategies with similar performance
results.
4/16/2015
33
Competitor Analysis
Competitive forces shape the strategy.
Strategies of opponent firms shape
competitive forces.
Determine each competitors probable
reaction to industry and environmental
changes
Anticipate the response of each
competitor to the likely strategic moves by
other firms
Develop a profile of the nature and
success of the possible strategic changes
each competitor might undertake.
4/16/2015
34
4/16/2015
35
Subjective Factors in
Strategic Choice
Intuitive and descriptive
Can not apply analytical model
Consideration for Governmental Policies
Perception of CSFs and Distinctive
Competencies
Commitment to past Strategic Actions
Strategists Style and Attitude to Risk
Internal Political Considerations
Timing and Competitor considerations
4/16/2015
36
Consideration for Governmental

Policies
Centrally planned and regulated
economy
Decision maker should be aware of
the crucial role that govt plays.
Govt Policies decides future.
4/16/2015
37
Perception of CSFs and Distinctive

Competencies
CSF- vital for organisation success

a specific ability is possessed by
an organisation exclusively
Advantage over others
4/16/2015
38
Commitment to past Strategic Actions
Not fully break away past

strategies
Move in incremental fashion
4/16/2015
39
Strategists Style and Attitude

to Risk
Different strategists; different styles
4/16/2015
40
Internal Political Considerations

Inter relationship, power structure
and balance
Dominant?
4/16/2015
41
Timing and competitor

considerations
When to exercise a strategic
choice?
Short term or long term?
Competitors actions and reactions.
4/16/2015
42
Contingency Strategies
4/16/2015
To deal with uncertainties.

Environment changes
Emergencies or disasters
Unexpected opportunities
43
Strategic plan
Final step before a strategy is
implemented.
Called corporate/ group/ perspective
plan.
Document which provides information
regarding the different elements of
strategic management and the
manner in which an organisation and
its strategists propose to put the
strategists into action.
4/16/2015
44
Contents of Strategic Plan
Clear statement of strategic intent

Result of environmental appraisal
Results of Organisational Appraisal
Strategies chosen and assumptions used.
Contingent strategies
Strategic budget for resource allocation and
schedule for implementation
Proposed organisational structure
Functional strategies and the mode of their
implementation
Measures to be used to evaluate
performance
4/16/2015
45
BCG Matrix
The BCG matrix model was developed by
Bruce Henderson in the early 1970s
The BCG matrix stands for Boston
consulting group
The BCG matrix model is a portfolio
planning model
The BCG model is a well-known portfolio
management tool used in product life
cycle theory
4/16/2015
46
BCG Matrix
BCG matrix is often used to prioritize
which products within company
product mix get more funding and
attention
It has 2 dimensions: MARKET
SHARE & MARKET GROWTH
The BCG Matrix consist of 4 category
in a portfolio of a company Stars,
Cash cows, Dogs, Question marks
4/16/2015
47
BCG Matrix
4/16/2015
48
Stars
Stars are the unit with a high market
share in a fast growing industry.
Star represent the best profits and
growth opportunities in the
organizations.
Generates high revenues and also
requires huge cash for sustaining the
STAR position.
Product is in growth stage.
4/16/2015
49
Cash Cows
A cash cow is a product or a
business unit that generates
unusually high profit margins.
They are the business with low
growth rate and high market
share.
Generating cash more than its
requirement which can be used
by other units.
Product in maturity Stage.
4/16/2015
50
Question Marks
Question Marks are the units with low
market share in a fast growing industry.
They required large amount of cash to
grow their market share. for e.g.:
Promotional expenses.
They have the potential to generate
profits and achieve a dominant position
in market.
Product is in introduction stage, in a fast
growing market.
4/16/2015
51
Dogs
Dogs often have little future and are
big cash drainer on the company.
Generating cash just to BREAKEVEN. It is a self sustaining unit.
They do not generate any profit for
the overall business and hence can
be sold off and hired off.
Product is in decline stage, with no
chance of revival.
4/16/2015
52
Strategic Implication Of BCG

MATRIX
4/16/2015
BCG Matrix helps in determining the

competitive advantage of each SBU
BCG Matrix will work when:
1)Market of each Division / SBU is well
defined.
2)Relative market share is an
indication of an SBUs competitive
position.
3)Market growth, cash investment and
profits of the SBU are positively corelated.kanishgeorge@gmail.com
53
Advantages
1) Diversification with sustainable
profits.
2) Allocation of Scarce Resources
of the company.
3) Higher profits and Growth rates
4) Raising Equity Capital only when
necessary.
4/16/2015
54
Limitation of BCG Matrix

High market is not the only success
factor
Market growth is not the only
indicator for attractiveness of a
market
Sometimes dog can earn even
more cash as cash cows
4/16/2015
55
Hofers Product Market

Evolution Matrix
Charles Hofer and Schendel
Three by Five matrix
Stages of Product/market and
competitive position of different
businesses in a company.
4/16/2015
56
Stages in Product or Market

Evolution
4/16/2015
Development
Growth
Shake out
Maturity to saturation
Decline
57
Segments in Competitive
position
Strong
Average
Weak
4/16/2015
58
The business unit competitive position
The Life-Cycle Portfolio

Matrix
Strong
Average
Weak
Th e Industrys stage in the evolutionary life cycle
Development
Growth
Competitive
shakeout
Maturity
Saturation
Decline
4/16/2015
59
Implication
Strategy for each SBU depends on
the stage of its product or market
evolution and competitive strength.
Used to identify & develop winners
Illustrates how businesses are
distributed across the stages of
industry evolution
4/16/2015
60
Thank You
Kanish George
Make Presentation much more fun
@Kanish George
kanishgeorge
4/16/2015
61

Strategy Analysis and Choice

Hochgeladen von

Dokumentinformationen

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Strategy Analysis and Choice

Hochgeladen von

Copyright:

Verfügbare Formate

Strategic Choice

Factors influencing Strategic

Focusing on strategic alternatives

Analysing the Strategic Alternatives

Evaluating the Strategic Alternatives

Making the Strategic

Investigation of objective factors

Tools and Techniques for

Strategic Group Analysis

Corporate Portfolio Analysis

Market size and growth

GE Matrix also known as...

GE Multi-factor Portfolio Matrix

GE Nine Cell Matrix

Business Unit Strength

GE Nine Cell Matrix

Harvest - Business units that fall under this phase are

Experience Curve Analysis

Larger firms will have lower unit

Life Cycle Analysis

Five Force Matrix

Rivalry Among Existing Competitors

Increasing consumer warranties or service

Occurs when a firm is pressured or sees an

Threat of New Entrants

Threat of Substitute Products

Bargaining Power of Suppliers

Suppliers are likely to be powerful if:

Suppliers products have few substitutes

Bargaining Power of Buyers

Buyer presents a credible threat of

Buyers compete with

* Bargaining down prices

* Forcing higher quality

Rivalry among the competitor

Reliance Retail, Aditya Birla Group , Vishal Retails,

The bargaining power of suppliers varies depending

Bargaining power of buyers

Consumers are price sensitive..

Strategic Group Analysis

Within an industry, firms with

Consideration for Governmental

Perception of CSFs and Distinctive

CSF- vital for organisation success

Commitment to past Strategic Actions

Not fully break away past

Strategists Style and Attitude

Internal Political Considerations

Timing and competitor

To deal with uncertainties.

Contents of Strategic Plan

Clear statement of strategic intent

Strategic Implication Of BCG

BCG Matrix helps in determining the

Limitation of BCG Matrix

Hofers Product Market

Stages in Product or Market

The business unit competitive position

The Life-Cycle Portfolio

Th e Industrys stage in the evolutionary life cycle

Das könnte Ihnen auch gefallen