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developing policies and plans designed to achieve these objectives and then allocating resources to implement the plans.
It involves the formulation and implementation of the major goals and initiatives taken by a company’s top management in behalf
of owners, based on considerations of resources and an assessment of the internal and external environment in which the
organization competes.
Part 1 -Strategic Analysis and Decision Making
Strategic Analysis – enables us to assess the initial situation to evaluate the situation inside and outside the company..It reveals
the factors that will cause changes in the environment, it is used to uncover problem, to identify factors and to study their impact.
It plays important role in strategic-decision making.
Strategic Management process
Feedback
Figure 1
Strategic Management Process
Strategic Thinking - based on analysis and application of analytical and systematic procedures. Primarily thinking about the
future. Looking forward trying to predict the future and find in it the specificities on how the future will be different from past
and present. Detecting factors that will cause changes in the environment. Focus on scanning the effect of key critical factors that
cause changes in the environment.
Hyper-competition/Dynamism- solution is to learn to run the business by becoming strategic. Thru:
1. Price Game Strategy-to level up with branded. Eg. TGP lower the cost of product by searching for cheapest supplier.
2. Finding the right market segment – group of customers having the same needs
3. Master the art of product positioning – advertising/product message which will place your product into a particular site.
4. Successful product campaign
Strategy Formulation
Organizational competitiveness
The strategic management model -- or strategic planning model, as it is also known -- is a tool used by managers to
plan and implement business strategies. Although there are variations of the strategic management model, most are
divided into six stages. Understanding these six stages will help managers to create and implement strategies in their
own firms
The Five Stages of the Strategic Management Process
The strategic management process is more than just a set of rules to follow. It is a philosophical approach to
business. Upper management must think strategically first, then apply that thought to a process. The strategic
management process is best implemented when everyone within the business understands the strategy. The five
stages of the process are goal-setting, analysis, strategy formation, strategy implementation and strategy monitoring.
Clarify Your Vision
The purpose of goal-setting is to clarify the vision for your business. This stage consists of identifying three key
facets: First, define both short- and long-term objectives. Second, identify the process of how to accomplish your
objective. Finally, customize the process for your staff, give each person a task with which he can succeed. Keep in
mind during this process your goals to be detailed, realistic and match the values of your vision. Typically, the final
step in this stage is to write a mission statement that succinctly communicates your goals to both your shareholders
and your staff.
Gather and Analyze Information
Analysis is a key stage because the information gained in this stage will shape the next two stages. In this stage,
gather as much information and data relevant to accomplishing your vision. The focus of the analysis should be on
understanding the needs of the business as a sustainable entity, its strategic direction and identifying initiatives that
will help your business grow. Examine any external or internal issues that can affect your goals and objectives.
Make sure to identify both the strengths and weaknesses of your organization as well as any threats and
opportunities that may arise along the path.
Formulate a Strategy
The first step in forming a strategy is to review the information gleaned from completing the analysis. Determine
what resources the business currently has that can help reach the defined goals and objectives. Identify any areas of
which the business must seek external resources. The issues facing the company should be prioritized by their
importance to your success. Once prioritized, begin formulating the strategy. Because business and economic
situations are fluid, it is critical in this stage to develop alternative approaches that target each step of the plan.
Implement Your Strategy
Successful strategy implementation is critical to the success of the business venture. This is the action stage of the
strategic management process. If the overall strategy does not work with the business' current structure, a new
structure should be installed at the beginning of this stage. Everyone within the organization must be made clear of
their responsibilities and duties, and how that fits in with the overall goal. Additionally, any resources or funding for
the venture must be secured at this point. Once the funding is in place and the employees are ready, execute the plan.
Evaluate and Control
Strategy evaluation and control actions include performance measurements, consistent review of internal and
external issues and making corrective actions when necessary. Any successful evaluation of the strategy begins with
defining the parameters to be measured. These parameters should mirror the goals set in Stage 1. Determine your
progress by measuring the actual results versus the plan. Monitoring internal and external issues will also enable you
to react to any substantial change in your business environment. If you determine that the strategy is not moving the
company toward its goal, take corrective actions. If those actions are not successful, then repeat the strategic
management process. Because internal and external issues are constantly evolving, any data gained in this stage
should be retained to help with any future strategies.
Mission
The mission -- the most basic part of the strategic management model -- is a broad focus that the firm's top
management team must decide before any other strategic planning can take place. A mission should roughly outline
what a firm wants to do and how it will do it. An example of a mission is to provide low cost consumer goods
directly to customers in the United States, Canada and Mexico.
Objectives
The firm's objectives follow from its mission. The objectives are measurable goals for achieving the mission.
Objectives might include constructing a factory, successfully filing for a patent, raising capital or others.
Situation Analysis
The situation analysis phase of the strategic management model involves assessing the current environment. There
are a variety of frameworks for performing this analysis, but the most commonly used is a SWOT analysis, which
measures the firm's strengths, weaknesses, opportunities and threats.
Strategy Formulation
The stage of strategy formulation takes into account the firm's objectives and the situation analysis. Strategies are
created that aim to achieve the firm's objectives given the environmental situation.
Application
The application stage of the strategic management model involves the actual implementation of the strategies. This
is often the most difficult stage because it requires the most extensive cooperation of all members of the
organization. The application stage can take several months or longer to complete.
Control
The control stage is the final step in the strategic management model. The purpose of this stage is to make
adaptations to the strategy after the implementation. Often, the environment and even firm objectives will change.
This step is used to recognize this and make adjustments to the firm strategies to adapt to these changes.
The SWOT Matrix Analysis –is the foundation for evaluating the internal potential and limitations and the
probable/likely opportunities and threats from the external environment.
The ability to determine and differentiate the past, current and future behavior of market is a competitive advantage
that will reward the business. Thru swot analysis, pestle framework and porter’s 5 forces
Strengths- the organizations expertise, traits or qualities of employees, or distinct feature that gives your company its
consistency. These are beneficial aspects or capabilities like financial resources, product and services, customer
goodwill and brand loyalty.
Weaknesses – are qualities that prevent us from accomplishing our mission and achieving full potential. It
deteriorates influences on the organizational success and growth, it could be depreciating machinery, insufficient
research, poor decision making, narrow product range. Weaknesses are controllable. They must be minimized or
eliminated.
Opportunities – are presented by the environment, it may arise from market, competition, industry and technology.
Organizations can gain competitive advantage by making use of opportunities.
Threats are uncontrollable, when a threat comes, the stability and survival can be at stake. Threats arise when
condition in external environment jeopardize the reliability and profitability of business.
Environmental Scanning
Inbound Logistics - Gets raw materials into the company, like shipping departments.
Operations - Perform operations on the raw materials to create the finished goods, like
maintenance, fabrication, and manufacturing.
Outbound Logistics - Move finished goods into the finished inventory and ultimately to the
customer, inventory handlers are included here.
Marketing & Sales - Market the good or service and sell it, an entire sales department resides here.
Procurement - Purchases goods for the company, like a purchaser (I have a friend who is a
purchaser)
Technology Development - Research and Development functions for the company like new
products, also includes IT functions. There are many jobs here in development and IT (I work in
IT now)
Human Resources - Makes sure there are people along the value chain, anyone in the HR
department.
All of these parts fall within three Systems: the Supply Chain Management System, the Customer
Relationship Management Systems, and the Enterprise Resource Planning Systems. The primary
are divided between Supply Chain and Customer Relations, the Support is within the ERP.
Outbound Logistics is the combination of all three systems.
Cloud/Mobile Computing and the Internet of Things would impact every part of the Support
Activities as well as Operations. The other parts of the Primary Activities are possibly already
using cloud computing with sales systems, tracking systems and so on already in the cloud.
Operations and the Support Activities would be changed mainly in dealing with the software we
use for those areas, a lot of what those areas do is in front of a computer and even now cloud
computing is being implemented or is already used in those areas whether it be through servers
for data or applications that are hosted somewhere.
A supply chain is a sequence of processes that must be completed to produce and distribute a commodity.
This commodity might be goods or it might be services, but either way, there needs to be a clear
manufacturing path for the goods or services to be produced. Having a strong supply chain is crucial to that
goal, and so is managing it effectively so the supply chain produces the best results -- because that's vital to
business health.
This could be considered the brains and heart of the supply chain. Overseeing supply chain integration means
coordinating communications between the rest of the supply chain to produce effective and timely results. Often,
this means exploring new software or other technological means to foster communications among departments.
Those in charge of integration are responsible for making sure that things are happening on time and on the budget,
without sacrificing quality.
2. Operations
This link in the supply chain coordinates the specifics of day-to-day operations for the company. It plans the
company’s output to make sure everything is running well and that advantages are maximized. Operations will keep
an eye on company inventory. They use business forecasting to predict which supplies will be needed when and by
whom and also to find ways to predict the effectiveness of products, marketing approaches, as well as end-user
results. Overall, the company’s production is overseen by operations.
3. Purchasing
This department sources the materials, products, or other goods needed to generate the company’s products.
Purchasing creates relationships with suppliers and also identifies the qualities and quantities of necessary items. It’s
very important for those in purchasing to keep an eye on the budget for things to be cost-effective for the company,
as well as adhering to high-quality standards.
4. Distribution
How do businesses commodities end up where they are supposed to? Distribution coordinates that. The logistics of
communications among retailers, clients, or wholesalers is the responsibility of the distribution part in the supply
chain of command. These groups must keep on eye on shipments, and to know not only what is needed in-house to
produce products but also that the products get to the end-customer on time and in good shape.
The four elements of supply chain management must work cohesively for everyone’s benefit. Not only do end-
customers reap the rewards; employees themselves also reap the rewards. A well-oiled supply chain is key to a
harmonious work environment, because when everyone does what they are supposed to do, there is less stress for
everyone.
This link in the supply chain coordinates the specifics of day-to-day operations for the company. It plans the
company’s output to make sure everything is running well and that advantages are maximized. Operations will keep
an eye on company inventory. They use business forecasting to predict which supplies will be needed when and by
whom and also to find ways to predict the effectiveness of products, marketing approaches, as well as end-user
results. Overall, the company’s production is overseen by operations.
Purchasing
This department sources the materials, products, or other goods needed to generate the company’s products.
Purchasing creates relationships with suppliers and also identifies the qualities and quantities of necessary items. It’s
very important for those in purchasing to keep an eye on the budget for things to be cost-effective for the company,
as well as adhering to high-quality standards.
Distribution
How do businesses commodities end up where they are supposed to? Distribution coordinates that. The logistics of
communications among retailers, clients, or wholesalers is the responsibility of the distribution part in the supply
chain of command. These groups must keep on eye on shipments, and to know not only what is needed in-house to
produce products but also that the products get to the end-customer on time and in good shape.
The four elements of supply chain management must work cohesively for everyone’s benefit. Not only do end-
customers reap the rewards; employees themselves also reap the rewards. A well-oiled supply chain is key to a
harmonious work environment, because when everyone does what they are supposed to do, there is less stress for
everyone.
Sales and Marketing: two terms we oftern hear together when working with mid-size companies. In some ways, this
is logical because the two need to work together. But in fact, Sales and Marketing are two very different functions
and require very different skills.
Business leaders know what Operations is; they make stuff. They know what Accounting is; they record and control
the money. And they know what Sales does; they sell stuff. So if you are not making stuff, selling stuff, or recording
the money—what is marketing and why do you need it?
Sales is the team whose job it is to “sell what’s in stock”. The company has specific products or services and—and
it's up to Sales to sell those things. Sales develops relationships with customers and/or channel partners. They knock
down the doors, overcome objections, negotiate prices and terms and often work internally to be sure their
customer’s orders are filled.
The perspective of Sales is from inside the company out toward the customers and their horizon is focused on this
week, this month, and this quarter. If sales is not focused on the now, then there may not be any revenue this week,
month, or quarter.
What is Marketing? Aligning with Customers, Now and for the Future
A key job of Marketing is to understand the marketplace from the perspective of the customer looking back towards
the company and helping lead the company where it should be in the future. Marketing’s job is to direct the
organization toward the segments, or groups of customers and channels where the company can profitably compete.
It should help the organization see how it needs to modify its product offerings, pricing, and communication so that
it meets the needs of the distribution channel or end customers. (This is a function of your market positioning
strategy.)
Marketing also needs to convert the market understanding into tools and tactics to attract the market, build (often
digital) relationships, and develop leads. WIthout Sales, Marketing efforts run short. Marketing directs Sales as to
where they should be hunting and what ammo to use. Note, however, that if Marketing becomes a sales support
function focused only on the now, the future can become lost.
Not even the best hunter can bring home dinner if they are shooting blanks at decoys. Markets are constantly
changing. The job of marketing is to stay ahead of the changes, and help the hunters see where they should be
hunting and provide them with the right ammunition. If Marketing is only focused on delivering the ammunition for
today, nobody will see where the industry is moving or where the company needs to hunt next. This limits growth
not only for Sales and Marketing, but also for your entire organization.
In all my years, working for companies that ranged from Fortune 100 to mid-size companies I have never met
anyone who was really good at both sales and marketing. I have held the title of VP of Sales and Marketing,
managing a 500 person sales and merchandising force. I was really a marketing person with sales authority. The
skills required to focus on the now and the push of sales are different. In many ways, they are contrary to the skills
of looking to the future and the customer perspective of marketing.
Every Sales organization feels they have a good understanding of their customers. But every Sales conversation with
a customer has a sales transaction lurking in the background. Therefore, customers can never be completely open
about their needs and wants when talking to a sales person.
For a company to really grow, someone must have the job of looking out the window towards where the company
needs to go in the future. For many companies, this is the job of the CEO and Sales hires someone to do some sales
support and gives them a marketing title. But as companies grow, the job of CEO starts to become a full time job in
itself and the strategic role of Marketing gets short changed. A study of mid-size companies by the University of
Texas showed that companies who separated the roles of Marketing and Sales were much more likely to grow faster
than the industry average. (Let us know if we can help you develop a powerful new business growth strategy.)
Sales needs to be focused on the now. You can’t run a company unless your sales team is focused on bringing in
today’s business. But you can’t really ask your Sales leaders where the company should go next and to develop the
18 month plan to get there without losing focus on today’s revenue. Besides, if your sales executive was really good
at developing future-focused business strategies and tying that strategy to the plans and tools of marketing to make it
happen, they would be a marketing person and not a now-focused sales person.
Difference Between Sales and Marketing. Sales and marketing are closely interlinked and are aimed at
increasing revenue. ... Once the product is out in the market, it is the task of the sales person to persuade the
customer to buy the product. Well, sales means converting the leads or prospects into purchases and orders.
A sales strategy takes place after the marketing strategy and is a plan that helps a company gain competitive
advantage. In order to be successful, a company must develop a sales strategy that allows the employees to focus on
customers and communicate to them, so they buy products.
Competitive Strategies
Competitive Strategy is defined as the long term plan of a particular company in order to gain
competitive advantage over its competitors in the industry. It is aimed at creating defensive position in an industry
and generating a superior ROI (Return on Investment).
According to Porter's Generic Strategies model, there are three basic strategic options available to organizations for
gaining competitive advantage. These are: Cost Leadership, Differentiation andFocus.
Generic Strategies
These three approaches are examples of "generic strategies," because they can be applied to products or services in
all industries, and to organizations of all sizes. They were first set out by Michael Porter in 1985 in his book,
"Competitive Advantage: Creating and Sustaining Superior Performance."
Porter called the generic strategies "Cost Leadership" (no frills), "Differentiation" (creating uniquely desirable
products and services) and "Focus" (offering a specialized service in a niche market). He then subdivided the Focus
strategy into two parts: "Cost Focus" and "Differentiation Focus." These are shown in figure 1 below.
Tip:
The terms "Cost Focus" and "Differentiation Focus" can be a little confusing, as they could be interpreted as
meaning "a focus on cost" or "a focus on differentiation." Remember that Cost Focus means emphasizing cost-
minimization within a focused market, and Differentiation Focus means pursuing strategic differentiation within a
focused market.
Step 1:
For each generic strategy, carry out a SWOT Analysis of your strengths and weaknesses, and the opportunities and
threats you would face, if you adopted that strategy.
Having done this, it may be clear that your organization is unlikely to be able to make a success of some of the
generic strategies.
Step 2:
Use Five Forces Analysis to understand the nature of the industry you are in.
Step 3:
Compare the SWOT Analyses of the viable strategic options with the results of your Five Forces analysis. For each
strategic option, ask yourself how you could use that strategy to:
Reduce or manage supplier power.
Reduce or manage buyer/customer power.
Come out on top of the competitive rivalry.
Reduce or eliminate the threat of substitution.
Reduce or eliminate the threat of new entry.
Select the generic strategy that gives you the strongest set of options.
Tip:
Porter's Generic Strategies offer a great starting point for strategic decision-making.
Once you've made your basic choice, though, there are still many strategic options available. Bowman's Strategy
Clock helps you think at the next level of details, because it splits Porter's options into eight sub-strategies. You can
also use USP Analysis and Core Competence Analysis to identify the areas you should focus on to stand out in
your marketplace.
Key Points
According to Porter's Generic Strategies model, there are three basic strategic options available to organizations for
gaining competitive advantage. These are: Cost Leadership, Differentiation and Focus.
Organizations that achieve Cost Leadership can benefit either by gaining market share through lowering prices
(whilst maintaining profitability) or by maintaining average prices and therefore increasing profits. All of this is
achieved by reducing costs to a level below those of the organization's competitors.
Companies that pursue a Differentiation strategy win market share by offering unique features that are valued by
their customers. Focus strategies involve achieving Cost Leadership or Differentiation within niche markets in ways
that are not available to more broadly-focused players.
PRODUCT LIFE CYCLE STAGES (PLC) – MANAGING THE PRODUCT LIFE CYCLE
After having been launched, a product should enjoy a long and happy life. But each product has a product life cycle
In order to cover all the effort and risk that went into launching a product, the company wants to earn a decent profit.
The company must be aware that the product will not sell forever: it goes through the product life cycle stages.
Definition of Product Life Cycle (PLC)
Before discussing the product life cycle stages, it is wise to explain what the product life cycle actually is. The
product life cycle (PLC) is the course of a product’s sales and profits over its lifetime.
Product Life Cycle Stages
1. Product Development. When the company finds and develops a new product idea, product development starts.
During product development, sales are zero, and the company’s investment costs increase.
2. Introduction. Sales slowly grow as the product is introduced in the market. Profits are still non-existent, because
3. Growth. The growth stage is a period of rapid market acceptance and increasing profits.
4. Maturity. In the maturity stage, sales growth slows down because the product has achieved acceptance by most
potential buyers. Profits level off or decline because marketing outlays need to be increased to defend the product
against competition.
Not all products follow all five stages of the product life cycle. While some products are introduced and die quickly
afterwards, others stay in the mature stage for a very long time. Some are cycled back into the growth stage after
reaching the decline stage through strong promotion or repositioning. In fact, a well-managed brand could live
forever if wise strategies are applied. Examples include Coca-Cola, Gillette, American Express, which still live on
Not only single products can go through the product life cycle stages. Indeed, the PLC concept can also describe a
product class (for instance petrol-powered cars), a product form (e.g. four-wheel drives) or a brand (such as the
BMW X5). In each case, the PLC concept applies differently. While product classes have the longest life cycles,
staying in the maturity stage for a long time, product forms tend to have the standard PLC shape.
Special Product Life Cycle Forms
We can also apply the Product Life Cycle stages to styles, fashion and fads. Their product life cycles are somewhat
special.
A style is a basic and distinctive mode of expression. For instance, styles appear in homes (e.g. country cottage,
functional art deco), clothing (e.g. formal and casual) and art (e.g. realist, surrealist and abstract). A style may last
for generations, but usually passes in and out of vogue. Therefore, a style’s product life cycle stages show several
periods of renewed interest.
A fashion is a currently popular or accepted style in a certain field. For instance, the more formal ‘business attire’
look in the 1980’s gave way to the ‘business casual’ look of the 2000’s. Fashions tend to grow slowly and remain
popular for a while, before declining slowly.
Fads are temporary periods of unusually high sales driven by consumer enthusiasm and immediate product or brand
popularity. A fad may be part of an otherwise normal product life cycle, passing through the product life cycle
stages. But at a certain point, sales raise unexpectedly, but drop afterwards equally quickly. The best example is the
Rubik’s Cube.
The product life cycle stages can be used for describing how products and markets work. When used carefully, the
PLC concept can be a great help in developing goods marketing strategies for the different product life cycle stages.
However, using the PLC concept for forecasting product performance or developing marketing strategies brings
some practical problems. For instance, it is difficult to forecast the sales level at each of the product life cycle stages,
as well as the length of each stage and the overall shape of the PLC curve. Also, the marketing strategy is both the
cause and the result of the product life cycle. The best option is to use a product’s current position in the product life
cycle in order to develop marketing strategies. The resulting strategies will then affect the product’s performance in
The idea behind the PLC concept is that companies must continually innovate. Regardless of the success of a
company’s current product line-up, it must skilfully manage the product life cycles of existing products for future
success. In order to grow, it must develop a steady stream of new products that offer new value to customers.
Corporate strategies
Boston Consulting Group Model
The Boston Consulting group's product portfolio matrix(BCG matrix) is designed to help with long-term
strategic planning, to help a business consider growth opportunities by reviewing its portfolio of products to decide
where to invest, to discontinue or develop products.May 25, 2018
BCG matrix
(or growth-share matrix) is a corporate planning tool, which is used to portray firm’s brand portfolio or
SBUs on a quadrant along relative market share axis (horizontal axis) and speed of market growth (vertical
axis) axis.
Growth-share matrix
is a business tool, which uses relative market share and industry growth rate factors to evaluate the
potential of business brand portfolio and suggest further investment strategies.
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.
There are four quadrants into which firms brands are classified:
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
BCG matrix quadrants are simplified versions of the reality and cannot be applied blindly. They can help as general
investment guidelines but should not change strategic thinking. Business should rely on management judgement,
business unit strengths and weaknesses and external environment factors to make more reasonable investment
decisions.
Advantages and disadvantages
Easy to perform;
Helps to understand the strategic positions of business portfolio;
It’s a good starting point for further more thorough analysis.
Growth-share analysis has been heavily criticized for its oversimplification and lack of useful application. Following
are the main limitations of the analysis:
Business can only be classified to four quadrants. It can be confusing to classify an SBU that falls right in
the middle.
It does not define what ‘market’ is. Businesses can be classified as cash cows, while they are actually dogs,
or vice versa.
Does not include other external factors that may change the situation completely.
Market share and industry growth are not the only factors of profitability. Besides, high market share does
not necessarily mean high profits.
It denies that synergies between different units exist. Dogs can be as important as cash cows to businesses
if it helps to achieve competitive advantage for the rest of the company.
Although BCG analysis has lost its importance due to many limitations, it can still be a useful tool if performed by
following these steps:
Step 1. Choose the unit. BCG matrix can be used to analyze SBUs, separate brands, products or a firm as a unit
itself. Which unit will be chosen will have an impact on the whole analysis. Therefore, it is essential to define the
unit for which you’ll do the analysis.
Step 2. Define the market. Defining the market is one of the most important things to do in this analysis. This is
because incorrectly defined market may lead to poor classification. For example, if we would do the analysis for the
Daimler’s Mercedes-Benz car brand in the passenger vehicle market it would end up as a dog (it holds less than 20%
relative market share), but it would be a cash cow in the luxury car market. It is important to clearly define the
market to better understand firm’s portfolio position.
Step 3. Calculate relative market share. Relative market share can be calculated in terms of revenues or market
share. It is calculated by dividing your own brand’s market share (revenues) by the market share (or revenues) of
your largest competitor in that industry. For example, if your competitor’s market share in refrigerator’s industry
was 25% and your firm’s brand market share was 10% in the same year, your relative market share would be only
0.4. Relative market share is given on x-axis. It’s top left corner is set at 1, midpoint at 0.5 and top right corner at 0
(see the example below for this
Step 4. Find out market growth rate. The industry growth rate can be found in industry reports, which are usually
available online for free. It can also be calculated by looking at average revenue growth of the leading industry
firms. Market growth rate is measured in percentage terms. The midpoint of the y-axis is usually set at 10% growth
rate, but this can vary. Some industries grow for years but at average rate of 1 or 2% per year. Therefore, when
doing the analysis you should find out what growth rate is seen as significant (midpoint) to separate cash cows from
stars and question marks from dogs.
Step 5. Draw the circles on a matrix. After calculating all the measures, you should be able to plot your brands on
the matrix. You should do this by drawing a circle for each brand. The size of the circle should correspond to the
proportion of business revenue generated by that brand.
Strategic implementation is critical to a company's success, addressing the who, where, when, and how of reaching
the desired goals and objectives. It focuses on the entire organization. ... Implementation involves assigning
individuals to tasks and timelines that will help an organization reach its goals.Jun 30, 2018
What is Strategic Asset Management? There are various definitions of Strategic Asset Management but their
underlying messages are consistent. It should:
It is not, as is commonly thought, maintenance, property management or facility management – although it involves
all these disciplines.
Recent research from the Economist Intelligence Unit shows Australia is falling behind in productivity at a global
level and there is academic consensus that Australian productivity and efficiency has been in decline over the last
ten years, most noticeably in the agriculture, mining and utilities sectors.
If productivity is an efficiency measure of how labour and capital are combined to generate output, then the
management and performance of an organisation’s assets will have a significant impact on its overall productivity.
Put simply, Strategic Asset Management can help organisations become more productive and help them to achieve
their strategic goals. When effectively executed, it is also a major element of an organisation’s financial planning.
Conversely, without a proper Asset Management strategy – underpinned by a clear policy and plan – the value and
condition of an organisation’s capital base will quickly erode. Capital will be misdirected and the operating
efficiency and effectiveness of the organisation will be put at risk.
The benefits are clear and measurable, so why have so few Australian organisations truly embraced the approach?
We believe Strategic Asset Management remains the elephant in the room and there is evidence to suggest that the
role and significance of assets and their management is:
Not understood
Considered too difficult
Simply ignored
A report by Ernst & Young into Corporate Real Estate (CRE) – a key part of Strategic Asset Management –
indicates the lack of commitment from Australian corporations. Its findings showed that:
58% of corporates did not have a documented CRE strategy in place.
Only 20% of companies thought that a CRE strategy should be considered at board level, compared to 60%
of international companies.
Organisations were principally focused on operational risk and facilities management and were ignoring
poorly allocated capital and residual value risk.
DEGW research, designed to complement the Ernst & Young paper – also found that Australia was well behind in
its approach to asset management and confirmed that assets were not considered a ‘C suite’ issue.
The public sector doesn’t fare any better with only a few organisations seriously embracing Strategic Asset
Management. Neither the Commonwealth Government nor the Western Australia state Government have high-level
sponsors for the management of their assets and they are by no means alone.
Ironically, most state governments have legislated or introduced regulations over local governments that require
them to implement asset management frameworks, as part of their larger corporate and financial management
reforms, whilst not imposing similar standards over themselves.
This is unfortunate but partly understandable as governments have so little data and knowledge of their significant
asset bases. For example, we estimate that ‘real’ property in the general government sector (excluding local
government) is worth well in excess of $1 trillion – clearly there are opportunities to unlock value.
A fresh approach
Efficiency is a culture that should be a part of everyday organisational management. Strategic Asset Management is
not only part of remaining efficient, it also enables better strategic outcomes.
The US and UK governments have made savings running into billions of dollars and pounds respectively, and
private sector organisations around the world are gaining competitive advantage by embracing strategic asset
management. Isn’t it about time Australian organisations followed suit?