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An overview of Planning Fundamentals How strategic planning differs from tactical and operational planning Strategic Planning: Yesterday and Today o Step 1: Establishment of Mission, Vision, and goals o Step 2: Analysis of External Opportunities and Threats o Step 3: Analysis of Internal Strengths and Weaknesses o Step 4: SWOT Analysis and Strategy formulation o Step 5: Strategy Implementation o Step 6: Strategy Control
Planning : Systematic process of making decisions about goals and activities that a group or organization or individu The basics planning process are: 1. Situational analysis
Planning should gather, interpret and summarize information which is relevant to the planning issues 2. Alternative goals and plans Evaluate the advantages, disadvantages and potential effects of each alternative goal and plan. 3. Goal and evaluation When performing evaluation, priority should be set in order to achieve goals and plans. 4. Goal and plan selection
After priority has been set, and evaluation has been conducted, the most feasible goals and plans m
organization, this steps is called planning scenarios which describes a particular set of future conditi 5. 6. Implementation Monitor and control
This is an essential step because planning is ongoing and the process is repetitive. Thus ma actual performance according to the units goal and plans.
Level of Planning
The level of planning in consist of : 1. Strategic planning Involves making decisions for the organization long term goals and strategies It has a strong external orientation. Strategic goal major targets relating to the organizations long term survival, value and growth.
Strategy is a pattern of actions and resource allocations designated to obtained the goal of the organ 2. Tactical and operational planning
This translates broad strategic goals and plans into specific goals and plans that are relevan Tactical plans focus on the major actions to fulfill the strategic plan.
Operation planning identifies the specific procedures and processes required at lower levels
Adidas bought out Salomon sports equipment, and with this purchase it makes adidas a second largest sports equip
From 1960s to 1980s strategic planning generally emphasized a top-down approach to goal setting and planning. D companies and consulting firms innovated a variety analytical method and planning approaches. Strategic management involves managers from all sections of organization in the formulation and implementation of The six major components of the strategic management process are: 1. Establishment of mission, vision and goals The first step is to establish mission. Mission is the basic purpose, scope and value of the organization. Second step is to establish Strategic vision It moves beyond the mission statement to provide a perspective to the organization goal. 2. Analysis of external opportunities and threats
Successful strategic management depends on an accurate evaluation of the environment. After env
Stakeholder is groups or individual who affect and are affected by the achievement of the mission, g
Compaq has to segment its product to different kind of products according to customers need; Ther about 50 percent. 3. Analysis of internal strengths and weakness The major or internal resource analysis are: o o o o Financial analysis Human resources assessment Marketing audit Operations analysis
Resources are inputs to a system that can enhance performance. Resources can take many forms but tend to fall into two broad classifications: o Tangible assets For instance: Real estate, Production facilities and raw materials o Intangible assets
Core competencies is the unique skills or knowledge that an organization possess to give an edge over competitors.
Benchmarking is the process of estimating how well the companys basic functions and skills compare to other companies.
1.
SWOT analysis is a comparison of weakness, strengths, threats and opportunities that helps Strategy formulation moves from simple analysis to devising a coherent course of action.
Corporate strategy identifies the set of businesses, marketing or industries in which the orga businesses.
An organization has 4 basic corporate strategy alternatives ranging from very specialized to
A concentration is a strategy employed for an organization that operates a single business a Vertical integration involves expanding the business to supply channels and distributors.
Concentric diversification used to add new business that produce related products, markets
The opposite of concentric diversification is conglomerate diversification, defined as a corpo into unrelated businesses.
BCG Matrix
Organization usually performs better if they implement a more concentric diversification stra
or similar to one another. For instance, Disney spend $19 Million to merge with ABC/Cap cit
Business Strategy
Defines the major actions that an organization builds and strengthens its competitive positio Two generic business strategies are: 1. Low Cost Strategy
Wal-Mart and Southwest Airlines peruse competitive advantages through low-cost s businesses by building competitive advantages by being efficient and offering a stan 2. Differentiation strategy Company attempts to be unique in its industry or market segment by using
Functional Strategy
This is the final step in strategy formulation. In this strategy, each functional area of the orga the business strategy.
Company Profiles
Starbucks: Inside the coffee cult
StarBucks
Starbucks employed and trained the "tattooed kids" and paid them above the industrys standard salary. They also g to express their ideas to the company. In return, the company expects their employees to adhere to a fairly rigid dres resources strategy is impressive because Starbucks generate revenues about $35 Million, and the company now is 1. Strategy implementation
Strategic managers must ensure that the new strategies are implemented effectively and eff Strategy implementation reflected in two major trends: o Adopting a more comprehensive view of implementation
o 1.
Strategic control system is designed to support managers in evaluating the organizations pr when discrepancies exit, taking corrective action.
Most strategic control systems include budgets to monitor and control major financial expen The dual responsibilities of the control system are efficiency and flexibility.
Dupont
DuPont has changed from a slow moving giant into a faster growing machine thanks to John A. Krol. He has done th planning process, by listening to them and asking for input which has improved the quality of decisions made. To imp diversify its operations into life sciences such as biotech agriculture and pharmaceuticals. When these operations su products dont go well, they sell them off. The overall plan of DuPont is the concentrate on faster growing markets th
Growth-share matrix
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The BCG matrix (aka B.C.G. analysis, BCG-matrix, Boston Box, Boston Matrix, Boston Consulting Group analysis, portfolio diagram) is a chart that had been created by Bruce Henderson for the Boston Consulting Group in 1968 to help corporations with analyzing their business units or product lines. This helps the company allocate resources and is used as an analytical tool in brand marketing, product management, strategic management, and portfolio analysis.[1]
Contents
[hide]
1 Chart 2 Practical use of the BCG Matrix o 2.1 Relative market share o 2.2 Market growth rate o 2.3 Critical evaluation o 2.4 Alternatives 3 Other uses 4 References
[edit] Chart
BCG Matrix
To use the chart, analysts plot a scatter graph to rank the business units (or products) on the basis of their relative market shares and growth rates.
Cash cows are units with high market share in a slow-growing industry. These units typically generate cash in excess of the amount of cash needed to maintain the business. They are regarded as staid and boring, in a "mature" market, and every corporation would be thrilled to own as many as possible. They are to be "milked" continuously with as little investment as possible, since such investment would be wasted in an industry with low growth. Dogs, or more charitably called pets, are units with low market share in a mature, slow-growing industry. These units typically "break even", generating barely enough cash to maintain the business's market share. Though owning a break-even unit provides the social benefit of providing jobs and possible synergies that assist other business units, from an accounting point of view such a unit is worthless, not generating cash for the company. They depress a profitable company's return on assets ratio, used by many investors to judge how well a company is being managed. Dogs, it is thought, should be sold off. Question marks (also known as problem child) are growing rapidly and thus consume large amounts of cash, but because they have low market shares they do not generate much cash. The result is a large net cash consumption. A question mark has the potential to gain market share and become a star, and eventually a cash cow when the market growth slows. If the question mark does not succeed in becoming the market leader, then after perhaps years of cash consumption it will degenerate into a dog when the market growth declines. Question marks must be analyzed carefully in order to determine whether they are worth the investment required to grow market share. Stars are units with a high market share in a fast-growing industry. The hope is that stars become the next cash cows. Sustaining the business unit's market leadership may require extra cash, but this is worthwhile if that's what it takes for the unit to remain a leader. When growth slows, stars become cash cows if they have been able to maintain their category leadership, or they move from brief stardom to dogdom.[citation needed]
As a particular industry matures and its growth slows, all business units become either cash cows or dogs. The natural cycle for most business units is that they start as question marks, then turn into stars. Eventually the market stops growing thus the business unit becomes a cash cow. At the end of the cycle the cash cow turns into a dog. The overall goal of this ranking was to help corporate analysts decide which of their business units to fund, and how much; and which units to sell. Managers were supposed to gain perspective from this analysis that allowed them to plan with confidence to use money generated by the cash cows to fund the stars and, possibly, the question marks. As the BCG stated in 1970: Only a diversified company with a balanced portfolio can use its strengths to truly capitalize on its growth opportunities. The balanced portfolio has:
stars whose high share and high growth assure the future; cash cows that supply funds for that future growth; and question marks to be converted into stars with the added funds.
The need which prompted this idea was, indeed, that of managing cash-flow. It was reasoned that one of the main indicators of cash generation was relative market share, and one which pointed to cash usage was that of market growth rate. Derivatives can also be used to create a 'product portfolio' analysis of services. So Information System services can be treated accordingly.[citation needed]
(of its 'maturity' in terms of the market life-cycle), and also of its attractiveness to future competitors. It can also be used in growth analysis.
are needed to extend the life of that `product'. Although it is necessary to recognize a `dog' when it appears (at least before it bites you) it would be foolish in the extreme to create one in order to balance up the picture. The vendor, who has most of his (or her) products in the `cash cow' quadrant, should consider himself (or herself) fortunate indeed, and an excellent marketer, although he or she might also consider creating a few stars as an insurance policy against unexpected future developments and, perhaps, to add some extra growth. There is also a common misconception that 'dogs' are a waste of resources. In many markets 'dogs' can be considered loss-leaders that while not themselves profitable will lead to increased sales in other profitable areas.
[edit] Alternatives
As with most marketing techniques, there are a number of alternative offerings vying with the BCG Matrix although this appears to be the most widely used (or at least most widely taughtand then probably 'not' used). The next most widely reported technique is that developed by McKinsey and General Electric, which is a three-cell by three-cell matrix using the dimensions of `industry attractiveness' and `business strengths'. This approaches some of the same issues as the BCG Matrix but from a different direction and in a more complex way (which may be why it is used less, or is at least less widely taught). A more practical approach is that of the Boston Consulting Group's Advantage Matrix, which the consultancy reportedly used itself though it is little known amongst the wider population. A different alternative that is getting more popularity by practitioners, is COPE analysis [3]. COPE analysis, takes an even wider business approach than McKinsey's, and is based on hard or estimated data instead of subjective scores.
[edit] References
1. ^ About BCG: http://www.bcg.com/about_bcg/history/history_1968.aspx 2. ^ a b c d the Rule of 123 3. ^ COPE analysis explained Retrieved from "http://en.wikipedia.org/wiki/Growth-share_matrix" View page ratings
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Marketing pundits could well be spouting a new acronym at wide eyed students of management courses. The acronym is FMCD. No prize for guessing correctly that the D does not stand for a Ram Gopal Verma movie; it actually means durables. Thanks to Nokia, India Inc has discovered a completely new product category: Fast Moving Consumer Durables. Mobile phones now inhabit an arena that has seen the morphing of detergents and shampoos with microwave ovens and washing machines. Handset companies like Nokia now need new mantras to position and market FMCDs. For Nokia India Managing Director Sanjay Sharma and his marketing head Sanjay Behl, there is a Hamlet like dilemma that simply refuses to go away: Do we position brand Nokia as a toothpaste or do we peddle it as a premium fl at screen television? On the one hand, Nokia needs to reinforce its stranglehold at the entry level itself where first time buyers join the mobile bandwagon by paying anything between Rs 2,000 to Rs 3,000. These buyers could pick up their first handset from the friendly neighbourhood shop which supplies them the latest pirated versions of Bollywood movies. On the other hand, Nokia also needs to keep these first time buyers as loyal customers when they move up the value chain and contemplate buying fancy handsets. The Real Challenge If Sharma and his team can transcend this dilemma, Nokias early success in India can endure as a legend and a lesson for others to emulate. If they get stuck with this positioning riddle, Nokia could be yet another example of how global leaders have failed to find the magic formula in India. By any yardstick, Nokia is a smashing success in India. According to various market research reports, Nokia commands more than 60% of the handset market in the country. The nearest rivals, Sony Ericsson, LG, Samsung and Motorola barely manage a 10% market share as individual entities. Yet, Nokias invincibility could be deceptive. For one, rivals like BenQ are rapidly emerging as aggressive price warriors. Moving up the value chain, new models from LG and Motorola are already giving Nokia a hard time. Global Lessons Nokia can draw from the lessons that global heavyweights have learnt in India. General Motors (GM), Procter & Gamble (P&G) and Sony stand out for their unique and oft en humbling experiences in India. All three are global leaders in their respective domains: automobiles for GM, Fast Moving Consumer Goods (FMCG) for P&G and consumer electronics for Sony. All three had an India entry strategy that tried to leverage their status as world leaders and consumer perceptions about the premium nature of their brand equity. All three initially
disdained the bottom end of the market and concentrated on the top segments. Th e result: All three failed to capture even respectable market shares in their respective domains. But Nokia has been proactive enough to invest $50 million to set up a manufacturing plant in the southern city of Chennai in India. This plant will manufacture mobile handsets as well as equipment. This is a clear signal from Nokia that it views India as a major market across the world. And why not? Going by latest figures, India is the fifth largest market in the world for Nokia. Also, if the current growth trend continues, more than a 100 million Indians will be buying mobile handsets by 2008. Nokia is not alone in investing in India and laying their bets on the future of the market. The South Korean conglomerate LG has already pumped in more than $32 million to set up a manufacturing plant in Pune. The Sony Story India has seen many such giants set up manufacturing facilities, only to withdraw later on as they found the Indian market hostile. A typical example is Sony, which trimmed down its manufacturing operations in Dharuhera, Haryana and now imports almost all of its audio products and CTVs (colour televisions). The Japanese giants performance in the Indian consumer electronics industry mirrors what is happening across the world: Sony is being battered by nimble footed and aggressive companies like LG, Samsung and even Microsoft in the segments that it used to dominate. In India, the Korean Chaebols LG and Samsung have emerged as clear leaders, both in terms of market share and brand visibility. Indian brands like Videocon and Onida too have hung on tight, leaving Sony quite far behind in the sweepstakes. According to an advertising industry professional that services the Videocon brand: If you can get a good quality 29 inch fl at screen TV for Rs 15,000, will you pay Rs 30,000 for a 21 inch TV? This is a question that Sony needs to ask itself if it is serious about emerging as a market leader in India. Sunny Sodhi, owner of a travel agency and a heavy mobile phone user, says: Nokia will not have the going as easy as it did in the past. The Indian market is too big and too tempting. Rivals will go all the way to grab the market share away from Nokia. P&G changed gears after being taught a lesson by the price sensitive Indian consumer seeking value for money. Till 2003, market leader Hindustan Lever Ltd. (HLL) faced a greater threat from its own fl aging growth than from P&G. All that changed last year with P&G becoming an aggressive price warrior. Till date, HLL and P&G continue to fight bruising price battles. P&G has gained significant market share, though accurate figures are difficult to obtain. The GM Lesson For Nokia Almost 10 years after GM entered India, the number one car company in the world boasts of a market share of just two per cent. Just one model from Japan, Honda City, sold more cars than all the GM models put together! However, Nokias India strategy seems to have worked very well right from the word go. It has offered value for money handsets for the price sensitive Indian consumer. It has invested time, energy and money to create and market Made for India mobile phones. If things are so hunky-dory, why should Nokia be worried? Nokias Roadblocks There are plenty of reasons. The two most important ones are: A perception that while Nokia is all about connecting people, it is getting disconnected from upwardly mobile young consumers. Globally, Nokia seems to have paid a price for complacency when its market share dropped from 35% in 2003 to a little less than 30% by early 2005. Its initial reluctance to introduce clamshell (folding) models paved the way for LG and Samsung, who have cashed-in well on their popularity in the Asian continent. Long standing players like Motorola and new entrants like LG aggressively marketed themselves as brands that are funkier and technologically with it. An even bigger problem confronting Nokia is the issue of after sales service. Vijay Nair, a Senior Associate with a legal service firm has a scathing comment: The only danger I see Nokia facing from rivals is at the level of after sales service. In Delhi, at least, the tie-up with HCL for after sales service is proving negative as the HCL employees are incompetent and discourteous to the customers. Mr. Gogia, who has just ended his seven year association with Nokia as a Priority Dealer on a bitter note, shares the same view. His Nokia dealership is in the up market locality of South Extension, New Delhi has seen the Finnish giant in both its gray and hay days. According to him, Nokia has not been able to differentiate between a Priority Dealer and a roadside store that could also stock Nokia phones. How Leaders Behave Most market leaders face this problem of complacency. Some, like General Motors, become truly complacent and stop reinventing themselves. The result: hitherto unknown players like Toyota simply snatch away the leadership status. Some, like General Electric, ruthlessly and continuously reinvent themselves to stay ahead of the pack. The result, General Electric stays at the top. As a global player, Nokia clearly has the ability to roll out models in all price ranges from entry level to premium. The best long term strategy is to identify market segments that can be profitably tapped and position key models segment- wise. Nokia is one company that can attack the competition on several fronts and it must leverage this strength. The Indian mobile phone market is currently in the Star stage of the BCG matrix. Nokia has to ready itself for a period of stiff competition, where it will invest heavily and margins will be highly squeezed. However, the market will eventually discard weak players and reach the cash cow stage; that is when Nokia will actually earn the spoils of victory.
BCG Matrix:Star SBU: Enterprise Services(Carriers & Corporates) Reason:-( Major Contributor to revenue in just 4 years of coming 04-08) ? SBU: Passive Infra Reason:-(Very new approach but quick grip of market/Good Coloborations like-Indus Towers/Untaaped Market) Cash Cow SBU: Mobile Services Reason:-(Legacy of Bharti) Dog SBU: Telemedia Services Reason:-(Significant fall in ARPU/Other Big Players existing in Market) Data for BCG Matrix in following Manner:Strategic Business Unit Market Share(SBU) Market Share(Largest Competitor) Relative Market Share Market Growth Quadrant Relative Market Share (in BCG Terms) (%age change b/w FY 07-10) in which the SBU lies Mobile Services 70.56% Reliance-CDMA/GSM-->17.94% 24.79% 1.38 33.00% Cash Cow Telemedia Services 9.22% BSNL-->37% 23% 0.62 44.00% Dog Enterprise Services(Carriers & Corporates) 18.26% Atire Technology-->42.6% 14.50% 0.34 30.00% Star Passive Infra 1.94% GTL Infra-->28.33% NA(Newly