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INTEGRATING LIFE-CYCLE AND PORTFOLIO ANALYSIS

 PORTFOLIO
- In terms of finance, it is a grouping of financial assets such as stocks, bonds and cash
equivalents.
- In business terms, it is the collection of products and services provided by a company.

 These are the examples of products that make up the portfolio of Nokia:

Feature Phones Smart Phones

Tablets VR Camera
 PORTFOLIO ANALYSIS
- It is a systematic way to analyze the products and services that make up an associations
business portfolio.
- It is a technique that has been utilized by finance analysts for many years.
- It has assisted financial analysts to systematically evaluate risks and returns of individual
investments.
- Most popular portfolio analysis and portfolio planning method is the “BCG Matrix”.

 BCG MATRIX
- Also known as “Growth-Share Matrix”.
- It is a chart that had been created by Bruce D.
Henderson for the Boston Consulting Group in 1970
to help corporations with analyzing their business
units or product lines.
- In this matrix, products/services are categorized into
4-cell matrix on the basis of market growth and
market share.
- It is based on the life-cycle model and this is an
alternative method of depicting the life-cycle.

BCG MATRIX

H ?
Star
Introduction
Growth Stage
Stage
Market Growth
Potential

Cash Cow Dog

Maturity Decline

Stage Stage

L
H Relative Market Share L
 MARKET SHARE
- It is the percentage of revenue or sales volume of the organization to that of the market.
 MARKET GROWTH
- It is the percentage growth compared to the next year.
- It is the increase in the demand for a particular product or service over specified period of
time.

o ELEMENTS OF BCG MATRIX


 QUESTION MARK (Low Market Share and High Market Growth)
- Also known as the “problem child”.
- These are the opportunities that no one knows how to handle.
- They aren’t generating much revenue right now because it still has a low market share.
- It should be examined whether it must be dumped or be converted into a star.
- Example of this is when the Nokia N-series was first released in the market. Being new
in the market, it reflects a low percentage in the total market share aside from the fact that
its growth rate is continuously increasing.
 STAR (High Market Share and High Market Growth)
- Products and services in this quadrant are seeing rapid growth.
- There should be some good opportunities here, and you hard work is needed to realize
them.
- Business organizations must invest in this product/service.
- Example: When the Nokia N-series is in its growth stage, the N-series had a wide
acceptability resulting in a growth rate of 35.5% of the sales volume.
 CASH COW (High Market Share and Low Market Growth)
- These are the products or services that are well established.
- They’re likely to be popular with customers, which makes it easier to exploit new
opportunities.
- However, spending too much effort on these must be avoided because the market is only
growing slowly and opportunities are likely to be limited.
- Business organizations must hang on to these business unit and nurture them.
- Example: The maturity stage of Nokia N-series came at the start of 2006. More people
were now aware of the Nokia N-series mobile phones. The market share became high, but
the rate of increase in sales volume declined.
 DOG (Low Market Share and Low Market Growth)
- These are the business units or products that have low market share in a low-growth
market.
- They often don’t make much profit, but they don’t need much investment either.
- These are the products/services that are usually being dumped or phased out.
- Example: The decline of the Nokia N-series started almost at the end of 2006 wherein the
competitors such as Samsung came up with very good internet enabled phones.

MERGER AND ACQUISITION INFLUENCE

 A huge number of mergers and acquisitions occur worldwide. However, many of this deals
have not been successful.

 The best example for this situation is the merger and acquisition between Nokia and Microsoft:

In Steve Ballmer's 15-year tenure as Microsoft CEO,


he got a lot of things right: several highly successful
product launches, significant increase in shareholder
value, and a few acquisitions that proved quite
valuable to the company.

However, he will likely be remembered as the man


who drove the most catastrophic merger in the
company's history.

Microsoft has always struggled in the mobile space. The company was early to the game with
Windows CE and Windows Mobile (far earlier than Apple and Google); but it was late to adopt
the mobile developer ecosystem and "app store" strategies of its competitors.

In November 2010, following the surprising success of the iPhone, the company introduced
Windows Phone, which abandoned much of the legacy 32-bit Windows code in previous mobile
releases. Windows Phone featured a brand-new user experience that has evolved into the Universal
Windows Platform (UWP) that powers Windows 10 and runs on all Windows devices.

However, Microsoft needed OEM hardware partners, who were reluctant to take on the
risk of an unproven software platform when they were already enjoying success with Android.
One partner that had taken that risk was Nokia, which -- under the leadership of former Microsoft
exec Steven Elop -- was itself being forced to transform. Competitors such as Samsung and Apple
were eating Nokia's lunch in the company's stronghold EMEA smartphone markets.

Nokia made some impressive Windows Phones during its partnership with Microsoft, but
it was not able to bring itself back to profitability. By 2013, in fact, the company was considering
a move to Android and had even built prototype devices running Google's software. If that move
had succeeded, Windows Phone would have been left with no OEM support. It would have
effectively been a death sentence.

Ballmer, looking to solidify his legacy, saw a potential synergy. Nokia, with its native
manufacturing capability and R&D, could be Microsoft's solution to ramping up their mobile
presence, in addition to providing an essential distribution channel via previously existing carrier
relationships.

In September of 2013 Microsoft bought Nokia's mobile business for over $7 billion. This
included the acquisition of most of the company's assets in Finland as well as manufacturing
capacity in Asia, along with 24,000 employees. Crucially, it didn't include the potentially valuable
Here maps business, which the Microsoft board reportedly refused to go along with.
Many analysts questioned why Microsoft had not simply contract manufactured the
phones, negotiated the carrier relationships on its own, and hired engineering talent for much less
money. The analysts turned out to be correct. Microsoft struggled to consolidate its development
platform over two consecutive OS releases on the desktop and its mobile OS, and was unable to
attract the developer and carrier partnerships needed to make the new Lumia phones successful.

Since Ballmer's departure from Microsoft in 2014, under the leadership of its new CEO
Satya Nadella, the company has laid off over 15,000 employees, the majority of whom came in
from the Nokia acquisition. In all, more than 20,000 jobs at Microsoft will have been cut once the
restructuring is complete. In 2015, the company was forced to write down the acquisition of
Nokia's mobile and services businesses for $7.6 billion.