MBA DB – SEM II

CH 03

Strategic Analysis and Choice

 Topic Content
• Strategic Analysis and Choice,
• BCG, TOWS, GE, Directional Policy Matrix.
• Organizational Capability Profile – Strategic Advantage Profile,
Corporate Level strategies- growth, stability, renewal, Corporate
portfolio analysis, Grand strategies,
• McKinsey’s7s Framework,
• Business Level Strategies- Michael Porter’s Generic strategies,
Functional level strategies.
• Environmental Threat and Opportunity Profile (ETOP),
There are three levels of strategy formation:
(a) Corporate level
(b) Business level and
(c) Functional level.
In an organisation, a functional strategy is adopted by each functional
area, viz. marketing, production, finance, human resources and so on,
in line with the overall business or corporate strategy, to achieve
organisational level objectives.
The functional strategy of a company is customised to a specific
industry or strategic business unit (SBU) and is used to back up other
corporate and business strategies.
• Each functional department develops certain objectives, which is to
be enforced by employees, and aids in the achievement of final
organisational/corporate level goals.
• As a multidivisional entity, an organisation may have various
business units with different sets of departments and various
arrangements of functional strategies.
• Formulation of strategies can be done at every level, but alignment
of those plans with other level of plans is as important as
formulating plans.
• The overall corporate strategy may fail if, at the functional level,
things do not work properly or plans are not assimilated effectively.
Organisations define functional strategies so as to help it in the total
integration of efforts to achieve the overall objectives
• Functional strategies are applied through functional and operational
implementation.
• There are five functional areas, which help in the execution of
functional strategies.
• These are marketing, finance, operations, human resource
management and information management plans and policies
• Strategic choice deals with the process of analysing, determining and
selecting a specific strategy or a combination of strategies.
• It plays an important role in achieving organisational objectives, since
it is important to ensure that the organisation makes the right choice
of a strategy at the right time, and implements it correctly as well
Functional strategies
• According to Gareth R. Jones, “Functional level strategy is a plan of
action to strengthen an organisation’s functional and organisational
resources, as well as its coordination abilities, in order to create core
competencies”.
• Corporate- and business-level strategies give birth to functional
strategies, which are implemented in the organisation through
functional and operational implementation.
• This strategy refers to a single functional operation and the activities
involved in it. This is an operating level of strategies.
• The decisions taken at this level are referred to as tactical decisions.
• The main purpose of a functional-level strategy is to achieve
corporate- and business-level objectives in a specific functional area
through the optimum allocation of available resources to maximise
profitability.
• Functional-level strategies relate to operating divisions, thus
connecting to business processes and value chain.
• Higher-level strategies depend on these strategies as they provide
input to business-level and corporate-level strategies.
• Once higherlevel strategies are formulated, functional units translate
them into action plans, which each department is supposed to
complete within a due course of time for the success of the strategy.
• A multiunit organisation dealing in several businesses
simultaneously can create a business strategy for each business.
• Each business having separate sets of departments will constitute its
own functional strategies for each department.
Strategic choice
• The strategy of an organisation is related to various decisions, such
as how, when and where to compete in the market. Strategic choice
is the process of making the final decision from available
alternatives.
• For example, an organisation has to decide whether to position its
product at a niche market with high price and less promotion or at
the mass market with low price and high promotion.
• The decision of selecting one of these choices comes as a challenge
for an organisation, as it has to select from various alternatives to
achieve the objectives in the best possible manner.
• A good strategic choice is based on correct data, facts and
figures and involves sound and rational reasoning.
• A decision taken on poor judgment and a weak strategic
outlook is a bad choice taken by an organisation towards its
future.
• The flaws in making choices can be prevented by carefully
following the choice making process
The features of strategic choice
A strategic choice should be genuine:
• A choice should be made after analysing various options available to
an organisation.
• A choice should clearly delineate what an organisation should or
should not do.
• For example, which customers to target or not to target
Strategic Choices

Managers have a number of choices to make regarding

their selection strategies. These strategies are outlined below:
1. Recruiting efforts: An organization can make a strategic choice to
focus recruiting efforts on minorities and women.
2. “Make’ or “Buy’: Organizations can choose to make or buy their
employees (that is, hire less skilled workers or hire skilled workers and
professional.
3. Budget: Organizations make strategic decisions regarding the budget
for recruiting and selecting employees
4. Untapped labor: An organization can make a strategic choice to
explore untapped labor sources.
5. Technological sophistication: Organizations make strategic decisions
regarding the technological sophistication of their recruiting
and selection devices.
6. Recruiting methods: An organization can choose the extent to which
internal versus external recruiting methods are used (that is recruiting
within the organization or outside the organization.)
A strategic choice should be sound:
• A choice should be logical and based on relevant data, facts, figures
and beliefs.
• It should neither ignore nor rely fully upon the intuition of choice
makers.
• The logic applied to make a choice should be easily verified and
tested.
• The data upon which the choice is made should also be valid.
A strategic choice should be actionable:
• A choice should be practical that can be implemented properly.
• It means a choice should be easily broken down into a number of
steps for its implementation.
• These steps should be easily communicable so that executives of the
organisation can implement them
A strategic choice should be compelling:
• An organisation should take a choice in such a way that it demands
commitment from every member of an organisation.
• The entire management should feel enthusiastic and energetic about
the choice taken by the organisation.
Process of Strategic Choice
1. Focusing/ Identifying strategic alternatives:

• It involves categorising various options available to an organisation.

• An organisation may face a difficulty in identifying all options with
equal transparency at the same time.
• For example, an organisation needs to identify two options, such as
producing a product at low cost that implies a strategy of cost
leadership, or producing a high-priced product with differentiation.
• Strategic choice makers prefer to limit the choices to a few
alternatives.
• However, this may lead to ignorance of some valuable alternatives.
• Thus, an organisation tries to focus on specific alternatives with the
help of a technique called gap analysis.
• Gap analysis involves visualising the future goals of an organisation
and working towards it by finding the ways to meet goals.
• Gap analysis helps organisations to know where they currently stand
and how they can achieve the desired performance
• The gap size (narrow or wide) determines the choice for alternatives.
• The strategic alternatives available to an organisation at the corporate
level are expansion, stability, retrenchment and combination.
• A narrow gap implies that an organisation is not too far from its goal,
thus the feasible alternative in this case can be stability strategies.
• If the gap is wide because of poor management, retrenchment
strategies can be implemented.
• However, if multiple reasons are responsible for the gap, combination
strategies are used.
2. Analyzing the Strategic Alternatives

• All strategic options are studied thoroughly to find out their

strengths, weaknesses, opportunities and threats.
• An organisation has to analyse various selection factors to finalise a
strategy. Selection factors are further divided into objective and
subjective factors.
• An objective factor is based on data and facts, such as percentage of
market share or sales; whereas, a subjective factor is based on the
personal judgment of a decision maker, such as perceptions and
beliefs.
• Thus, based on selection factors, the alternatives selected at the first
stage are analysed to ascertain their benefits and risks
3. Evaluating the strategic alternatives
• It involves assessing options against the set criteria.
• An organisation, before finalising an alternative, always checks
whether it has enough resources and capabilities to implement the
selected option.
• The long-term objectives of an organisation are also taken into
consideration before selecting a strategy.
• For example, an organisation cannot follow the cost leadership
strategy if raw material costs are high.
4. Selecting the best strategic alternative
• The evaluation stage should follow a clear strategy for making a final
choice.
• After finalising the strategy, a blueprint should be prepared by an
organisation that details out conditions under which the alternative
will be used.
• However, an organisation should be ready for unexpected events,
which may arise later and create new opportunities or wipe out
unforeseen threats.
• Therefore, an organisation should also devise some contingency
strategies
 Strategic Gap Analysis
• Strategic gap analysis refers to the study of factors that need to be
considered while making a strategic choice.
• It helps in answering various questions, such as what industries to
enter or leave, what business to create and expand and which
products and markets to retain or divest
• In an organisation, strategic gap analysis is carried out with the help
of various tools used at two different levels; namely,
1. Corporate Level Analysis and
2. Industry Level Analysis
• Corporate level analysis focuses on businesses under the same
corporate umbrella, whereas business-level analysis focuses on
individual businesses.
• The corporate-level analysis is relevant in the case of diversified
organizations having several businesses, whereas the industry-level
analysis is relevant in the case of single business entities.
• Competition is an important arena in the case of industry-level
strategies; therefore, industry-level analysis is based on competitor
analysis.
• Let us now discuss different strategic analysis techniques used at the
corporate and industry levels.
Corporate-Level Analysis
• Corporate-level analysis is used in the case of multi-business or multi-
product organizations.
• It involves techniques that help strategists to take strategic decisions
at the corporate level.
• It examines each business unit as a separate entity, which contributes
to the organisation.
1. BCG Matrix
2. GE Nine Cell Matrix
3. Life Cycle Analysis.
BCG Matrix
• BCG matrix was developed in the 1970s by Bruce D. Henderson for
the The Boston Consulting Group, a global management consulting
organisation.
• Also known as the BCG growth share matrix, it is used for managing a
portfolio of different business units in an organisation.
• It shows a relationship between the market growth rate and relative
market share of a business unit
Bruce D. Henderson
BCG Matrix
• BCG Matrix (also known as the Boston Consulting Group analysis, the
Growth-Share matrix, the Boston Box or Product Portfolio matrix) is a
tool used in corporate strategy to analyse business units or product
lines based on two variables: relative market share and the market
growth rate.
• By combining these two variables into a matrix, a corporation can plot
their business units accordingly and determine where to allocate
extra (financial) resources, where to cash out and where to divest.
• The main purpose of the BCG Matrix is therefore to make
investment decisions on a corporate level.
• Depending on how well the unit and the industry is doing, four
different category labels can be attributed to each unit:
1. Dogs,
2. Question Marks,
3. Cash Cows and
4. Stars.
Stars
• Stars are those businesses or products that have high market shares
and high market growth.
• As they have a high market growth, they need heavy investment as
well.
• Eventually, their growth will slow down and they may turn into cash
cows.
• These products will need a lot of investment to retain their position,
to support further growth as well as to maintain its lead over
competing products.
• Star products generates a lot of income due to the strength
they have in the market.
• The main problem for product portfolio managers it to judge
whether the market is going to continue to grow or whether
it will go down.
• Star products can become Cash Cows as the market growth
starts to decline if they keep their high market share
• For example, Apple iPhone
Cash Cows
• Cash cows are those products that have a low market growth; however,
they have high a market share.
• These are mature and successful businesses which require a limited
amount of investment.
• Cash cows don’t need the same level of support as before. This is due to
less competitive pressures with a low growth market and they usually
enjoy a dominant position that has been generated from economies of
scale.
• Cash cows are still generating a significant level of income but is not costing
the organisation much to maintain. These products can be “milked” to fund
Star products.
• Example, many would argue that iPod is a cash cow for Apple as the
product has a high market share and certainly, a low market growth
Question marks
• Question marks are also called problem children.
• These are the businesses or products which have a low market share
but a high market growth.
• Example : Apple TV is a question mark as it makes a bit of money;
however, it has a high growth potential.
Dogs
• Dogs are those businesses or products which have a low market
share and a low market growth.
• These products are very likely making a loss or a very low profit at
best. These products can be a big drain on management time and
resources. The question for managers is whether the investment
currently being spent on keeping these products alive could be spent
on making something that would be more profitable.
• Example : Apple Pippin was launched in Japan in 1995 and in the USA
in 1996. However, the product flopped extremely miserably. Apple
Pippin is an example of dogs.
Relative Market Share
• This indicates likely cash generation, because the higher the share
the more cash will be generated.
• As a result of 'economies of scale' (a basic assumption of the BCG
Matrix), it is assumed that these earnings will grow faster the higher
the share.
• The exact measure is the
brand's share relative to its largest competitor.
Market Growth Rate
• Rapidly growing in rapidly growing markets
• Is that they are usually net cash users – they require investment. The
reason for this is often because the growth is being 'bought' by the
high investment
• The market growth rate helps in judging whether an organisation
should remain in the particular industry or not.

• A high market share gives special benefits to the organisation, such

as strong bargaining power
Strategies
Limitations of BCG Matrix
As with all other models, BCG matrix has some limitations as well.
• The matrix focuses on two strategic factors only: market share and growth.
More factors/variables should have been considered.
• Likewise, high or low market growth is not very clearly defined.
• Problems of getting data
• High market share does not mean profits all the time.
• Business with low market share can be profitable also.

However, putting limitations aside, BCG matrix is a very useful tool for
strategic planners
 GE Matrix
Aims of GE Model:
• This model aims to evaluate the existing portfolios of strategic
business units and to develop strategies to achieve growth by
addition of new products and businesses to this portfolio and further,
to analyze which business units to invest in and which ones to sell off.
• The GE McKinsey matrix is a nine-box matrix which is used as a
strategy tool.
• It helps multi-business corporations evaluate business portfolios and
prioritize investments among different business units in a systematic
manner.
• This technique is used in brand marketing and product management.
• The analysis helps companies decide what products need to be added
to a product portfolio as well as what other opportunities should
continue to receive investments.
• Though similar to the BCG matrix, the GE version is a lot more
complex.
• The analysis begins as a two-dimensional portfolio matrix but the
dimensions are multifactorial with industry attractiveness measures
and business strength measures.
• The business world is becoming increasingly focused on its
investment decisions as resources become more and more scarce.
• Each decision needs to be the best use of investments and aim to
bring in the most return on this investment.
• For diversified businesses, the fight for resource allocation becomes
even more complex because multiple products, brands and portfolios
need to be managed.
• This matrix helps companies make these decisions in a more
systematic and informed manner.
• The matrix is a 3×3 grid.
• The Y-axis measures market attractiveness while the x-axis measures
the business strength.
• The scale is high, medium and low.
• List the entire range of products created or sold by a particular
strategic business unit.
• Identify the factors that make a specific market attractive.
• Evaluate the strategic business unit’s position in the market.
• Calculate the business strength and market attractiveness.
• Determine the strategic business unit’s category: High, Medium or
low.
1) Market Attractiveness
• This dimension helps determine the attractiveness of the market by
analyzing the benefits a company is likely to get by entering and competing
within the market.
• A number of factors are studied within this analysis.
• These include the size of the market, its rate of growth, profit potential,
and the nature, size and weaknesses of the competition within the
industry.
Some factors used to determine market attractiveness include:
a. Long term growth rate
b. Size of the industry
c. Industry Profitability
d. Structure of the industry
e. Product life cycle
f. Demand
2) Business Unit /Competitive Strength
• The other main dimension that makes up this grid is the competitive
or business strength of the company itself.
• An assessment along this dimension helps understand whether a
company has the required competence to compete in a particular
market.
• This can be determined by internal factors such as assets, market
share and development of this market share, brand position and
loyalty, creativity, and handling of market changes and fluctuations.
• This can also be determined by external factors such as
environmental concerns, government regulations and laws, energy
consumption etc.
• Some factors that can determine this business/competitive strength
include:
a. Total market share
b. Market share growth compared to competitors
c. Strength of the brand
d. Company profitability
e. Customer loyalty
f. Value chain
g. Product differentiation
• Grow – Business units that fall within this category attract investment
by the corporation because they are in a position to bring high
returns in the future.
• Investments include those in research and development, acquisitions,
advertisement and brand expansion as well as an expansion in
production capacity.
• Hold/Selectivity – These business units are in a more ambiguous
position and it is unclear whether they will grow in the future or
become stagnant.
• Investments in this category may happen after money has already
been put into ‘grow’ units and if there is a strategic purpose for these
units.
• Harvest – Units in this category may be poor performers and in less
attractive industries and markets.
• Investment will be put into these if they generate revenues to equal
this investment.
• If this does not happen, then these units may be liquidated.
How To Apply The GE Matrix

• Step 1: Determine Industry Attractiveness of Different Business Units

• Step 2: Determine the Competitive Strength of each Business Unit

• Step 3: Plot the business units on a matrix

With all the scores needed in hand, the business units can now
be plotted in the matrix. Each unit is denoted by a circle with
the size of the circle representing the same proportion as the
business revenue that the unit brings in for the company.
• Step 4: Analysis of Information
 Based on the position of each business unit in the matrix,
there are three actions a company can take for each unit.
These actions are to invest/grow, selectivity/earnings and
harvest/divest.
 Each unit falls within a certain set of boxes and this position
determines the action to be taken.
• Step 5: Identify future direction of each unit
 With the help of an industry analyst, the company may be able
to determine the potential direction the future will take.
 With this information, the steps to be taken may be altered
significantly if the potential in any area is expected to improve or
reduce.
 Within the matrix, an arrow is added to each circle, showing its
future direction.
• Step 6: Prioritize Investments
The final step in the matrix analysis is to decide the wheres and
hows of the investment decisions for the company in practice.
Advantages

1. Raises awareness between managers about the performance of

their products in the market and aids in developing strategies to
get maximum returns from the resources available.
2. Helps extract information about a business unit's strengths and
weaknesses and to devise strategies to accelerate and improve
performance.
3. Aids the business in growing and in providing information about
potential market opportunities.
 Limitations
1. The industry attractiveness and business unit strength can only be
accurately determined by a consultant or a very experienced
person.
2. The entire exercise can be costly to conduct for a company
3. Potential synergies and dynamics between 2 or more business units
are not taken into account.
4. It is more complex in comparison to the BCG matrix.
 Conclusion
• Many businesses have various strategic business units (SBUs), all
competing for investment.
• Therefore it makes it very hard for an organization to decide where to
invest its limited resources.
• The GE Mckinsey Matrix model is useful for analyzing your business
units against multiple factors and provides a structured means to
helps organizations understand where to make investments.
• The model helps in determining the current situation of the business,
as well as future positions of the business.
• Thus this information is used as an input for making investment
decisions.
 McKinsey 7S model
• McKinsey 7S model was developed by Robert Waterman and Tom
Peters during early 1980s by the two consultants McKinsey
Consulting organization.
• The model is a powerful tool for assessing and analyzing the changes
in the internal situation of an organization.
• It is based on 7 key elements, which determine the organization’s
success, which should be interdependent and aligned for producing
synergistic outcomes
• The model can be used widely in various situations where an alignment is
required: For improving organizational performance.
• Analyzing and evaluating the effects of futuristic changes on the
organization.
• Can be a useful framework during the situation of Merger and Acquisition
involving striking an alignment between the key processes of an
organization.
• Providing a recommendative framework for implementing a strategic plan
of action.
• The model can be effectively applied to various teams or groups or projects
as well.
• The McKinsey 7 S model refers to the seven key interrelated or
integrated elements of an organization which are subdivided into
hard and soft elements:
• The Hard elements are within the direct control of the management
as it can be easily defined and identified.
• The following elements are the hard elements in an organization.
1. Strategy: It is the plan of action, or the roadmap or the blueprint by
way of which an organization gains a competitive advantage or a
leadership edge.
2. Structure: This refers to organizational structure or the reporting
pattern.
3. Systems: This includes the day to day activities in which the staff
members involve themselves for ensuring the completion of their
assigned tasks.
• The Soft elements are less tangible and are difficult to be defined and
identified as such elements are more governed by the culture. But
according to the proponents of this model, these soft elements are equally
important as the hard elements in determining an organization’s success as
well as growth in the industry.
• The following elements are the soft elements in an organization:
1. Shared Values: The superordinate goals or the core values which get
reflected within the organizational culture or influence the code of
ethics.
2. Style: This lays emphasis on the leadership style and how it influences
the strategic decisions, people motivation and organizational
performance.
3. Staff: The general staff or the capabilities of the employees
4. Skills: The core competencies or the key skills of the employees play a
vital role in defining the organizational success
 Four Corners Analysis
• The Four Corners Analysis, developed Michael Porter, is a model well
designed to help company strategists assess a competitor's intent and
objectives, and the strengths it is using to achieve them.
• It is a useful technique to evaluate competitors and generate insights
concerning likely competitor strategy changes and determine
competitor reaction to environmental changes and industry shifts.
• By examining a competitor's current strategy, future goals, assumptions
about the market, and core capabilities, the Four Corners Model helps
analysts address four core questions:
• Motivation - What drives the competitor? Look for drivers at various
levels and dimensions so you can gain insights into future goals.

• Current Strategy - What is the competitor doing and what is the

competitor capable of doing?

• Capabilities - What are the strengths and weaknesses of the competitor?

• Management Assumptions - What assumptions are made by the

competitor's management team?
 Advantage of Porter's Four Corners Analysis

1. Porter's Four Corners tool has been around for a long time and it's
earned a place for itself as a useful and respected management tool.
The real advantage of this approach is:
2. Try to get inside the mind of the opposition
3. Explore the beliefs and assumptions of your competitors.
4. Use past behavior to predict future action, but actively tries to see if
there is likely to be a shift in their strategy.
 Components of Four Corners Analysis

• The four corners refer to the four elements that are critical in analyzing
a market rival, including independently and collectively assessing its:
Drivers / future goals, Management Assumptions, Strategy and
Capabilities.
• Unlike the other static models (i.e. SWOT Analysis) that they don't
actually help the analyst understand what would motivate a competitor
to take particular actions, the four corners method was developed to
capture insights about what competitors plan to do from the present
forward.
• Now, let's take a look of the four component of the analysis:
Drivers

• Analyzing a competitor's goals assists in understanding whether they are

satisfied with their current performance and market position.
• This helps predict how they might react to external forces and how
likely it is that they will change strategy.
• We may brainstorm by considering the following points:
• What is it that drives them forwards
• What is it that drives them to compete?
• How does this motivate and shape their strategy?
Management Assumptions

• The perceptions and assumptions that a competitor has about itself, the
industry and other companies will influence its strategic decisions.
Analyzing these assumptions can help identify the competitor's biases
and blind spots. We may brainstorm by considering the following
points:
• What do they believe about themselves and the world in which they
operate?
• What assumptions have they made about their own strengths and
weaknesses in relation to their competitors?
• Is this likely to make their strategy proactive or reactive? Aggressive, or
defensive?
Current Strategy
• A company's strategy determines how a competitor competes in the
market.
• However, there can be a difference between 'intended strategy' (the
strategy as stated in annual reports, interviews and public statements)
and the 'realised strategy' (the strategy that the company is following in
practice, as evidenced by acquisitions, capital expenditure and new
product development).
• Where the current strategy is yielding satisfactory results, it is reasonable
to assume that an organisation will continue to compete in the same way
as it currently does.
• We may brainstorm by considering the following points:
• How do your competitors actually act and are they happy will they be
with the efficacy of their actions?
• Is there a gap between intended strategy and realized strategy?
• Is there likely to be a sea-change in their strategy due to current lack of
success or are they likely to keep moving in the same direction?
Capabilities

• The drivers, assumptions and strategy of an organisation will determine

the nature, likelihood and timing of a competitor's actions. However, an
organisation's capabilities will determine its ability to initiate or respond
to external forces. We may brainstorm by considering the following
points:
• What are their best options for responding to competition from their
rivals? For example:
• Are they more likely to respond with a price drop
• Or through aggressively targeting its distribution network?
Four Corners Analysis Template
Porter’s four corners example – Pepsi vs Coca-Cola.
• The battle fought by Pepsi and Coca-Cola in the 20th century is
legendary.
• Many people think that, the fight was only for the Cola-flavored
drinks… And that is not true.
• Let’s imagine what Pepsi could have thought about Coca-Cola’s strategy:
• Drivers: Coca-Cola wants to be the most popular drink in the world.
• Management Assumptions: They assume that they are way ahead their
competitors.
• Strategy: Coca-Cola is associating its name to “Happiness”, Christmas,
etc.
• Capabilities: They have the best Supply Chain in the world for drinks.
• What will Coca-Cola do? (according to Pepsi)
• They will continue to spread their powerful brand on 5 continents.

• What did Pepsi do?

PepsiCo focused on other products:
Snacks.
Other beverages.
Breakfast products.

• Pepsi attacked the niches that Coca-Cola ignored.

 Result

• Coca-Cola is much more popular that Pepsi… But PepsiCo is bigger

than Coca-Cola Company.
• PepsiCo annual revenue: 67 billion USD (2019).
• Coca-Cola annual revenue: 37 billion USD (2019).
 When should you use Porter's Four Corners?

It is recommend that to use this model in the following situations:

• When the Market is driven by a large Company that sets the pace for
the others.
• When you are able to do what a Competitor does, but better.
• When there is a Competitor who is “hot on your heels”.
• When the market is so saturated that the only way to grow is by
replacing the competition.
 Apple and Microsoft… Two super Titans.

• It has been a curious battle because, for many years, Microsoft went
ahead of Apple but, finally, Apple overtook Microsoft.
• What would the Four Corners of Microsoft have been like?
• Drivers: Be the World leader in Software systems.
• Management Assumptions: They assume they can copy or improve any
competitor.
• Strategy: They offer their software pre-installed to hardware companies.
• Capabilities: They have the best programmers and also, they can buy any
competitor.

• What will Microsoft do? (according to Apple)

• They will continue to expand their presence in the Software market.
• Either they have the best programs, or they can purchase any competitor they want.
What did Apple do?
• They focused on their own Hardware systems.
• They also created their own Software environment.
• They diversified their products: mp3 players, tablets, laptops… and
Phones.

• This strategy didn’t work very good for many years… Until they
presented their iPhone to the world.
 Result
• Apple’s revenue is 260 billion USD.
• Microsoft’s revenue is 143 billion USD.

• However, consider Microsoft a much more stable company than Apple is.
• Microsoft has a highly diversified revenue, while Apple depends on one single
product: the iPhone.
 The iPhone represents the 55% of total Apple’s revenues.
 If I were a major shareholder in Apple… I’d be very worried.