STRATEGIC ANALYSIS

Meaning
◦ Strategic Choice
◦ Involves a lot of commitment and
affects the future
◦ A lot of analysis goes into making a
strategic choice; look inwards,
outwards and sideways before taking
a leap.

◦ Selection factors
Tools for Strategic Analysis

BCG Portfolio Matrix

GE Nine Cell Matrix

Porter’s 5 Force Model of

Competition in Industry
BCG Portfolio Matrix
◦ Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2 matrix) developed by
BCG, USA.

◦ It provides a graphic representation for an organization to examine different businesses in it’s

portfolio on the basis of their related market share and industry growth rates.

◦ It is a two dimensional analysis on management of SBU’s (Strategic Business Units).

◦ This is also known as the Growth/ Share Matrix

◦ The product or service offering of the company are plotted in four different categories
which include "Dogs," "Cash Cows," "Stars," And “Question Marks.
◦ Relative Market Share- SBU Sales this year compared to leading competitors sales this
year
◦ Measures comparative advantage indicated by market dominance

◦ Market Growth Rate = Industry sales this year - Industry Sales last year

◦ Resources are allocated to the business units according to their situation on the grid.

Stars
1. Large market share in a fast
growing industry
2. Net cash flow is usually
modest.
3. Fantastic opportunities and
can generate higher ROI
due to higher market share,
growth market, and cash
generation capacity
Cash Cow
1. products that are well-
established and
consistently produce cash
through a higher market
share in the low growth
markets.
2. Cash cows require little
investment and generate
cash that can be utilized for
investment in other business
units.
3. Core Business
Question Mark
1. low relative market share
and located in a high
growth industry.
2. They require huge amount
of cash to maintain or gain
market share.
3. Most businesses start as
question marks as the
company tries to enter a
high growth market
4. Can become Stars or Dogs
Dogs
1. Weak market shares in low-
growth markets
2. They neither generate cash
nor require huge amount of
cash
3. These business firms have
weak market share
because of high costs, poor
quality, ineffective
marketing, etc
4. Unless a dog has some
other strategic aim, it
should be liquidated if
there is fewer prospects for
it to gain market share
BCG Matrix- Coca Cola
BCG and PLC
GE Nine Cell Matrix
◦ General Electric Matrix was given by McKinsey in 1970 to manage a large and complex
portfolio of strategic business units.

◦ The strategic planning tool helps the organization to prioritize its investment in different
business units by considering three possible scenarios which include protect, harvest,
and divest.

◦ It consists of the Nine-cell Matrix that considers the industry attractiveness as well as
business strengths while proposing and guiding various business strategies.
◦ Industry Attractiveness
◦ Market size
◦ Long-term growth potential
◦ Industry Profit Margin
◦ Competitive Intensity
◦ Seasonality
◦ Cyclicality
◦ Economies of scale
◦ Technology and social
◦ Environmental, Legal and Human
Impacts
◦ Business Strength/Competitive
Position
◦ Relative Market Share
◦ Profit Margins
◦ Ability to compete on price and
quality
◦ Knowledge of consumer and
market
◦ Competitive strength and
weaknesses
◦ Technological Capability
◦ Caliber of Management
 Stability

Expansion

Retrenchment
Apple’s GE-McKinsey Matrix
Porter’s 5 Forces Model
◦ The third tool for strategic analysis is an industry analysis tool.
◦ An industry is defined as a group of companies offering products or services that are
close substitutes of each other.

◦ Originally developed by Harvard Business School's Michael E. Porter in 1979, the five
forces model looks at five specific factors that determine whether or not a business can
be profitable in relation to other businesses in the industry.

◦ Porter's Five Forces is considered a macro tool in business analytics – it looks at the
industry's economy as a whole
Understanding Porter's Five Forces
◦ 1. Competitive rivalry
◦ 2. Bargaining power of suppliers
◦ 3. Bargaining power of buyers
◦ 4. Threat of new entrants
◦ 5. Threat of substitutes