MGT 502.

Business Strategy, Social Resposibility and

Sustainability

CLASS SEMINAR

MUNA SUBEDI (031817)

NORBU ZANGPO(031818)
 Unit 4.
 Evaluation of Strategies: Assessing the Suitability of
Strategies
 Portfolio analyses, Life cycle analyses (LCA)
 Cultural fit of an organization-embryonic stage, growth,
maturity and decline.
 Screening choices-bases for comparison, ranking, decision
trees, Scenarios.
 Portfolio analyses, Life cycle analyses (LCA)
 Screening choices-bases for comparison, ranking,
decision trees, Scenarios
 A companies with multiple product lines or business units
must also ask themselves how various products and
business units be managed to boost overall corporate
performance:
 How much of time and money should we spend on our
best products and business units to ensure that they
continue to be successful?
 One of the most popular aids to developing corporate
strategy in a multiple business corporation is portfolio
analysis.
 In portfolio analyses, top management views its
product lines and business units as a series of
investment from which it expects a profitable
return. The product lines/business units form a
portfolio of investment that top management must
constantly juggle to ensure the best return on the
corporation’s invested money.
 McKinsey & Company study of the performance
of the 200 largest U.S corporations found that
companies that actively managed their business
portfolios through acquisitions and divestitures
created substantially more shareholder value than
those companies that passively held their business.

 Most
popular portfolio techniques is the BCG
Growth- share matrix
 BCG GROWTH –share Matrix is the simplest way
to portray a corporation’s portfolio of investment.

 The BCG Growth Matrix has some common

attributes with the product life cycle. As a product
moves through its life cycle, it is generally
categorized into one of four types for the purpose
of funding decisions:
 Question Marks (Problem children or wildcat)

are new products with the potential for success, but they need a lot of cash for development. If such a product
is to gain enough market share to become a market leader and thus a star, money must be taken from more
mature products and spent on the question mark. This is a “fish or cut bait” decision in which management
must decide if the business is worth the investment needed.
 Eg. After years of fruitlessly experimenting with an electric car, General Motors finally decided in 2006 to
take a chance on developing the Chevrolet Volt.
 Star.

are market leaders that are typically at or nearing the

peak of their product life cycle and are able to
generate cash to maintain their high share of the
market and usually contribute to the company’s
profits. The iPhone business has been called Apple’s
“crown jewel” because of its 52% market share and
the extensive app network available on iTunes.
 Cash cow-
typically bring in far more money than is needed to maintain their
market share. In this declining stage of their life cycle, these products
are “milked” for cash that will be invested in the new question marks.
Expenses such as advertising and R & D are reduced.
 Panasonic’s videocassette recorders (VCRs) moved to this
category when sales declined and DVD player/recorders
replaced them. Question marks unable to obtain dominant
market share and thus become stars) by the time the industry
growth rate inevitably slows become dogs.`
 Dogs:
have low market share and do not have the potential (because they are
in an unattractive industry) to bring in much cash. According to BCG
Growth matrix, dogs should be either sold off or managed carefully for
the small amount of cash they can generate.

Eg. Dupont, the investor of nylon, sold its textiles unit in 2003
because the company wanted to eliminates its low margin products
and focus more on its growing biotech business. The same was true
of IBM when it sold its PC business to China’s Lenovo Group in
order to emphasize its growing services business.
 Life Cycle Analysis

 Stages of the industry life cycle.

 The life cycle of an industry refers to the stages of introduction, growth, maturity,
and decline that occur over the life of an industry.
 Introduction stage
 In the introduction stage, products are unfamiliar to consumers. Market segments
are not well defined and product features are not clearly specified. The early
development of an industry typically involves low sales growth, rapid
technological change, operating losses, and the need for strong sources of cash to
finance operation. Since there are few players and not much growth, competition
tends to be limited.
 Success in the introduction stage requires an emphasis on R & D
and marketing activities to enhance awareness of the product or
services. The challenge becomes one of developing the product and
finding a way to get users to try it. There’s an advantage to being the
“first mover” in the market.
 Consider Coca cola’s success in the becoming the first soft drink
company to build a recognizable global brand.

 Examples of products currently in introductory stages of the

industry life cycle include electric vehicles, digital camera and high
definition television.(HDTV)
 Growth stage
 Characterized by strong increase in sales. The potential for strong sales(and
profits) attracts other competitors who also want to benefit. As the product enter
the growth stage, the primary key to success is to build consumer preferences for
specific brands. This requires strong brand recognition ,differentiated products, &
the financial resources to support a variety of value- chain activities such as
marketing and sales, customer services, R& D.
 -effort in the growth stage are directed towards stimulating selective demand, in
which a firm’s products offerings are chosen along with those of its rivals.
 Revenue in the growth stage increase at an accelerating rate because1. New
consumers are trying the products
 2. growing proportion of satisfied consumers are making repeat purchase.
 Maturity Stage

 With few attractive prospects,marginal competitors begin to exit the

market.At the same time,rivalry among existing THERE IS OFTEN
FIERCE competitors intensifies BECAUSE PRICE
COMPETITION AT THE SAME TIME THAT EXPENSES
ASSOCIATED WITH attracting new buyers are rising. Advantages
based on efficient manufacturing operations and process engineering
becomes more important for keeping cost low as customers become
more price sensitives.
 Decline stage
 The decline stage occurs when industry sales and profits
begin to fall. Changes in consumer tastes or a
technological innovation can push a product into decline.
Type-writter have entered into the decline stage because of
pc.
 When the product enters the decline, it often consumes a
large share of management time and financial resources.in
the decline stage, a firm’s strategic option become
dependent on the action of rivals. If many competitors
decide to leave the market, sales and profit opportunities
increases. On the other hand, prospects are limited if all
competitors remain.
 Four basic strategies are available in the decline phase:
maintaining,
 harvesting,
 exiting or consolidating.
 Maintaining refers to keeping a product going without significantly reducing
marketing support, without investing on the hope that competitors would exit the
market.eg. Use of typewriter use in rural area. Telephone line. Use.
 Harvesting strategy involves obtaining as much profit as possible and requires that
costs in the decline stage be reduced quickly. Managers should consider the firm’s
value creating activities and cut associated budgets. Advertisement need to help to
sell product as to generate profit.
 Exiting the market involves dropping the product from a firm’s portfolio.
 Consolidation- involves one firm acquiring at a reasonable price the best of the
surviving firms in an industry.
 Eg. Product currently in decline stage are:
 Videocassette recorder replaced by digital video disk recorder
 personal
Strategy Evaluation Techniques

 Screening Options
• used to categorise strategies as well as to
eliminate some which do not fit in any situation
• Bases for comparison
Approaches to the screening of
options
I. Ranking method:
Are a systematic way of analysing specific options for their
suitability.
II. Decision Tree
It ranks options by the process of progressively eliminating
others.
III. Scenarios
It attempts to match specific options with a range of possible
future situation.
Thank you