BUSINESS STRATEGY

IBS (MBA) Bangalore

SESSIONS -29

Course Coordinator
Dr. L.R.S.Mani
BCG MATRIX

 Bruce Henderson in 1970.

 To allocate resources.

 Used as an analytical tool

 On relative market share & growth rates.

 MARKET SHARE
 % of total market i.e. being served by the company.

 Revenue or unit volume

 RMS= business unit sales this yr

leading rival sales this yr
MARKET GROWTH RATE
 Market attractiveness

 MGR= Industry sales – industry sales

this yr last yr X 100
industry sales last yr
BCG MATRIX

Portfolio planning model

1) Stars
2) Question Marks
3) Cash Cows
4) Dogs
 STARS

 High market share in fast growing market

 Cash consumptions & cash generation

 It can become next cash cows

CASH COWS

 High market share in slow growing market

 To maintain the business

 Generate more cash then required

 Located in a mature industry

DOGS

 It is known as pets.

 Low market share & low growth rate.

 Situated in declining stage.

QUESTION MARKS
 Problem children.

 Low market share.

 It can also become star.

 It can also degenerate into dogs.

 High investment.
STEPS OF BCG MATRIX

1) Identify & divide it into SBUs

2)Assessing & comparing

- SBU’s relative market share strategic business unit sbu
- Growth rate

3) Classify the SBU’s

4)Develop strategic objectives

BENEFITS
 Simple & easy
 Maximize the future growth & profitability

LIMITATIONS
 It uses 2 dimension
 Problems in getting data
MCKINSEY 7S MODEL

 Waterman, Peters and Phillips (1980), working for the

US management consultancy McKinsey, developed
the 7S approach. They suggested that there were seven
aspects of an organization that needed to harmonize
with each other, to point in the same direction like the
needles of seven compasses. If each aspect supports
the others then the organization can be said to be
'organized'. As each of these aspects can be titled with
a word beginning with S this list or web has become
known as the 7S Model.
MCKINSEY 7S MODEL
MCKINSEY 7S MODEL

 Strategy: plan or course of action leading to the allocation of an organization's

finite resources to reach identified goals.
 Structure: salient features of the organizational chart (e.g. degree of hierarchy,
extent of centralization/decentralization) and interconnections within the
organization.
 Systems: procedures and routine processes, including how information moves
around the organization.
 Staff: personnel categories within the organization, e.g. academics, administrators,
technicians.
 Style: characterization of how key managers behave in order to achieve the
organization's goals.
 Skills: distinctive capabilities of key personnel and the organization as a whole.
 Shared values: the significant meanings or guiding concepts that an organization
imbues in its members.
MCKINSEY 7S MODEL

The 7S Model can be used in two main ways:

 Firstly, the strengths and weaknesses of an organization can

be identified by considering the links between each of the

Ss. No S is a strength or a weakness in its own right; it is
only its degree of support, or otherwise, for the other Ss
which is relevant. Any Ss which harmonize with all the
other Ss can be thought of as strengths, any dissonances as
weaknesses.
 The Table on next slide can be used to undertake this cross-

analysis. In each box the action that needs to be taken to

align the two elements is recorded.
MCKINSEY 7S MODEL
MCKINSEY 7S MODEL

 The 7S approach is considered important by many

commentators because of its dual emphasis on 'soft'
organizational components (style, staff, skills, and shared
values) as well as the 'hard' (strategy, structure and systems). It
facilitated the translation of academic research into managerial
practice, popularizing the notion of organizational culture as
the 'normative glue' that holds together the organization,
promoting consensus and integration. As a result, the notion
that organizations are independent social systems - whose
values, symbols, rituals, myths and stories exert a powerful
influence on the behaviour of members - was encouraged into
the mainstream.
MCKINSEY 7S MODEL
REVERSE ENGINEERING
 In order to attain sustainable competitive advantage,
an understanding of the competitor products
becomes very important. Apart from comprehending
the competitor’s activities, it becomes necessary to
be able to checkmate every move of the competitor
in order to maintain or increase the market share. For
this purpose, reverse engineering has been of great
help and has been accepted as an important strategic
tool during the strategy implementation.
REVERSE ENGINEERING
 Reverse engineering involves examining
competitor products or similar products in great
detail by dissecting them or virtually tearing them
apart.
 The process tries to understand three questions
relating to the product to be reverse engineered :
1. What does the product do?
2. How does it do that?
3. Why would you want to do that?
REVERSE ENGINEERING
 Reverse Engineering and redesign involve
investigation, prediction and developing
hypotheses, achieved through the following steps:
1. Concrete experience in function and form relating
to the product
2. Choosing design models and apply for the same
for analysis of the product.
3. Starting reengineering either as parametric
redesign, adaptive redesign or original redesign.
REVERSE ENGINEERING

Four distinct phases of reengineering process.

 Identification of the product for reengineering

 Process of improving the product

 Analysis of redesign proposals

 Ramp up

Reverse engineering encompasses both a passion

arising from enthusiasm for an ultimate analysis
and the proper methodology an tools required for it.