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FM : Anis Gunawan,MM Portfolio models.

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Presentation on theme: "FM : Anis Gunawan,MM Portfolio models."— Presentation transcript:

1 FM : Anis Gunawan,MM Portfolio models

2 Topic Suggested reading 1.The strategic planning process Intro to the Integrating case study Chapter 1-2 Case 1 :The ABC Cheese Factory 2.Portfolio model Page Chapter 3 Case 2 :Abbotsleigh Citrus 3.The growth strategies Page Chapter 4 Case 3 :Degrees South 4.Five forces model Page Chapter 5 Case 4 : A retail meat market Question No 1 5.Competitive generic strategies Page Chapter 6 Case 5 : A retail meat market Question no 2 6.Competitive market position and related strategies Page Chapter 8 Case 6 : A retail meat market Question No 3 7.Strategic alliance and network Page Chapter 9 Exam -

3 3 Portfolio models Portfolio models are a visual tool used to: 1. Compare all SBUs within a company on specific criteria. 2.Give an indication of the most logical strategic direction to take each SBU, and to what extent, i.e., the level of resources to commit. 3.They provide some of the supporting evidence needed to validate strategic decisions.

4 Strategic business unit (SBU) 1.operates in a different industry or market, each of which has different market conditions and potential; 2.has its own set of customers ; 3.has its own set of competitors ; 4.has a range of product/service offerings; 1.at different stages of the product/market life cycle; and 2.each with different resource needs based on potential and growth direction. 4 A part of a larger business that operates as a small, separate business. Each SBU:

5 Product Strategy Product-Mix Width Product-Line Strength Jet

6 Product Strategy Product-Mix Width Product-Line Strength Production closed in 1991 Production closed in

7 Airbus Industrie Multinational Consortium of two-stated-owned enterprises: France Aerospatiale (37,9 %) and Spain’s CASA (4,2%) Deutsche Airbus (37,9%) and British Aerospace (20%)

8 Airbus Industrie A 380, Airbus’ latest product Airbus

9 9 The GE/McKinsey model 1.Developed by McKinsey for General Electric in the 1970s to overcome some of the limits of the BCG Model. 2.Uses several factors combined and compared to calculate business strength and market attractiveness. 3.Is calculated using management assessment. 4.Contains nine sectors with different strategy implications suggested for each sector. GE

10 Harvest or divest Manage selectively or for earnings Invest / Grow Business strength High Medium Low High 4 Medium 3 Low 2 1 B A C..\ Vide o\Ai rbus vsB oein g.flv..\ Vide o\Ai rbus vsB oein g.flv D Market attractiveness The GE/McKinsey Model for Airbus Airbus380 Airbus 319 Airbus 340 Airbus

11 Harvest or divest Manage selectively or for earnings Invest / Grow Business strength High Medium Low High 4 Medium 3 Low 2 1 B A C D Market attractiveness The GE/McKinsey Model for Boeing B727 B B B787

12 12 Parts of the GE Model 1. Market/industry attractiveness indicates how easy it is for the business to achieve its objectives given the opportunities within the particular market or industry. 2. Business strength is a comparative factor indicating how successful the business is likely to be compared to its direct competitors. 3. Circles represent the comparative size of the overall market. 4. Shaded sectors indicate the market share of the particular business or SBU. 5. Sectors indicate a range of strategy directions suggested for SBUs located in each sector. 6. Arrows indicate the future position of the SBU over the next 3 to 5 years if current strategies remain in place.

13 13 Calculating market attractiveness and business strength 1.Decide what factors are most relevant. 2.Decide how many factors need to be included to create a balance between completeness and functionality. 3.Decide the relative weighting to be attributed to each factor. 4.Allocate a score for the company’s SBUs representing performance against each factor.

14 Market Attractiveness Analysis, 2009 Weight Rating ( 1 – 5 ) ValueDescription 1. Overall market size 2. Annual market growth rate 3. Historical profit margin 4. Competitive intensity 5. Technological requirements 6. Inflationary vulnerable 7. Energy requirement 8. Environment impact 9. Social/political/legal Must be acceptable

15 Business Strength Analysis, 2000 Weight Rating ( 1 – 5 ) ValueDescription 1. Market share 2. Share growth 3. Product quality 4. Brand reputation 5. Distribution network 6. Promotional effectiveness 7. Productive capacity 8. Productive eficiency 9. Unit costs 10. Material supplies 11. R & D performance 12. Managerial personnel

16 GE port folio strategy Market attractiveness Business strength Protect position 2.Invest to build 3. Build selectively 4. Build selectively 5. Selectively manage for earning 6. Limited Expansion Or divest 7. Protect & refocus 8. Manage For earning 9.Divest StrongMediumWeak High Medium Low

17 G.E. Port Folio Strategy 1. Protect position Invest to growth at maximum digestible rate. Concentrate effort on maintaining strength 2. Invest to build Challenge for leadership Build selectively on strengths Reinforce vulnerable areas 3.Build selectively Specialize around limited strengths Seek way to overcome weaknesses Withdraw if indications of sustainable growth are lacking 4. Build selectively Invest heavily in most attractive segments Build up ability to counter competition Emphasize profitable by raising productivity 5. Selectively/ Manage for earnings Protect existing program Concentrate investments in segments where profitable is good and risk are relatively low 6. Limited expansion Or Harvest Look for way to expand without high risk, otherwise, minimize investment and rationalize operations 7.Protect and refocus Manage for current earnings Concentrate on attractive segments. Defend strengths 8. Manage for Earning Protect position in most profitable segments. Upgrade product line Minimize investment 9. Divest Sell at time that will maximize cash value Cut fixed costs avoid investment meanwhile

18 G.E. Port Folio Strategy Business Strength Market Attractiveness Low Medium High Strong Medium Weak Build Selectively Cars

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