2 2.Portfolio model Topic Exam Suggested reading 1.The strategic planning processIntro to the Integrating case studyChapter 1-2Case 1 :The ABC Cheese Factory2.Portfolio modelPageChapter 3Case 2 :Abbotsleigh Citrus3.The growth strategiesPageChapter 4Case 3 :Degrees South4.Five forces modelPageChapter 5Case 4 : A retail meat marketQuestion No 15.Competitive generic strategiesPageChapter 6Case 5 : A retail meat marketQuestion no 26.Competitive market position and related strategiesChapter 8Case 6 : A retail meat marketQuestion No 37.Strategic alliance and networkChapter 9Exam-
3 Portfolio models Portfolio models are a visual tool used to: Compare all SBUs within a company on specific criteria.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.They provide some of the supporting evidence needed to validate strategic decisions.
4 Strategic business unit (SBU) A part of a larger business that operates as a small,separate business. Each SBU:operates in a different industry or market, each of which has different market conditions and potential;has its own set of customers;has its own set of competitors;has a range of product/service offerings;at different stages of the product/market life cycle; andeach with different resource needs based on potential and growth direction.
6 Product-Line Strength Product StrategyProduct-Mix WidthProduct-Line StrengthProduction closed in 1991787Production closed in 1984
7 Airbus IndustrieMultinational 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 IndustrieAirbusA 380, Airbus’ latest product
9 The GE/McKinsey model GE Developed by McKinsey for General Electric in the 1970s to overcome some of the limits of the BCG Model.Uses several factors combined and compared to calculate business strength and market attractiveness.Is calculated using management assessment.Contains nine sectors with different strategy implications suggested for each sector.
10 The GE/McKinsey Model for Airbus Harvest ordivestManage selectively or for earningsInvest / GrowBusiness strengthHigh Medium Low5High4Medium 3Low1BAC..\Video\AirbusvsBoeing.flvD380Airbus380Airbus 340Market attractivenessAirbusAirbus 319
11 The GE/McKinsey Model for Boeing Harvest ordivestManage selectively or for earningsInvest / GrowBusiness strengthHigh Medium Low5High4Medium 3Low1BACDB787BMarket attractivenessBB727
12 Parts of the GE ModelMarket/industry attractiveness indicates how easy it is for the business to achieve its objectives given the opportunities within the particular market or industry.Business strength is a comparative factor indicating how successful the business is likely to be compared to its direct competitors.Circles represent the comparative size of the overall market.Shaded sectors indicate the market share of the particular business or SBU.Sectors indicate a range of strategy directions suggested for SBUs located in each sector.Arrows indicate the future position of the SBU over the next 3 to 5 years if current strategies remain in place.
13 Calculating market attractiveness and business strength Decide what factors are most relevant.Decide how many factors need to be included to create a balance between completeness and functionality.Decide the relative weighting to be attributed to each factor.Allocate a score for the company’s SBUs representing performance against each factor.
16 Market attractiveness GE port folio strategyStrongMediumWeak5.003. Buildselectively1.Protectposition2.Invest tobuildHigh3.67Market attractiveness5. Selectivelymanagefor earning6. LimitedExpansionOr divest4. BuildselectivelyMedium2.337. Protect& refocus8. ManageFor earning9.DivestLow1.002.335.003.671.00Business strength
17 G.E. Port Folio Strategy 3.Build selectively 1. Protect position 2. Invest to buildInvest to growth at maximumdigestible rate.Concentrate effort on maintainingstrengthChallenge for leadershipBuild selectively on strengthsReinforce vulnerable areasSpecialize around limited strengthsSeek way to overcome weaknessesWithdraw if indications of sustainablegrowth are lacking4. Build selectively5. Selectively/Manage for earnings6. Limited expansionOr HarvestInvest heavily in most attractivesegmentsBuild up ability to countercompetitionEmphasize profitable by raisingproductivityProtect existing programConcentrate investments insegments whereprofitable is good and riskare relatively lowLook for way to expand withouthigh risk, otherwise, minimizeinvestment andrationalize operations7.Protect andrefocus8. Manage forEarning9. DivestProtect position in mostprofitable segments.Upgrade product lineMinimize investmentSell at time that will maximizecash valueCut fixed costs avoid investmentmeanwhileManage for current earningsConcentrate on attractivesegments.Defend strengths
18 Market Attractiveness CarsG.E. Port Folio StrategyWeakStrongMedium5.002014High3.67Market AttractivenessBuildSelectivelyMedium20112.33Low1.005.003.672.331.00Business Strength