Forretning og Ledelse – Lektion 7 Business Portfolio Management

Forretning og Ledelse – Lektion 7 Diversification Economies of Scope Corporate managerial capabilities Increased market power Environmental change Risc spreading Expectation of powerful stakeholders Reasons

Related Diversification Unrelated Diversification Vertical Integration Backward Integration Forward Integration Horizontal Integration Conglomerate – Dominant Management Logic Underdeveloped Markets Forretning og Ledelse – Lektion 7 Growth

Forretning og Ledelse – Lektion 7 Products Existing New Markets Ansoff’s Growth Matrix Market Penetration Consolidation DiversificationMarket Development Product Development

Manufacturer Raw materials supply Component Supply Transport Financing Related Diversification Competitive Products Complementary Products Distribution outlets Transport Repair Servicing Backward integration Horizontal integration Forward integration Forretning og Ledelse – Lektion 7

Performance High Low Undiversified Related limited diversification Unrelated extensively diversified Forretning og Ledelse – Lektion 7

Reasons for international diversity Globalization of markets and competition Follow customers Bypass limitations in home market Differencies between countries and geographical regions Broader size of the market Internationaliation of value added activities (outsourcing) Forretning og Ledelse – Lektion 7

The International Network Cost Advantages Unique Capabilities Characteristics of national locations Forretning og Ledelse – Lektion 7

Value Creation and the corporate parent Value adding activities Value destroying activities Corporate strategic intent Intervening within business to improve performance Own expertise Bureaucratic fog Financial safety net Focus for managerial ambition Forretning og Ledelse – Lektion 7

The role of the corporate parent Portfolio manager Synergy manager Parental Developer Forretning og Ledelse – Lektion 7

The parenting matrix: The Ashridge Portfolio Display Fit between business units CSF and parent skills (Parent´s feel) High Low HighFit between business unit parenting opportunities and the parents skills (how will business benefit) Ballast Businesses Alien Businesses Heartland Businesses Value Trap Businesses Forretning og Ledelse – Lektion 7

Core Competencies SBU Core Competencies Sell?? Buy?? SBU Competence Forretning og Ledelse – Lektion 7

A company's core competency is the one thing that it can do better than its competitors. A core competency can be anything from product development to employee dedication. Modern business theories suggest that most activities that are not part of a company's core competency should be outsourced. IThe concept of core competencies was developed in the management field C.K. Prahalad and Gary Hamel introduced the concept in a 1990 Harvard Business Review article. They wrote that a core competency is "an area of specialized expertise that is the result of harmonizing complex streams of technology and work activity." As an example they gave Honda's expertise in engines. Honda was able to exploit this core competency to develop a variety of quality products from lawn mowers and snow blowers to trucks and automobiles. To take an example from the automotive industry, it has been claimed that Volvo’s core competence is safety. According to Prahalad and Hamel a core competence has three characteristics: it provides potential access to a wide variety of markets, it increases perceived customer benefits and it is hard for competitors to imitate. For example, Black and Decker's core technological competency is in 200 to 600 W electric motors. All of their products are modifications of this basic technology (with the exception of their work benches, flash lights, battery charging systems, toaster ovens, and coffee percolators). Forretning og Ledelse – Lektion 7

Core Competencies Core Products Divisions SBU Forretning og Ledelse – Lektion 7

The Growth Share Matrix Relative Market Share Market Growth Rate 10% 1.0 Low High DogsCash Cow Question Mark Star Forretning og Ledelse – Lektion 7

Business Strength Market Attractiveness Low Medium High StrongWeakMedium Forretning og Ledelse – Lektion 7

Build Selectively Harvest heavily in most attractive segments Build up ability to counter competition Emphasize profitability by raising productivity Protect Position Invest to grow at maximum digestible rate Concetrate effort on maintaining strength Invest to Build Challenge for leadership Build selectively on strength Reinforce vulnerable areas Build Selectively Specialize around limited strengths Seek ways to overcome weaknesses Withdraw if indication of sustainable growth are lacking Selectivity/Manage for Earnings Protect existing program Concentrate investments in segments where profiitabiity is good and risks are relatively low Limited Expansion or Harvest Look for ways to expand without high risk; otherwiise minimize investment and rationalize operations Protect and Refocus Manage for current earnings Concentrate on attractive segments Defend strength Manage for Earnings Protect position in most profitable segments Upgrade product line Minimize investment Divest Sell at time that will maximize cash value Cut fixed costs and avoid investments meanwhile Business Strength Market Attractiveness Low Medium High StrongWeakMedium Forretning og Ledelse – Lektion 7

Offentlig Sektor High Low Public Sector Star Back Drawer Issue Golden Fleece Political Hot Box Ability to Serve Effectively Public Need + funding attractive ness Forretning og Ledelse – Lektion 7