FORMULATING STRATEGIES
FORMULATING STRATEGIES: Corporate level
Multi-business corporations have to consciously decide as to what lines of businesses they would like to be in. If, at the same time, they are Multi-national corporations then they have to also decide which countries they would like to do business in. These decisions are of crucial importance which have a direct bearing on the fortunes of the enterprise and are made at the Corporate level.
Corporate level Strategies
PORTFOLIO STRATEGY
The firm decides on a mix of business units and product-lines that fit together in a logical way to provide synergy and competitive advantage for the corporation. Such a balanced mix of business divisions are called Strategic Business Units (SBUs).
Each SBU may have a unique business mission, product-lines, competitors and markets relative to the other SBUs (eg. SBUs of Hindustan Lever are Soaps & Detergents; Personal products; Fats & culinary items; Animal feeds; Beverages; Frozen foods; Speciality chemicals; Agribusiness; and Exports.)
Bruce Henderson, President, The BOSTON CONSULTING GROUP (BCG) and his team in 1970, evaluated SBUs with respect to two dimensions, namely
- Business growth rate, i.e., how rapidly is the entire industry increasing, and
- Market share, showing whether a business unit has larger or smaller share than its competitors.
The combinations of Growth and Share provide four categories of SBUs for a Corporate portfolio.
The BCG Matrix
The BCG Growth-Share Matrix, 1970
Analysis of the BCG Matrix
The combinations of Growth and Share, as seen in the BCG Matrix, provide four categories of SBUs for a Corporate Portfolio:
1. The ‘STAR’ enjoys large market share in a rapidly growing industry – important because of additional growth potential. Profits should be ploughed back into the business for future growth and profits. Stars are visible and attractive, hence to be nurtured and developed.
2. The ‘CASH COW’ is a dominant business
Multi-business corporations have to consciously decide as to what lines of businesses they would like to be in. If, at the same time, they are Multi-national corporations then they have to also decide which countries they would like to do business in. These decisions are of crucial importance which have a direct bearing on the fortunes of the enterprise and are made at the Corporate level.
Corporate level Strategies
PORTFOLIO STRATEGY
The firm decides on a mix of business units and product-lines that fit together in a logical way to provide synergy and competitive advantage for the corporation. Such a balanced mix of business divisions are called Strategic Business Units (SBUs).
Each SBU may have a unique business mission, product-lines, competitors and markets relative to the other SBUs (eg. SBUs of Hindustan Lever are Soaps & Detergents; Personal products; Fats & culinary items; Animal feeds; Beverages; Frozen foods; Speciality chemicals; Agribusiness; and Exports.)
Bruce Henderson, President, The BOSTON CONSULTING GROUP (BCG) and his team in 1970, evaluated SBUs with respect to two dimensions, namely
- Business growth rate, i.e., how rapidly is the entire industry increasing, and
- Market share, showing whether a business unit has larger or smaller share than its competitors.
The combinations of Growth and Share provide four categories of SBUs for a Corporate portfolio.
The BCG Matrix
The BCG Growth-Share Matrix, 1970
Analysis of the BCG Matrix
The combinations of Growth and Share, as seen in the BCG Matrix, provide four categories of SBUs for a Corporate Portfolio:
1. The ‘STAR’ enjoys large market share in a rapidly growing industry – important because of additional growth potential. Profits should be ploughed back into the business for future growth and profits. Stars are visible and attractive, hence to be nurtured and developed.
2. The ‘CASH COW’ is a dominant business