10.5 Corporate-level strategy and strategic models Flashcards
(30 cards)
What is the distinction between “business level” and “corporate level”?
Business level refers to an individual business unit that may require a separate strategy, while corporate level refers to a collection of businesses operating within a wider boundary.
This chapter looks at three separate approaches to the development of strategy:
- blue o_____ strategy
- corporate p________
- p________analysis and the Boston Consulting Group approach
ocean
parenting
portfolio
Blue ocean strategy is built on thee principles:
- m______ needs to be analysed to find new opportunities
- value can be added by lowering c______ and raising p______
- i_________ will come through a focus on the key elements that provoke new ways of thinking and acting
markets
costs
prices
innovation
When discussing “blue ocean strategy”, Kim & Mauborgne refer to “red oceans” - what do they mean by this?
Existing markets “awash with the blood of competitors” as a results of fighting for competitive advantage.
When discussing “blue ocean strategy”, what do Kim & Mauborgne mean by “blue ocean”?
Blue oceans are areas of untapped market space demanding creativity with the opportunity for profitable growth.
Lynch (2015) identified four dimensions of realising value from blue ocean strategy:
- e________ - which areas of the existing red oceans are not necessary? (do we need packaging?)
- r______ - removal of over-designed products and services (do mobile phones need to be complex?)
- r_____ - the need to improve features of current products (will a longer warranty make a product more attractive?)
- c______ (use of existing knowledge and abilities to create new value (e.g. linking cost savings on packaging to reduced reduced environmental impact)
elimination
reduction
raising
creation
“Blue oceans” never last for long due to competition. Give some examples of blue ocean strategy/products.
Apple’s iTunes product - digital music library
Apple’s original iPhone - first “modern” smartphone
Cirque du Soleil - cruelty free entertainment
Nintendo Wii console - motion controls have since been copied
Bloomberg - provision of real time financial data
When discussing strategy, it is important to note that a diversified organisation will require some level of centralised control. This is know as c________ p_________.
Corporate Parenting
A diversified organisation may find that it is more efficiently controlled from the centre through corporate parenting. What functions may be more efficiently controlled from the centre?
Finance, HR, Legal, CoSec etc.
Goold et al (1994) identified five core activities through which a corporate parent can add value:
1 E_________ - providing a clcear overall vision
2 Facilitating s______ - enabling cooperation and sharing between business units
3 C_______ - developing business unit managers to encourage the shared vision and ethos
4 Central s_____ and resources - cost efficient use of expertise from the centre.
5 I_______ - alignment and correction of individual unit performance
Envisioning Synergy Coaching Services Intervention
What are some potential downsides to the corporate parenting approach to strategy?
Corporate parenting could destroy value through excessive centralised bureaucracy.
Individual under performing business units may go unnoticed.
P_______ a______ is a technique used to help decision makers consider the strategic options available to them and where to build their business.
Portfolio analysis
Which is the most common and popular approach to “portfolio analysis”?
The Boston Consulting Group (BCG) approach.
The BCG portfolio analysis matrix includes f sectors depending on the rate of market growth and market share:
S_____
P_____ c____
C___ c____
D____
Stars
Problem Child
Cash cow
Dogs
What is a “Dog” in the Boston Consulting Group portfolio analysis matrix?
Low market growth and low market hare - they are only marginally profitable and need to be withdrawn when they become loss making.
They are cash neutral.
What is a “Cash cow” in the Boston Consulting Group portfolio analysis matrix?
Low market growth but high market share - cash cows are established products in a mature market.
There is little room for growth but they are core cash generators.
What is a “Problem Child” or “Question Mark” in the Boston Consulting Group portfolio analysis matrix?
High market growth, low market share - compete in high growth markets but with little market share - this will include new products being launched into the market that could become cash cows.
They are users of cash in the organisation.
What is a “Star” in the Boston Consulting Group portfolio analysis matrix?
High market growth and high market share. Stars normally arise from a problem child becoming a market leader, but with continued investment required to maintain growth.
They are generally cash neutral.
Can you give an example of a “dog” for a supermarket using the Boston Consulting Group portfolio analysis matrix?
Batteries - necessary but not a core offering.
Can you give an example of a “cash cow” in the Boston Consulting Group portfolio analysis matrix?
A wide range of alcoholic and soft drink brands.
Can you give an example of a “problem child” in the Boston Consulting Group portfolio analysis matrix?
Inexpensive single-wear clothing
Can you give an example of a “star” in the Boston Consulting Group portfolio analysis matrix?
High-end pre-packaged ready meals.
The benefit of the BCG model is to plot and monitor the movement of different p______ between the four segments and analyse how this aligns with the product l__________.
Products
Lifecycle
Lynch (2015) identified several difficulties with the BCG matrix. Give two examples.
1) Problems around defining the market and what is mean by growth.
2) The ability to measure “market share” and what this is based on.
