U5 What Strategic Options are Available to the Corporation? Flashcards
(283 cards)
1
Q
What Do Medical Outsourcing Trends Mean for Hospitalists?
X-ray has left the building
A
Medical outsourcing is a growing trend in American hospitals, driven by shortages of on-call radiologists and intensivists, economic pressures, and advances in telemedicine.
2
Q
A
Hospitalists will likely encounter—if they have not already—outsourced services that range from off-site medical transcription and language interpreters to long-distance radiology and, increasingly, electronic intensivist services.
3
Q
A
What are the implications for quality patient care and collegial interface when hospitals contract with outsourced providers? What are the advantages, possible disadvantages, and opportunities for hospitalists as teleradiology and eICUs become facts of life? […]
4
Q
Overseas outsourcing a ‘hot button’
According to the American College of Radiology, teleradiology has become ?
A
a fixture in most practices and hospitals.
5
Q
Some institutions have retained their own radiologists, who take advantage of?
A
teleradiology by reading digitized radiographs and CT scans from home instead of within the hospital building.
6
Q
A shortage of radiologists has led others to ?
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contract with off-site providers of teleradiology services.
7
Q
Those who provide services at night are sometimes called———————companies.
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“nighthawk”
8
Q
Outsourcing radiology, Dr. Wachter believes, is a logical step due to?
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technological advances,
although he admits that visiting the radiology department in his hospital often yields educational and collegial opportunities that online X-ray reading does not.
9
Q
At Saint Clare’s Hospital in Weston\/Wasau, Wis., a new, 107-bed, state-of-the-art facility built by?
A
Ministry Health Care, Richard Bailey, MD, is medical director of Inpatient Care and Hospitalist Services.
10
Q
Radiology and other ancillary specialist services are provided by?
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the Diagnostic and Treatment Center (DTC), jointly owned by Ministry Health Care and the Marshfield Clinic.
11
Q
“This is one more way our hospitalist program supports the hospital and provides?
A
value beyond just seeing patients,” he says.
11
Q
The DTC, through a relationship with a radiology group in Hawaii, provides?
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night coverage for full reads of radiographs and scans from 5 p.m. to 5 a.m. The interactions are virtually seamless, according to Dr. Bailey.
11
Q
The company’s radiologists mostly carry out preliminary night-reads but also?
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do final-reads on approximately 20% of their cases.
11
Q
———————————————————- when conferring with radiologists on the phone, he reports.
A
“We don’t even notice they’re in Hawaii,”
12
Q
Off-site radiology also created an opportunity for his hospitalist group, says Dr.Bailey. Saint Clare’s hospitalist group provides?
A
supervision of contrast administration when needed during night and weekend coverage times.
12
Q
Overseas outsourcing a ‘hot button’
Using an overseas teleradiology company offers many advantages, says ?
A
Sunita Maheshwari, MD, a consulting pediatric cardiologist and director of Teleradiology Solutions, a four-year-old teleradiology company located in Bangalore, India.
13
Q
If contrast must be administered for an imaging study at the client hospital, a local tech, emergency department physician, or resident usually handles the procedure, with?
A
the Teleradiology Solutions radiologist in constant voice contact.
14
Q
“The time zone advantage is huge,” says
——————- With the ——————- time difference between the United States and India, Teleradiology Solutions’ radiologists work regular day shifts and are able to cover
———————-hospitals simultaneously, depending on how busy their client hospitals are.
A
Dr. Maheshwari.
12.5-hour
10–20
15
Q
You don’t have to have one radiologist who stays up all night to be able to?
A
read two CT scans and one X-ray, who will [then] be groggy the next morning for his [or her] regular day shift,” she says.
16
Q
It makes a great deal of sense from the standpoint of human resource efficiency to not waste several nights of ?
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several doctors covering multiple hospitals.
17
Q
Dr. Maheshwari reports that American hospital staff are ?
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often pleasantly surprised to find a “cheerful, awake” radiologist on the other end of the phone.
18
Q
Despite these benefits, however, Dr. Maheshwari and her colleagues have noticed a ?
A
political backlash stemming from the outsourcing of US jobs to Asia that colors Americans’ reactions to overseas teleradiology.
19
Q
In her company’s first two years, some physicians questioned the company’s level of?
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quality and lashed out because it is located in India, reports Dr. Maheshwari.
20
Q
“Our work speaks for itself,” she says. “We have not lost a client, and, in fact, our hospitals have managed to grow because ?
A
they have been able to take their radiologists off the night shift, and they take on more day work.”
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Like several overseas teleradiology companies, Teleradiology Solutions retains a staff of US-trained radiologists and goes through?
the same licensing and credentialing (they are JCAHO-accredited) as American companies.
22
The company now has------------ US hospitals as clients and includes in its client mix some remote hospitals in --------------------------------------, where the Ministry of Health is experiencing a similar ------------------------------------------------. […]
40
India and Singapore
shortage of radiologists
23
Areas to Consider When Formulating a Strategy
Strategy planning is a demanding entrepreneurial task, which decides whether?
the organization or the strategic business unit will be successful in the future.
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Planning strategy does not provide the management of an organization with?
one ideal strategic decision.
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Strategy planning always involves :
looking at various alternatives and scenarios.
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Deciding which path to take lies with the
---------------------. The history of the organization, its culture, and its management are the factors usually influencing--------------------------------.
management
strategic decisions
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More Information
An excellent overview of this topic can be found in the article by Levitt (1960).
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In order to plan the strategic process systematically, management has to define?
individual tasks that should be performed.
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There are several areas that need to be included in the strategy planning process.
1- Customer-Oriented Strategies
2-Competitive Strategies
3-Distribution Strategies
4-Stakeholder Strategies
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Customer-Oriented Strategies
The most important aspect of the marketing strategy is focusing on ?
customer orientation.
This means how the organization deals with its customers.
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The main decision is whether?
the organization markets to all customers and segments (e.g., Coca-Cola)
or whether it should focus on specific market segments (e.g., Schweppes).
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Competitive Strategies
Besides the customers, ------------------ also plays a major role in the strategic process.
the competition
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The organization has to decide how it plans to deal with its --------------------------.
competitors
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One strategic option to gain a market share is to challenge a competitor directly by?
targeting their customers.
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A contrary option is to draw up a cooperation strategy that attempts to?
secure the existence of all organizations in the market.
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One such example in the German market was the so-called ----------------------, which was composed of several steel corporations.
Rail Cartel
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Corporations in this cartel were fined by?
the Federal Cartel Office for having come to a joint agreement regarding prices for rails and points.
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Examples of legal cooperation include?
airline alliances, like Star Alliance. This type of cooperation may serve to prevent an overly intensive price competition.
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A further approach for companies is to avoid?
direct competition by specializing in serving small niche markets.
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Small market niches usually have fewer competitors as larger organizations focus on?
the large market segments.
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Distribution Strategies
Depending on the sector, distributors or trading companies may play a major role in terms of -----------------------------------------.
strategy planning
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An example is?
the consumer goods market in Germany.
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The grocery retail market is dominated by large organizations and buying groups such as--------
Edeka.
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These large buyers wield a great deal of power over?
the consumer goods companies.
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As they buy in large quantities, they often dictate the price and packaging of the products, which?
reduces the flexibility of the consumer goods companies to respond to changes in the market place.
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Stakeholder Strategies
Stakeholders have enormous influence over?
consumers and the environment of an organization.
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Managing the stakeholders of an organization is a critical component of?
the corporate strategy.
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The strategic options for managing stakeholder interests are?
manifold and extend from open confrontation to cooperation.
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Open confrontation is often used by?
environmental (e.g., Greenpeace) or consumer protection agencies (e.g., Stiftung Warentest in Germany or the FTC in the USA).
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The risk of major damage to the company’s reputation due to?
negative information in the media is high.
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When employing a cooperative strategy, there are various possibilities for organizations to?
work with stakeholders.
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One option is to integrate critical stakeholders into?
your own organization.
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In 2008, the German Schufa Holding AG, an organization that was?
viewed critically by many stakeholders,
founded a consumer advisory council that consists of politicians, scientists,
and members of protection agencies.
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Schufa Holding AG
This is a protection agency for the general insurance of the credit business. It provides credit information on individuals and organizations.
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A company can choose to operate in an environment in which?
there are few critical stakeholders.
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This is often the case in business-to-business environments where there is ?
.
little or no involvement of consumers
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Negative word-of-mouth or damaging media campaigns are?
therefore rare in these environments.
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It is not only large corporations that look for new areas to expand into; small companies also try to?
obtain broader market exposure in order to minimize their risk.
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When operating in multiple markets, companies can compensate the decline in?
sales in one area with increases in another.
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For example,
if a construction company serves both the private and the public sectors, it can offset government budget cuts for public building projects by focusing on the private sector and vice versa. Thus, its existence is not compromised if one area experiences a strong decline
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When an organization expands its current range of products or services into new markets or sectors, this is referred to as--------------------------.
diversification
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Diversification
Product diversification means increasing the range of products offered.
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Companies can diversify in four directions with regards to products and markets:
--Market penetration
--Developing new products or services
--Developing new markets
--Diversification
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Market Penetration
The first strategic option for expansion is?
market penetration where companies try to increase the market share of their current products or services.
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The company can rely on its current resources and capabilities to increase?
its presence in the market by increasing its market share.
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An increase in market share equals an increase in ----------------------- the market itself and over its distributors.
power over
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Market penetration can be implemented by?
lowering costs and increasing profit margins through economies of scale.
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However, the risk is that the competitors will increase their pressure on?
the organization and a battle over prices might ensue.
Furthermore, most countries have legal restrictions for monopolistic behavior and monopolies are tightly regulated.
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Developing New Products or Services
Companies can also expand by offering modified or new products or services in their existing markets. This allows them to ?
increase sales by acquiring new customers or by getting existing customers to buy more products.
70
For example,
bookstores today are being forced to find new ways of selling books. Many try to sell through online stores, which is an expensive and risky option. The competence of small bookstores lies in providing information and advice to the consumer.
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The following article illustrates the battle of survival of large bookstores in the US.
Why Borders Failed While Barnes & Noble Survived
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الاسئلة بالعكس
liquidated – meaning sold off in pieces – and almost 11,000 employees will lose their jobs.
It appears to be all over for the Borders bookselling chain. The company will be?
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the end of September.
The chain’s 400 remaining stores will close their doors by?
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competitor Barnes & Noble, Borders pioneered the book megastore business.
The retailer’s first bookstore opened in Ann Arbor, Mich., 40 years ago. Along with?
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the business.
But Borders made some critical missteps over the years that cost it?
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killed itself.
The vast tracts of retail space that Borders will soon vacate speak to a gargantuan business that essentially?
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offering a huge variety of books – tens of thousands of titles in a single store – at a time when most bookstores could afford to stock a fraction of that.
At one time, size was its advantage. Borders built a reputation on?
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a superior inventory system that could optimize, and even predict, what consumers across the nation would buy.
Borders also had an early technical advantage:
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lost its edge.
But in the mid-1990s, Borders -----------------------.
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digital
Barnes & Noble
firm Morningstar
“It made a pretty big bet in merchandising. [Borders] went heavy into CD music sales and DVD, just as the industry was going ------------------. And at that same time,------------------------------------ was pulling back,” says Peter Wahlstrom, who tracks Barnes & Noble for the investment research -----------------------------------------.
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---------------------------------------------------------------
He says Barnes & Noble also invested in?
-------------------------------------------------------------------
beefing up its online sales. Eventually, it also developed its own e-reader, the Nook.
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Borders did not. Instead,?
it expanded its physical plant, refurbished its stores, and outsourced its online sales operation to Amazon.
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“In our view, that was more like handing the keys over to?
a direct competitor,” Wahlstrom says.
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Indeed, outside a Borders bookstore in Arlington, Va., shoppers say?
they rarely buy books the old-fashioned way.
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“I’ll go to Borders to find a book, and then I’ll to go to Amazon to buy it, generally,” customer ---------------------------------says.
Jennifer Geier
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With so many people going online to buy books, Borders lost out. The last time it turned a profit was 2006. In February of this year, it filed for?
bankruptcy protection.
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Those who bemoaned the rise of bookselling giants might see irony in----------------------- With one of the major players gone, there might be some room, once again, for -----------------------.
Border’s demise.
the little guys
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“I think there are a bunch of different niches around that can still be sustained, but I don’t think there’s a need for?
the mass-book seller to be as prevalent or as apparent as they were five or 10 years ago,” Wahlstrom says.
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Wahlstrom says Borders is disappearing at a time when, as consumers, readers are?
more empowered than ever.
He says he still reads paper books but also reads on his iPhone, computer, or tablet.
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“Just as I’m probably device agnostic, I am supplier agnostic. I can go online, I can go to?
Barnes & Noble, I can go to Apple, or I can go to Google. Or I can borrow it from a friend or I can go to a library,” he says.
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Dan Raff, a management professor at The Wharton School, argues that ?
smaller-town America will suffer from the loss of a chain bookstore.
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“The big-box store was a glorious thing while it lasted. To people in many parts of America, they were a kind of Aladdin’s cave,”?
Raff says. At Borders, people could access literary variety, contrary to smaller, independent bookstores.
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With Barnes & Noble staking its future on?
digital technology, Raff says, it’s likely the big bookstore will only live on in big cities.
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Developing New Markets
Companies have the option of offering existing products in new markets in order to ?
.
expand the usage of the current product or service
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One example is?
the use of the medical laser to coagulate blood and stop bleeding during surgeries.
Lasers have been used in this area for many years. Through product modification, the lasers are now used also for the removal of body hair and pigmentation marks.
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In order to sell an existing product in a new market, companies have to either modify the product or at least?
the product design and packaging to appeal to the new market segment.
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Often, an organization has to establish a new distribution network or a new marketing mix in order to reach the target market. When looking at our example of surgical lasers, the customers were?
no longer the surgeons and hospitals but rather private practices, plastic and cosmetic surgeons, and dermatologists.
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The medical companies had to ?
expand their distribution network drastically to meet the increase in customers.
They also had to hire sales people familiar with this new field.
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As evidenced in this example, developing new markets requires ?
a large commitment on the part of the company.
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Diversification
Corporate diversification describes the strategy of?
entering new markets with new products.
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Complete changes in company strategy are rarely successful, as seen in the unsuccessful 2000 merger between?
Time Warner and AOL. The largest traditional media company, Time Warner, and the most successful new media provider at the time, AOL, merged.
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The world was in an internet bubble and the merger was celebrated as a milestone for?
the transformation of the old into the new economy (Institute of Media and Communications Policy, 2015).
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The merger was unsuccessful as the corporation failed to create synergy between ?
the two very different companies.
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Despite the many risks, diversification strategies offer enormous opportunities if?
they are managed well.
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The three main reasons for companies to diversify are the following:
==Increase efficiency
==Utilize management competencies
==Increase market power
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Increase efficiency
Organizations have the opportunity of increasing efficiency by?
expanding their existing resources and capabilities into new markets, products, or services.
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Using current capabilities to expand results is called ?
the composite or network effect.
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If the organization has unused or underutilized resources or capabilities that cannot be sold to?
other users and do not contribute to generating profits, companies have the option to diversify into new markets or businesses.
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The network effect leads to cost savings and other advantages through so-called?
synergy effects. Synergy describes the effect that bundling activities will have on the efficiency of the process.
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Positive synergetic effects occur when the unity or the bundling creates more?
value than each of the units or activities separately.
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To illustrate this concept, let us look at McDonald’s McCafé. McDonald’s does not just sell hamburgers and chicken nuggets but also coffee and pastries. The costs for McDonald’s to offer both?
their standard restaurant and McCafé in one of its franchises are less than the costs of running a separate hamburger booth alongside a coffee shop.
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The reason for the lower costs are that all products are offered in?
the same restaurant by the same employees, whereas the hamburger booth and the coffee shop both pay rent and each have their own employees, thereby duplicating many functions and activities.
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Utilize management competencies
The competencies of an organization’s management team might also be used to?
develop new markets, products, or services.
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Managers have the competency to not just manage one but?
several products or services.
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The French luxury goods company Moët Hennessy∙Louis Vuitton S.A., better known as?
LVMH, owns many companies and brands, from champagne manufacturers to fashion labels and perfumes and even finance media companies.
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All these companies use few common resources or production competencies. However, LVMH increases the value of?
the organization by utilizing their management competencies to build and maintain brands and to develop the creative potential among their employees.
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Increase in market power
The market power of an organization increases the larger it is. If a corporation owns and operates a number of businesses, it can offset?
the businesses that do not generate as much profit with other more profitable divisions.
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In this way, the company that operates at a less profitable level receives financial support, which creates?
a competitive advantage in the market. Its market power increases and it can threaten financially weaker competitors.
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However, government regulations help reduce?
the market power of very large organizations.
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The Anatomy of the GE-Honeywell Disaster
On the evening of Wednesday, June 13, Jack Welch, CEO of General Electric, retreated to his room at the Conrad Hilton hotel in Brussels and wrestled with an unfamiliar feeling – one of impending defeat. Just eight months before, he had, it seemed, pulled off a stunning coup.
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Welch had always coveted Honeywell International, whose business making advanced electronics for the aviation industry, he thought, made a perfect fit with GE, one of three leading global manufacturers of airplane engines.
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In October 2000, during a visit to the New York Stock Exchange, he had learned that United Technologies Corp. – whose Pratt & Whitney division is another huge engine maker – planned to buy Honeywell.
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Within 45 minutes, on the phone from his car, Welch had lined up his board to make a counter-offer.
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Two days later he had Honeywell in the bag; it would be the largest ever merger between two industrial companies. Welch delayed his retirement to oversee the integration of GE and Honeywell – and to set the capstone on his legendary career.
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And now, in the European capital, his last big deal was falling apart. On that day in June, Welch had met twice with Mario Monti, the European Union’s Commissioner for Competition.
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Monti believed that the combination of Honeywell’s cockpit controls with GE’s engines and powerful aircraft financing division would stifle competition.
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In other words, he viewed with suspicion precisely those synergies that, for Welch, made the deal so attractive. Monti would approve the merger only if Welch made the kind of concessions that, from GE’s standpoint, wrecked its whole point.
128
The next morning Monti called Welch once more, to discuss how the apparent breakdown in talks should be handled. GE issued a statement saying that attempts at compromise fell “far short” of Monti’s “extraordinary demands.”
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Welch placed a call to Andrew Card, chief of staff to President Bush, who was about to sit down with European leaders in Goteborg, Sweden.
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As the GE boss recounted the conversation to TIME, he told Card that he would appreciate“whatever help you can give us”. In the formal meetings in Sweden, GE never came up.
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But on June 15, in Warsaw, Bush said he was “concerned” that the Europeans had rejected the merger. Monti was furious – not with Bush, he told TIME, but with those who had sought the President’s help.
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Three days later Monti said he “deplore[d] attempts to … trigger political intervention.” And though the case dragged on for two more weeks, the deal was dying a slow death.
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Welcome to globalization. The collapse of the GE-Honeywell merger shows that companies that benefit from a global market can now be governed in all they do by any of the countries or regions in which they do business.
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There’s no settled code of rules in the global marketplace, just a haphazard collection of local practices and habits. Still, the GE case is extraordinary.
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Never before have officials outside the US nixed a merger between two giant American corporations already approved by the DOJ.
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Never before have US companies lobbied so ferociously against their U.S. rivals in a foreign capital. And that’s why, for any company that seeks to profit from globalization, there are abundant lessons in the story of how Jack fell down.
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For months, nobody thought he would. After Welch stole Honeywell from United Technologies, he said:
138
“This is the cleanest deal you’ll ever see.” Honeywell and GE were both industrial conglomerates, but their product lines had few overlaps.
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A combined company, however, would be a powerful force. So United Technologies, Rolls-Royce of Britain – the third of the trio that dominates jet engines – and other businesses were determined to stop the deal.
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They didn’t find the going easy on either side of the Atlantic. “At the beginning, we weren’t invited in the front door or the back door,” says an executive with a competitor.
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(With legal actions still a possibility, many of those interviewed for this story insisted on anonymity.)
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In Washington, the antitrust division of Justice would wait until June 14 for the arrival of a new head – Charles James, Bush’s nominee, who was considered to be pro-business.
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“The DOJ would not and did not meet with us,” says John Briggs, who represented Rockwell, an American competitor of Honeywell. “There was just no real constituency for taking on Jack Welch without political leadership in place.”
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Things looked no better in Brussels. Since 1990 the European Commission, the executive arm of the 15-nation European Union, has exercised jurisdiction over all mergers between firms with combined revenues of $4.2 billion, of which $212 million must be within Europe.
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The GE-Honeywell deal easily met the criteria. When US lawmakers ask what business it is of the Europeans if two US companies want to merge, part of the answer is that GE alone employs 85,000 people in Europe and collected $25 billion in revenue there last year.
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Still, Commissioner Monti wasn’t looking for a fight. The Italian economics professor is sufficiently conservative that he was offered the foreign ministry in Silvio Berlusconi’s new right-wing Italian government.
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Moreover, Monti was proud of the working relationship he had forged with his American counterparts;
148
he told TIME he had “profound respect” for the US regulators and described his own agency as a “junior institution”.
149
Before Christmas, when GE’s competitors called on the case officer assigned to the merger, Enrique Gonzalez-Diaz, to persuade him to start a lengthy “phase two” investigation of the deal, Gonzalez-Diaz accused them of whining.
150
That wasn’t good. For the merging companies and their opponents, Gonzalez-Diaz was the man to see. The Spaniard, 39, a native of the Canary Islands, is known as a brilliant mathematician and lawyer, hardworking and intensely ambitious.
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One source (on the losing side of this case) also calls him “deeply cynical about the motivation of business and a nightmare to deal with.”
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GE’s opponents knew they would never convince Monti without first winning over Gonzalez-Diaz. The principals came to a rough division of labor:
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Rolls-Royce stressed the dangers of allowing GE to “bundle” engines and avionics in packages that other firms couldn’t match, and United Technologies concentrated on GE’s role as a buyer of planes through GE Capital Aviation Services, its finance and leasing subsidiary.
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GECAS, it was argued, would insist that those from whom it bought aircraft should buy both GE engines and Honeywell avionics, hence reducing consumer choice and stifling technological innovation.
155
“I got the impression that Enrique was interested when we explained to him that GECAS was frequently a launch customer for airplanes,” said a lawyer.
156
“He said, ‘Really? I thought they only dealt in secondhand machines.’” GECAS, according to Welch, has only an 8% share of the new-plane market.
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Yet GE’s competitors were starting to make headway. GE, for its part, was beginning to discover that while Monti was always a gentleman, his staff could be as hard as nails.
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On Feb. 26, all parties met in Brussels. Monti, said Welch, “listened carefully to our case … I thought we had a shot.” But at 6:30 that evening, GE and Honeywell were called back to the Commission’s offices.
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Armed with answers to the detailed questionnaires Gonzalez-Diaz’s staff had sent to competitors and customers, Monti was going to phase two, a full-blown investigation.
160
The European capital then experienced the most intense politicking old hands there have seen. “There were journalists, lobbyists, and lots of arbitragers from Wall Street calling constantly,” says a lawyer.
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Gonzalez-Diaz’s team visited Rockwell’s operations in Cedar Rapids, Iowa. By this point, sources close to the case say, Monti’s team had not only heard an earful from GE’s competitors but had also registered concerns from 15 airlines, whose identities were kept secret from GE.
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On May 8, the Commission issued a 155-page statement of objections to the merger, and on May 29, the parties gathered for a two-day hearing.
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Outsourcing
Outsourcing is a strategy where a company decides to?
have an outside organization perform an activity that the company has previously performed itself for a fee.
164
In today’s global world, outsourcing is a very successful strategic decision to-------------------------. With the internet and the --------------------------capabilities, many service areas can be outsourced. The case study at the beginning of the chapter about---------------------outsourcing illustrates the------------------------of this concept quite well.
reduce costs
telecommunication
medical
advantages
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India: A Hotbed for Outsourcing
India is a popular country for outsourcing services. Companies from English-speaking countries in particular benefit from?
the language advantage of India, which was formerly part of the British Empire.
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If you call the computer hotline of a US-based company, you will most likely speak to?
a service employee in Bangalore, India.
167
Many US tax consulting companies have the standard tax procedures performed by?
tax consultants in India and sent electronically to the US office, where the exceptions and more complicated parts are added in.
168
As described in the case study, if you check into?
a hospital in the US at night and they need to take an X-ray image, there is often no radiologist on duty at that time.
169
The image is instead sent to?
India to a radiologist who assesses the image and sends the report electronically back to the US hospital within the hour.
170
The reasons why India is so popular for outsourcing are ----------------.
manifold
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India has:
a large, well-educated, English-speaking workforce.
At the same time, the wage level is significantly below the level in developed countries.
Wage-related costs are also lower.
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India offers stable economic and political conditions and a well-functioning IT infrastructure.
Furthermore, India enforces laws to protect patents and intellectual property.
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Disadvantages of Outsourcing
Outsourcing can compromise the quality of?
products and services and therefore their position in the market.
174
The US automotive industry has outsourced since the 1990s and, since then, their competitive position in?
the automotive market has continued to decline.
175
Successful outsourcing has to be done carefully by developing?
relationships with the outsourcing partner firms.
176
In 1991, the corporation General Motors (GM) outsourced most of?
the production of its components.
177
Its strong market position at the time was used to pressure the new component suppliers to?
offer the products at the lowest price possible.
178
This reduced the costs of production for-------- but in 2007, GM reported huge --------------. One of the reasons for this development was that GM never built partnerships with their -------------.
GM,
losses
suppliers
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Many of GM’s automotive companies had open?
conflicts with their suppliers that extended many years.
180
They kept inviting tenders from different suppliers to obtain?
the lowest price and provided little exchange of information.
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The suppliers, constantly pressured on prices, did not invest in?
new technologies or align their systems with those of GM.
182
This development led to the poor quality of many American cars, which resulted in ?
a large decline in the demand for US-manufactured automobiles.
183
Product Portfolio Analysis Using the BCG Matrix
Portfolio
This describes the collection of all products offered by a company.
184
Portfolio analysis is a planning tool that enables an organization to make recommendations on?
how to allocate its resources (financial, human resources, etc.) to the various business units.
185
The goal of the portfolio analysis is to decide on the optimal combination of products for ?
the organization, to reduce company risk through diversification of the portfolio, and to assure long-term sources of revenue.
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Portfolio analyses use information about environment and corporate resources to?
evaluate the success of products and businesses.
187
They provide answers as to which?
products or businesses are the most promising and valuable for?
the organization to invest in.
188
Portfolio analyses provide a direction for investment and budget decisions and can be?
seen as a preliminary step to the strategic plan.
189
The BCG matrix is:
a portfolio analysis that was invented by the Boston Consulting Group.
190
The model depicts the position of businesses in relation to?
their market share and growth potential of the business.
191
The relative market share is an internal indicator of ?
the competitiveness of the organization.
192
It compares the companies’ own market share to their main -------------------. The underlying idea is that companies with a large ---------------------benefit from economies of scale and can offer their products at a lower and more ----------------------------- than the competition.
competitors
market share
competitive price
193
The growth potential of the market is the external indicator of?
the attractiveness of the market or business.
194
Growth potential is derived from the product life cycle model of?
markets, with a high growth rate being more attractive than markets with a lower growth rate.
195
The three factors are considered in the matrix:
1-The growth potential of the business or market growth rate (Y axis)
2-The relative market share of the product or business (X axis)
196
3-The revenue contribution of the business or product to the organization (the size of the circle around the product)
197
These parameters combined provide ?
information about the strategic position of the organization’s products, services, or businesses and the financial requirements of the individual products\/businesses to balance the company’s cash flow.
198
The BCG matrix also indicates ?
the ideal situation with a balanced product portfolio.
199
A balanced portfolio includes?
enough products that generate profits (cash cows) for the organization to be able to finance new products (stars and question marks).
200
Each of the four quadrants of the BCG matrix suggests ?
standard strategies that can be guidelines for strategic measures.
201
The matrix will be further explained using a fictional example from?
the consumer electronics market.
202
Figure 6: BCG Matrix (Case Study: Consumer Electronics Market]image
203
Figure 6: BCG Matrix (Case Study: Consumer Electronics Market]image
204
Stars
Stars are products or businesses with a large share of?
a market that show high growth potential – in other words, established products or services in an attractive market.
205
Stars often require high investment costs for?
marketing and promotional measures, but they provide high earnings to the organization due to their high percentage of the market share.
206
In order to expand this position in the market, the company needs to?
strengthen and secure their competitive advantage for these products or services.
207
A company should have enough stars in their portfolio so as to provide?
financial leverage for the future.
208
If the growth potential of the market flattens, the stars become the-----------------. It is important for companies to develop large circles in the --------------------------------------with their stars and cash cows as these are the main ------------------------------------------.
cash cows
BCG matrix
revenue contributors
209
In the area of consumer electronics, an example of?
a star would be electronic books (e-books). In today’s consumer marketplace, e-books are a product with very large growth potential.
210
Question Marks
Question marks are ?
products with a small share of a market with high growth potential.
These are mostly new products or services that need a large financial commitment to be established in the market.
211
The risk of failure is high in this quadrant, as is the possibility of a market exit.
212
Management have to decide?
which question marks will be successful in the future and make the financial commitment required to build their market share.
213
Management also has to take the questions marks with little chance of?
success off the market.
214
In theory, question marks bring tomorrow’s growth and thus need further investment to?
increase the market share.
215
The financial means for ?
this investment usually come from the cash cows.
216
An example of ?
a question mark technology in the consumer electronics market are Blu-ray discs.
217
The Blu-ray disc is a digital optical storage disc, which was developed as a high-definition medium to replace the DVD.
218
Its benefits over the DVD are higher data volume and storage capability.
219
Blu-ray discs can be used to store movies with very high resolution and offer the viewer outstanding image quality.
220
Because of the need for high marketing costs, which were not available to the companies producing Blu-ray discs, the technology had an initial low growth rate.
221
Despite rivals such as Apple’s iTunes, which directly competes with Blu-ray, there has been a gradual upward trend ever since.
222
Cash Cows
Cash cows have a high share of a market with?
a lower growth rate.
223
These are established products or businesses in a market with a declining attractiveness. Due to?
their established position in the market, the financial investments are fairly low for the organization and the revenue situation is very good.
224
Since the market does not grow much, the cash flow surplus from these products or services should be used for?
the development of new products.
225
A company should have several cash cows to ?
finance the question marks and stars, which are the future revenue generators for the organization.
226
The cash cows should ideally have large areas in?
the BCG matrix that reflect a healthy revenue contribution to the organization.
227
A cash cow in the area of consumer electronics is?
the flat screen television.
228
Flat screen TVs have been popular for many years and generated large sales numbers. Due to ?
fierce competition, the prices for flat screen TVs have gone down dramatically.
229
Today, there is very moderate growth in this sector and companies invest little in?
product improvements as the market is all but sated.
230
Poor Dogs
Poor dogs are products or businesses showing?
low market growth and have a low market share.
231
These are unattractive products or services in?
unattractive markets with little future potential.
232
The revenue contribution of these products or services is ?
negative or balanced, but the organization does not make profit with a poor dog.
233
Companies should not invest in products in ----------------quadrant.
Poor Dogs
234
The financial surpluses should go into?
the stars and question marks.
235
The resources that go into the production of ?
poor dogs should be freed up and used for the production of more promising or successful products.
236
The circles around the poor dogs in the BCG matrix should be?
small as the revenue contribution is not significant.
237
In the sector of consumer electronics, the poor dogs are, for example,
the Discman or a portable disc player, which has been replaced by the MP3 player.
238
Critical Evaluation
The BCG matrix offers a picture of t?
he product portfolio or even entire business portfolio of a company that can facilitate planning decisions.
239
It displays a great deal of complex information in a simple matrix structure. It provides?
a good overview of the current product portfolio in order to make strategic investment decisions.
240
A criticism of the BCG matrix is that?
it only considers the relative market share and the market growth potential.
241
Other important market or trend information is not included as?
it has the potential to falsely influence decisions.
Furthermore, the portfolio matrices do not take into consideration connections between products or businesses (i.e., composite effects).
242
The BCG matrix focuses on?
currently existing products and provides no information on new products or market trends.
243
Finally, the standardized strategies for?
the quadrants provide very simplistic recommendations for strategic decisions.
244
Composite effects
These refer to the qualitative impact of individual activities with regard to several products at the same time on the benefit for the market participants.
245
Based on the BCG matrix, the consulting company McKinsey and the American corporation General Electric developed a matrix using two indicators:
(1) market attractiveness,
and (2) competitive strengths. This matrix, like the BCG matrix, has the goal of facilitating investment decisions for product or business developments.
246
However, the external analysis is not restricted to the growth potential of?
the market, as in the BCG matrix, but includes many factors under the umbrella term market attractiveness, such as market volume, profitability, and the intensity of the competition.
247
The internal analysis was also developed further. Instead of just looking at the relative market share, as in the BCG matrix, the GE-McKinsey matrix analyzes?
the relative competitive strengths of the organization over the competition.
248
This includes not only the relative market share but also?
the relative product quality, the image of the company, and its financial strength.
Furthermore, the GE matrix with its 3 x 3 = 9 sections is more detailed than the BCG matrix with its 2 x 2 = 4 sections.
249
Figure 7: GE-McKinsey Matriximage
250
Figure 7: GE-McKinsey Matriximage
251
Figure 7: GE-McKinsey Matriximage
252
Figure 7: GE-McKinsey Matriximage
253
Depending on the results of the analyses of the market attractiveness and the relative competitive strength, the business units or the products of a company are depicted in?
one of the nine sections of the matrix.
254
The strategic recommendation from the matrix is:
the more attractive the market and the stronger the competitive position of the business or product, the more should be invested.
255
If the market attractiveness is?
low and the competitive position weak, the business unit or product should be divested.
256
The financial means that are freed up from?
divesting unattractive products or businesses should be invested in the more promising areas.
257
The products and businesses that are positioned in the middle segments of?
the matrix are more difficult to evaluate and more detailed analyses are required in order to make a final decision as to whether to invest in the business or product or whether to divest it.
258
Critical Evaluation
The main advantage of the GE-McKinsey matrix is that it concentrates?
a great deal of complex information into a clear and comprehensible overview of the product portfolio of a company.
259
Thus the matrix can be utilized to?
facilitate strategic decisions regarding investments in various businesses or products\/services.
260
However, there are several disadvantages to this matrix. One disadvantage is that?
a great deal of complex information is concentrated within the matrix.
261
Many products or businesses are in the middle segments which need?
further analysis. This does not allow for immediate strategic decisions to be made.
262
The concentration of information also leads to?
a loss of individual data about the business or product that might be important for decision-making.
263
Moreover, trends and future developments in the market are not included or considered (e.g., changes in ?
the technological sector, such as the internet, have had a strong impact on the attractiveness of many sectors and yet are not considered in the matrix).
264
A further disadvantage is that?
, just like the BCG matrix, connections between products or businesses are not taken into consideration.
265
There is the possibility that products from different business units are produced on?
the same assembly line.
266
If one of the products is divested for cost reasons, the assembly line still has to be?
maintained to produce the other product.
267
The logic of the portfolio matrix does not hold for this example as?
the desired cost savings cannot be realized in such situations.
268
The strategic plan is one of the most important --------------------------tasks and determines the future success or failure of a company. Areas to take into consideration in strategic planning are ----------------------------------------------------------------------------.
management
customers, competitors, distributors, and stakeholders
269
Expanding into new products or new sectors is called ----------------------.
diversification
270
Companies can pursue various expansion strategies, such as?
further market penetration with the existing products, new product or service development, new market development, or complete diversification with new products in new markets.
271
Companies diversify in order to increase the efficiency of their operations, to?
exploit their management competencies, or to increase the power in the market.
272
Another strategic decision to take into consideration is ---------------------------. When outsourcing, companies have activities that were previously provided ---------------------, performed by an outside organization to ------------------------.
outsourcing
internally
save costs
273
Outsourcing is a very successful strategy in today’s global business environment. However, quality issues often occur when?
outsourcing, and therefore, companies that outsource should have well-established quality management systems.
274
Portfolio analyses help managers make decisions on ?
the optimal combination of products or businesses offered by an organization.
275
They provide a great deal of information about the external business environment and illustrate the internal features of?
the organization in a clear, comprehensible matrix.
276
The BCG matrix, with the indicators market growth and market share, segments the products into ?
stars (in which the company should invest), cash cows (which provide the financial means to develop new products), poor dogs (which should be divested), and question marks (whose development is still unclear).
277
Using the indicators market attractiveness and competitive strength, the GE-McKinsey matrix offers?
a more detailed view with nine segments. In addition, the two indicators for this matrix combine more information than the BCG matrix.
278
Portfolio analyses offer a great overview over the product portfolio, but they ignore ?
connections between products, and therefore, clear decisions are sometimes difficult.
279
