Tahir Presentation
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Transcript of Tahir Presentation
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Strategy-Formulation Analytical
FrameworkSWOT Matrix
SPACE Matrix
BCG Matrix
IE Matrix
Grand Strategy Matrix
Stage 2:The Matching Stage
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SPACE Matrix
Strategic Position & Action Evaluation Matrix
Aggressive
Conservative
Defensive
Competitive
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SPACE Matrix
Two Internal Dimensions
Financial Strength (FS)Competitive Advantage (CA)
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SPACE Matrix
Two External Dimensions
Environmental Stability (ES)Industry Strength (IS)
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5
SPACE Factors
Competitive advantage (CA)
Market share -5.0Product quality -1.0
Customer loyalty -1.0
Technology -1.0
Control over supplier & distributor-2.0
Financial Strength (FS)
Return on investment 5.0
Leverage 3.0
Liquidity 4.0
Working capital 3.0
3 years income 5.0
internal Strategic PositionInternal Strategic Position
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6
SPACE Factors
Industry Strength (IS)
Growth potential 4.0
Profit potential4.0
Financial stability 5.0
Labor cost 3.0
Ease of entry into market 2.0
Environmental Stability (ES)
Technological changes -5.0
Rate of inflation -2.0
Barriers to entry -2.0Competitive pressure -6.0
Price elasticity of demand -2.0
External Strategic Positionexternal Strategic Position
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Steps to Developing a SPACE Matrix
1. Select a set of variables to define FS,
CA, ES, & IS
2. Assign a numerical value:
1. From +1 to +6 to each FS & IS dimension
2. From -1 to -6 to each ES & CA dimension
3. Compute an average score for each FS,CA, ES, & IS
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Steps to Developing a SPACE Matrix
1. Plot the average score on the
appropriate axis
2. Add the two scores on the x-axis and plot
the point. Add the two scores on the y-
axis and plot the point. Plot the
intersection of the new xy point
3. Draw a directional vector from the origin
through the new intersection point.
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SPACE MatrixFS
+6
+1
+5
+4
+3
+2
-6
-5
-4
-3
-2
-1-6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6
ES
CA IS
Conservative Aggressive
Defensive Competitive
(1.6, 1.4)
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Strategy-Formulation Analytical
FrameworkSWOT Matrix
SPACE Matrix
BCG Matrix
IE Matrix
Grand Strategy Matrix
Stage 2:The Matching Stage
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INTRODUCTION
BOSTON CONSULTING GROUP (BCG)
MATRIXis developed byBRUCEHENDERSONof theBOSTON
CONSULTING GROUP IN THE EARLY1970s.
According to this technique, businesses orproducts are classified as low or highperformers depending upon their marketgrowth rate and relative market share.
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QUESTION MARKSHigh growth , Low market share
Most businesses start of as question marks.
They will absorb great amounts of cash if themarket share remains unchanged, (low).
Question marks have potential to become star
and eventually cash cow but can also becomea dog.
Investments should be high for question marks.
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STARSHigh growth, High market share
Stars are leaders in business.
They also require heavy investment, to maintain its large market
share.
It leads to large amount of cash consumption and cash generation.
Attempts should be made to hold the market share otherwise the
star will become a CASH COW.
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CASH COWSLow growth , High market share
They are foundation of the company and often the stars
of yesterday.
They generate more cash than required.
They extract the profits by investing as little cash as
possible
They are located in an industry that is mature, not
growing or declining.
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DOGSLow growth, Low market share
Dogs are the cash traps.
Dogs do not have potential to bring inmuch cash.
Number of dogs in the company should be
minimized.
Business is situated at a declining stage.
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Relative Market Share and
Market Growth
To understand theBoston Matrix
you need to understand howmarket share and market growth
interrelate.
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MARKET SHARE
Market share is the percentage of the total market that is beingserviced by your company, measured either in revenue terms orunit volume terms.
RELATIVE MARKET SHARE
RMS = Business unit sales this year
Leading rival sales this year
The higher your market share, the higher proportion of themarket you control.
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MARKET GROWTH
RATE Market growth is used as a measure of a markets
attractiveness.
MGR = Individual sales - individual sales
this year last yearIndividual sales last year
Markets experiencing high growth are ones where
the total market share available is expanding, andtheres plenty of opportunity for everyone to makemoney.
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MAIN STEPS OF BCG MATRIX
Identifying and dividing a company into SBU.
Assessing and comparing the prospects of each SBU
according to two criteria :
1. SBUS relative market share.2. Growth rate OF SBUS industry.
Classifying the SBUS on the basis of BCG matrix.
Developing strategic objectives for each SBU.
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BCG MATRIX WITH CASH FLOW
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BENEFITS
BCG MATRIX is simple and easy to
understand.
It helps you to quickly and simply screen the
opportunities open to you, and helps you
think about how you can make the most of
them.
It is used to identify how corporate cashresources can best be used to maximize a
companys future growth and profitability.
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LIMITATIONS
BCG MATRIX uses only two dimensions, Relative market
share and market growth rate.
Problems of getting data on market share and market
growth.
High market share does not mean profits all the time.
Business with low market share can be profitable too.
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CONCLUSION
Though BCG MATRIX has its limitations it is one
of the most FAMOUS AND SIMPLE portfolioplanning matrix ,used by large companies
having multi-products.