Strategic choice Topic 1

Transcription

1 Strategic choice Topic 1 Ansoffs Product/Market Growth Matrix (2 ) William Meaney MBA BSc. ACMA 1

2 Strategic Choice Growth options Generation of Options Evaluation of options Selection of Strategy Basis Means Options Porters Generic Strategies Ansoff s Matrix Merger Acquisitions Licence Franchise Joint Ventures Strategic Alliances Divestment Sub contracting Contract Manufacture. Outsourcing MBO etc. Own and control Shared ownership and control Have use of Suitable Appropriate Feasibility Financial Decisional Models Pro forma accounts Capital budgeting Capital Investment appraisal NPV etc. Decision trees (EMV) Expected Monetary Values William Meaney MBA BSc. ACMA 2

3 Ansoff s Product market growth matrix Risk? Products/Services Present New Present Market Penetration Present products to existing customer 2 New Product development Present products to new customers 16 MARKETS 8 64 New Market Development Present products to new markets Diversification New products and new markets William Meaney MBA BSc. ACMA 3

4 Reasons for external growth Existing business seen vulnerable in some way Growth potential limited Threatened by new technology Take-over a possibility Diversification may occur because Strength or expertise transfer benefit Synergy potential exists Fresh management and ideas Joint ventures Component parts of two or more businesses merged Join forces to develop new project Develop new business jointly Agreements between manufacturers and suppliers International trading partnerships William Meaney MBA BSc. ACMA 4

5 Ansoff s Product market growth matrix Options Present MARKETS New Products/Services Present New Booz Allen Market Penetration Reduce price Advertising Sales promotion Free trial Branding Build customer loyalty New Product development Market Development New Segments New channels of distribution New markets regionally, nationally, internationally New methods internet Diversification Acquisition/Merger Licence Franchise Joint ventures Strategic Alliances Hamilton William Meaney MBA BSc. ACMA 5

6 Ansoff s Product market growth matrix- Diversification Present MARKETS Present Products/Services New Market Penetration New Product development New Market Development Diversification Related diversification Unrelated Diversification Concentric Integration Backward Horizontal Forward Lateral William Meaney MBA BSc. ACMA 6

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8 Related diversification Related diversification (Concentric) Integration Forward Horizontal Backward William Meaney MBA BSc. ACMA 8

9 Related diversification Related diversification (Concentric) Integration Backward Horizontal Forward Lateral Types of Strategic Fit Shared technology Similar operating methods Common labour skills Common distribution channels Suppliers and raw materials sources Ability to share sales force Customer overlap Any area where meaningful sharing opportunities exist in business value chains William Meaney MBA BSc. ACMA 9

10 BACKWARD INTEGRATION RELATED DIVERSIFICATION RAW MATERIAL MANUFACTURER COMPONENTS MANUFACTURE MACHINERY MANUFACTURE PRODUCT/PROCESS RESEARCH/DESIGN RAW MATERIALS SUPPLY COMPONENTS SUPPLY MACHINERY SUPPLY FINANCING TRANSPORT HORIZONTAL INTEGRATION COMPETITIVE PRODUCTS COMPLEMENTARY PRODUCTS MANUFACTURER BY PRODUCTS FORWARD INTEGRATION DISTRIBUTION OUTLETS TRANSPORT MARKETING INFORMATION REPAIRS AND RECEIVING William Meaney MBA BSc. ACMA 10

11 Related Diversification Advantages Control of Supplies Quantity, Quality, Price Control of markets Access to information technological change market trends Cost savings on related activities Spreads risk - or does it! Better resource utilisation Economies of Scale in functional activities Strategy driven approach Disadvantages Skills and competence not easily transferable Culture problems if achieved by acquisition Possible concentration in wrong areas William Meaney MBA BSc. ACMA 11

12 Unrelated conglomerate diversification Unrelated Diversification William Meaney MBA BSc. ACMA 12

13 Unrelated diversification sharing? What they can share Financial Branding Production skills Marketing skills Distribution networks Research and Development Risk Management skills William Meaney MBA BSc. ACMA 13

14 Unrelated diversification - conglomerate Advantages Stable performance over business cycles due to differences in multiple business Allocation of resources to high return areas to maximise ROI Opportunities to achieve economies of scale, scope and experience through skill transfers, brands, technology Finance driven shareholder value increase Disadvantages Poor performance due to complexity of business Failure to exploit key synergies 1+1=1.5 not 1+1=3 Coordination difficult Philip Morris and Kraft foods for example Finance driven shareholder value increase Difficulty of competently managing diverse business interests William Meaney MBA BSc. ACMA 14

15 How will this help in your exam? Ansoffs matrix is a powerful and practical tool for determining the direction of strategic growth. Knowing the approaches and limitations is an essential part of the process of determining strategic choice It is a key requirement in Q1 and thus should be learned to application level William Meaney MBA BSc. ACMA 15