Business Strategies

Growth strategies

About GE Matrix Developed by McKinsey & Company in 1970s. GE is a model to perform business portfolio analysis on the SBUs. GE is rated in terms of Market Attractiveness & Business Strength It is an Enlarged & Sophisticated version of BCG.

Classification
Business Strength
Strong
High

Medium

Weak
5.00

Market Attractiveness

3.67

Medium

2.33

Low
5.00

3.67

2.33

1.00

Market Attractiveness

Annual market growth rate Overall market size Historical profit margin Current size of market Market structure Market rivalry Demand variability Global opportunities

Business Strength Current market share Brand image Brand equity Production capacity Corporate image Profit margins relative to competitors R & D performance Managerial personal Promotional effectiveness

Business Position
High Medium Invest Selectively & Build Develop Selectively for Income Low Develop for Income Harvest or Divest

Market Attractiveness

Medium Low

High

Invest Heavily for Growth Invest Selectively & Build Develop Selectively & build on strengths

Harvest

Divest

Strategies Protect Position

Invest to grow Effort on maintaining strength

Invest to Build
Challenge for leadership Build selectively on strength

Build Selectively
Invest in most attractive segment Build up ability to counter competition Emphasize profitability by raising productivity

Strategies
Protect & Refocus
Manage for current earning Defend strength

Selectivity for earning

Protect existing program Investments in profitable segments

Build Selectivity
Specialize around limited strength Seek ways to overcome weakness Withdraw if indication of sustainable growth are lacking

Strategies
Limited expansion for Harvest
Look for ways to expand without risk

Manage for Earnings

Protect position in profitable segment. Upgrade product line Minimize Investment

Harvest
Sell at time that will maximize cash value Cut fixed costs and avoid investment meanwhile.

Over View
High High

Business Strengths

Low

Market Attractiveness

Attractive

Moderate Attractive

Unattractive

Low

TATA Group IT (information Technology): TCS Consumer Durable: Automobiles, Titan, etc. Textiles: Tata Fabrics, West Sides, etc.

GE Matrix for TATA

High High

Business Strengths
IT
Consumer Durables

Low

Market Attractiveness

Low

Textiles

BCG v/s GE BCG Market Growth Market share 4 cell Multi Products Primary tools GE
Market Attractiveness Market strength

9 cell Multi Business Units Secondary tools

Five Competitive Forces

Threat of New Entrants

Bargaining Power of Suppliers

Rivalry Among Existing Competitors Threat of Substitutes

Bargaining Power of Customers

porters five forces Model of coMpetition

Threat of Threat of New New Entrants Entrants

Bargaining Power of Suppliers

Rivalry Among Competing Firms in Industry

Bargaining Power of Buyers

Threat of Substitute Products

Purpose of Five-Forces Analysis

The five forces are environmental forces that impact on a companys ability to compete in a given market. The purpose of five-forces analysis is to diagnose the principal competitive pressures in a market and assess how strong and important each one is.

porters five forces Model of coMpetition

Threat of Threat of New New Entrants Entrants

Threat of New Entrants

Barriers to Entry

Economies of Scale Product Differentiation Capital Requirements Switching Costs Access to Distribution Channels Cost Disadvantages Independent of Scale Government Policy Retaliation Expected

porters five forces Model of coMpetition

Threat of Threat of New New Entrants Entrants

Bargaining Power of Suppliers

Bargaining Power of Suppliers

Suppliers are likely to be powerful if: Supplier industry is dominated by a few firms Suppliers products have few substitutes Buyer is not an important customer to supplier
Suppliers product is an important input to buyers product Suppliers products are differentiated Suppliers products have high switching costs Supplier poses credible threat of forward integration

Suppliers exert power in the industry by: * Threatening to raise prices or to reduce quality

Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases

porters five forces Model of coMpetition

Threat of Threat of New New Entrants Entrants

Bargaining Power of Suppliers

Bargaining Power of Buyers

Bargaining Power of Buyers

Buyer groups are likely to be powerful if: Buyers are concentrated or purchases are large relative to sellers sales
Purchase accounts for a significant fraction of suppliers sales Products are undifferentiated Buyers face few switching costs
* Bargaining down prices * Forcing higher quality * Playing firms off of each other

Buyers compete with the supplying industry by:

Buyers industry earns low profits

Buyer presents a credible threat of backward integration Product unimportant to quality Buyer has full information

porters five forces Model of coMpetition

Threat of Threat of New New Entrants Entrants

Bargaining Power of Suppliers

Bargaining Power of Buyers

Threat of Substitute Products

Threat of Substitute Products

Keys to evaluate substitute products: Products with similar function limit the prices firms can charge Products with improving price/performance tradeoffs relative to present industry products Example: Electronic security systems in place of security guards Fax machines in place of overnight mail delivery

porters five forces Model of coMpetition

Threat of Threat of New New Entrants Entrants

Bargaining Power of Suppliers

Rivalry Among Competing Firms in Industry

Bargaining Power of Buyers

Threat of Substitute Products

Rivalry Among Existing Competitors Intense rivalry often plays out in the following ways:
Jockeying for strategic position Using price competition

Staging advertising battles Increasing consumer warranties or service Making new product introductions

Occurs when a firm is pressured or sees an opportunity

Price competition often leaves the entire industry worse off Advertising battles may increase total industry demand, but may be costly to smaller competitors

Rivalry Among Existing Competitors

Cutthroat competition is more likely to occur when:

Numerous or equally balanced competitors Slow growth industry High fixed costs High storage costs Lack of differentiation or switching costs Capacity added in large increments Diverse competitors High strategic stakes High exit barriers

The Five Forces are Unique to Your Industry Five-Forces Analysis is a framework for analyzing a particular industry.
Yet, the five forces affect all the other businesses in that industry.

Growth
Internal External
Licensing Franchising Strategic Alliance Joint venture Merger & Acquisitions Green field ventures

Concentration growth
If a companys current product lines have real growth potential. Growing firms in a growing industry tend to choose these strategies

Vertical
Forward integration
Assuming a function previously provided by distributors

Backward integration
Assuming a function previously provided by a supplier

Horizontal
Extending product variants and scope of operations into other territories

Concentric growth
Related diversification
Entering into related businesses opportunities for
Transferring competitively valuable expertise, technological know-how and other capabilities from one business to another. Combining related activities to reduced cost Achieving economies of scope Exploiting well known common brand name / contact Achieving synergy 1+ 2 > 3 Examples Rolls royce Aircraft , Automobiles eng GE electrical appliances , captive power gensets, energy generation / diesel locomotives

Conglomerate growth
Un-related diversification
Diversifying into an industry unrelated to its current one. Future growth given importance To spread the business risk Ex TATA : steel / Automobile / IT / Tea / FMCG / Life Style / Publishing / Power & energy ITC Cigarettes / FMCG/ Packaging King fisher Hard Drinks / Airlines Wipro FMCG/ IT / Electricals Godreg Machine tools / FMCG

Turn Around
Turn around management refers to the management measures that reverse the negative trends in the performance indicators of the company (ie) turn a sick company back to a healthy one.

Indicators for the need of Turn around Persistence negative cash flow Declining Market Share Deterioration in physical facilities

Elements that contribute to a Turn around Changes in Top management To initiate credibility action Neutralizing external pressure Initial control / cost control Revenue generation thru liquidation of Nonperforming assets Better co-ordination