10.5 Corporate-level strategy and strategic models

Question 1

What is the distinction between “business level” and “corporate level”?

Answer 1

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.

Question 2

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

Answer 2

ocean
parenting
portfolio

Question 3

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

Answer 3

markets
costs
prices
innovation

Question 4

When discussing “blue ocean strategy”, Kim & Mauborgne refer to “red oceans” - what do they mean by this?

Answer 4

Existing markets “awash with the blood of competitors” as a results of fighting for competitive advantage.

Question 5

When discussing “blue ocean strategy”, what do Kim & Mauborgne mean by “blue ocean”?

Answer 5

Blue oceans are areas of untapped market space demanding creativity with the opportunity for profitable growth.

Question 6

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)

Answer 6

elimination
reduction
raising
creation

Question 7

“Blue oceans” never last for long due to competition. Give some examples of blue ocean strategy/products.

Answer 7

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

Question 8

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_________.

Answer 8

Corporate Parenting

Question 9

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?

Answer 9

Finance, HR, Legal, CoSec etc.

Question 10

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

Answer 10

Envisioning
Synergy
Coaching
Services
Intervention

Question 11

What are some potential downsides to the corporate parenting approach to strategy?

Answer 11

Corporate parenting could destroy value through excessive centralised bureaucracy.

Individual under performing business units may go unnoticed.

Question 12

P_______ a______ is a technique used to help decision makers consider the strategic options available to them and where to build their business.

Answer 12

Portfolio analysis

Question 13

Which is the most common and popular approach to “portfolio analysis”?

Answer 13

The Boston Consulting Group (BCG) approach.

Question 14

The BCG portfolio analysis matrix includes f sectors depending on the rate of market growth and market share:

S_____
P_____ c____
C___ c____
D____

Answer 14

Stars
Problem Child
Cash cow
Dogs

Question 15

What is a “Dog” in the Boston Consulting Group portfolio analysis matrix?

Answer 15

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.

Question 16

What is a “Cash cow” in the Boston Consulting Group portfolio analysis matrix?

Answer 16

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.

Question 17

What is a “Problem Child” or “Question Mark” in the Boston Consulting Group portfolio analysis matrix?

Answer 17

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.

Question 18

What is a “Star” in the Boston Consulting Group portfolio analysis matrix?

Answer 18

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.

Question 19

Can you give an example of a “dog” for a supermarket using the Boston Consulting Group portfolio analysis matrix?

Answer 19

Batteries - necessary but not a core offering.

Question 20

Can you give an example of a “cash cow” in the Boston Consulting Group portfolio analysis matrix?

Answer 20

A wide range of alcoholic and soft drink brands.

Question 21

Can you give an example of a “problem child” in the Boston Consulting Group portfolio analysis matrix?

Answer 21

Inexpensive single-wear clothing

Question 22

Can you give an example of a “star” in the Boston Consulting Group portfolio analysis matrix?

Answer 22

High-end pre-packaged ready meals.

Question 23

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__________.

Answer 23

Products

Lifecycle

Question 24

Lynch (2015) identified several difficulties with the BCG matrix. Give two examples.

Answer 24

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.

Question 25

List three business level strategies and three corporate level strategies.

Answer 25

Business level

• cost leadership
• differentiation
• organisational focus

Corporate level

• blue ocean strategy
• corporate parenting
• portfolio analysis

Question 26

What 4 dimensions did Lynch (2015) identify for realising value from blue ocean strategy?

Answer 26

1 Elimination - which red ocean aspects are really important?
2 Reduction - removal of overdesigned features
3 Raising - improve important features
4 Creation - use existing knowledge to create new value

Question 27

How has Saga demonstrated blue ocean thinking?

Answer 27

Introduction of a three-year fixed price insurance product.

Question 28

Who developed blue ocean strategy?

Answer 28

Kim & Maubogne (2005)

Question 29

Goold et al (1994) identified 5 key areas of value add for a corporate parent. What were these?

E
FS
C
CS&R
I

Answer 29

Envisioning - clear overall vision
Facilitating Synergy - enabling cooperation and sharing
Coaching - development of business managers
Central services and resources - cost efficient use of central expertise
Intervention - correction of performance where needed

Question 30

What are the two axis of the BCG Portfolio analysis model?

Answer 30

Market share (horizontal) vs market growth (vertical)