Multibusiness Strategy

Question 1

What are portfolio techniques?

Answer 1

An approach pioneered by the Boston Consulting Group attempted to help managers “balance” the flow of cash resources among their various businesses while also identifying their basic policy purpose within the overall portfolio.

Question 2

What are the limitations of the Protfolio Approach?

Answer 2

1. It does not address how value is being created across business units
2. Truly accurate measurement for matrix classification was not as easy as the matrices portrayed
3. The underlying assumption about the relationship between market share and profitability varied across industries and market segments
4. The limited policy options came to be seen more as basic policy missions
5. It ignored capital raised in capital markets
6. It typically failed to compare the competitive advantage a business received from being owned by a particular company with the costs of owning it

Question 3

What is a relative competitive position

Answer 3

The market share of a business is divided by the market share of its largest competitor.

Question 4

What is market growth rate?

Answer 4

The projected rate of sales growth for the market being served by a particular business

Question 5

What are stars in the BCG growth-share matrix?

Answer 5

Businesses in rapidly growing markets with large market shares.

Question 6

What are cash cows in the BCG growth-share matrix?

Answer 6

Businesses with a high market share in low-growth markets or industries.

Question 7

What are dogs in the BCG growth share matrix?

Answer 7

Low market share and low growth businesses

Question 8

What are the businesses in the BCG Growth-share matrix?

Answer 8

1. star
2. cash cows
3. dogs
4. question marks

Question 9

What are question marks in the BCG Growth-share Matrix?

Answer 9

Businesses whose high growth rate gives them considerable appeal but whose low market share makes their profit potential uncertain.

Question 10

What is the industry attractiveness -business strength matrix?

Answer 10

It uses multiple factors to assess industry attractiveness and business strength rather than the single measures employed in the BCG matrix.
It also has 9 cells instead of BCG’s 4 to allow for finer distinctions among business portfolio positions

Question 11

What are factors considered in constructing an industry attractiveness-business strength matrix under industry attractiveness?

Answer 11

1. Nature of competitive rivalry
2. Bargaining power of suppliers/customers
3. Threat of substitute products/new entrants
4. Economic factors
5. Financial norms
6. Sociopolitical considerations

Question 12

What are factors considered in constructing an industry attractiveness-business strength matrix under business strength?

Answer 12

1. Cost position
2. Level of differentiation
3. Response time
4. Financial strength
5. Human assets
6. Public approval

Question 13

What is the BCG Policy environments matrix

Answer 13

This approach uses the idea that it was the nature of competitive advantage in an industry that determined the policies available to a company’s businesses, which in turn determined the structure of the industry.

Question 14

What are the types of businesses in BCG’s policy environments matrix?

Answer 14

1. volume businesses
2. stalemate businesses
3. fragmented businesses
4. specialization businesses

Question 15

What are volume businesses?

Answer 15

Businesses that have few sources of advantage, but the size is large – typically the result of scale economics

Question 16

What are stalemate businesses?

Answer 16

Businesses with few sources of advantage, most of them small. Skills in operational efficiency, low overhead, and cost management are critical to profitability

Question 17

What are fragmented businesses?

Answer 17

Businesses with many sources of advantage, but they are all small. They typically involve differentiated products with low brand loyalty, easily replicated technology, and minimal scale economies

Question 18

What are specialization businesses?

Answer 18

Businesses with many sources of advantage. Skills in achieving differentiation (product design, branding expertise, innovation, and perhaps scale) characterize winning specialization businesses.

Question 19

What are the elements critical in meaningful shared opportunities?

Answer 19

1. The shared opportunities must be a significant portion of the value chain of the businesses involved.
2. The businesses involved must truly have shared needs – needs for the same activity – or there is no basis for synergy in the first place.

Question 20

What is the parenting opportunities framework?

Answer 20

The perspective that the role of corporate headquarters (the “parent”) in multibusiness (the “children”) companies is that of a parent sharing wisdom, insight, and guidance to help develop its various businesses to excel

Question 21

What are the 10 sources of parenting opportunities?

Answer 21

Size & Age
Management
Business Definition
Predictable Errors
Linkages
Common capabilities
Specialized expertise
External relations
Major decisions
Major changes

Question 22

According to the BCG, corporate adds value through 5 types of levers, these are?

Answer 22

1. Corporate functions and resources
2. Policy development
3. Financing advantages
4. Business synergies
5. Operational engagement

Question 23

What are the types of parenting policy types?

Answer 23

Hands-off owner
Financial sponsor
Family builder
Policy guide
Functional leader
Hands-on manager

Question 24

What is patching?

Answer 24

The process by which corporate executives routinely “remap” their businesses to match rapidly changing market opportunities – adding, splitting, transferring, exiting, or combining chunks of businesses

Question 25

What is policy positioning in patching?

Answer 25

The way a business is designed and positioned to serve target markets.