FORMULATION OF STRATEGY: ANALYSING THE PRODUCT PORTFOLIO

•THE BCG MATRIX

•THE SHELL MATRIX

•THE GENERAL ELECTRIC MATRIX

SOME DEFINITIONSBusiness Portfolio: The collection of businesses and

products that make up the company.

Portfolio analysis: A tool by which managementidentifies and evaluates the various businesses thatmake up the company

Strategic business unit (SBU): A unit of the companythat has a separate mission and objectives and that canbe planned independently from other companybusinesses. A SBU can be a company division, aproduct line within a division, or sometimes a singleproduct or brand.

BCG MATRIX : BCG CLASSIFICATION OF PRODUCTS

Dogs

Market share

Mar

ket g

row

th

Low

High

0.1x1x10x0

10

20

StarsQuestion marks

Cash cows

PORTFOLIO ANALYSISStars

Cash cowsLow-growthHigh-share businesses or productsEstablished and successful units that generate cash that the company usesto pay its bills and support other business units that need investment

Question marksLow-share business units in high-growth markets

Dogs

High –growth High market share (High-share businesses)Products often require heavy investment to finance their rapid growth

THE GENERAL ELECTRIC MATRIX BY MCKINSEY

Typical (external) factors that affect Market Attractiveness:- Market size- Market growth rate- Market profitability - Pricing trends - Competitive intensity / rivalry - Overall risk of returns in the industry- Entry barriers - Opportunity to differentiate products and services- Demand variability- Segmentation - Distribution structure- Technology development 

Typical (internal) factors that affect Competitive Strength of a Strategic Business Unit:- Strength of assets and competencies- Relative brand strength (marketing)- Market share- Market share growth- Customer loyalty- Relative cost position (cost structure compared with competitors)- Relative profit margins (compared to competitors)- Distribution strength and production capacity- Record of technological or other innovation- Quality- Access to financial and other investment resources- Management strength 

THE PRODUCT PORTFOLIOTHE BCG MATRIX