Session13: Portfolio Strategy and Unique Selling Propositions

Session13: Portfolio Strategy and Unique Selling Propositions

Dr. Mark H. Mortensen66.490.211 and 212Tues &Thurs 2:00 to 3:15

3:30 to 4:45

Manning School of Business

Mortensen Consulting Group

Today

1. Go over mid-term quiz

2. Discussion on portfolio strategy

3. Group workshop on portfolio strategy

4. Discussion on unique selling propositions

5. Assignment for next class


Growth

Organic – grow the businessConcentrationDiversification

Inorganic – acquire new businesses


Concentration Strategies

8-4



8-5



8-6


Vertical Integration Strategies Vertical integration: When a firm gets involved

in new portions of the value chain Can be very attractive when a firm’s suppliers or

buyers have too much power over the firm and are becoming increasingly profitable at the firm’s expense

By entering the domain of a supplier or a buyer, executives can reduce or eliminate the leverage that the supplier or buyer has over the firm

Can create risks

Can create complacency

8-7


Vertical Integration Strategies Backward vertical integration: A strategy that

involves a firm entering a supplier’s business Used when executives are concerned that a supplier

has too much power over their firms

Forward vertical integration: A strategy that involves a firm entering a buyer’s business Useful for neutralizing the effect of powerful buyers

8-8


Diversification Strategies

Diversification strategies: Involve a firm entering entirely new industriesRequires moving into new value chains

Three tests for diversification:How attractive is the industry that a firm is

considering entering? How much will it cost to enter the industry? Will the new unit and the firm be better off?

8-9



Related diversification: When a firm moves into a new industry that has important similarities with the firm’s existing industry or industries

Core competency: A skill set that is difficult for competitors to imitate, can be leveraged in different businesses, and contributes to the benefits enjoyed by customers within each business 8-10



Unrelated diversification: When a firm enters an industry that lacks any important similarities with the firm’s existing industry or industries Most unrelated diversification efforts do not

have happy endings

8-11


Strategies for Getting Smaller

Retrenchment: Reducing the size of part of a firm’s operations, often through laying off employeesFirms following a retrenchment strategy shrink

one or more of their business unitsFirms using this strategy hope to make just a

small retreat rather than losing a battle for survival

8-12


Strategies for Getting Smaller

Divestment: Selling off part of a firm’s operations It reverses a forward vertical integration

strategy

Spin-off: Creating a new company whose stock is owned by investors out of a piece of a bigger company

8-13


Portfolio Planning and Corporate Level Strategy Portfolio planning: A process that helps

executives make decisions involving their firms’ various industriesOffers suggestions about what to do within

each industry, and provides ideas for how to allocate resources across industries.

It first gained widespread attention in the 1970s and it remains a popular tool among executives today

8-14


Portfolio Planning and Corporate Level Strategy The Boston Consulting Group (BCG)

matrixBest-known approach to portfolio planning Using the matrix requires a firm’s businesses

to be categorized as high or low along two dimensions:

Its share of the market

The growth rate of its industry

8-15


Managing a portfolio of products


Workshop on Product Portfolio

Come up with some examples of products that occupy the various positions on the matrix.

Discuss in your groups how you would manage the different products in the matrix.


Unique selling proposition

Step 1: Market Who will buy your product?

Step 2: Need What simple need does your product satisfy?

Step 3: Pain (starts to differentiate your product) What "pain" does your product relieve for the buyer?

Step 4: Solution How does your product relieve that pain and therefore separate

itself from the competition that still inflicts the pain?


Product Differentiation Sometimes, you are not unique. What then? Understand the Characteristics that Customers Value:

First, brainstorm what customers value about your product or services and those of your competitors. Move beyond the basics common to all suppliers in the industry, and look at the criteria customers use to decide which product or service to buy.

As with all brainstorming, by involving knowledgeable people in the process, you'll improve the range of characteristics you'll identify. So talk to sales people, customer service teams and, most importantly, talk to customers themselves.

Rank Yourself and Your Competitors by These Criteria:Now identify your top competitors. Being as objective as you can, score yourself and each of your competitors out of 10 for each characteristic. Where possible, base your scores on objective data. Where you can't, do your best to see things from a customer's perspective and make your best guess.

Identify Where You Rank Well:Now plot these points on a graph. This helps you spot different competitors' strengths and weaknesses.

And from this, develop a simple, easily communicated statement of what differentiates you from your competitors.


For Thursday

Look up “game theory” on line Think through the “Prisoners’ Dilemma”

game


For Next Tuesday

Use the Apple Case Study that you bought.

Has Apple finally solved its long-standing problemsa. With respect to the Macintosh business?

b. With respect to its broader strategic position?

Going forward, what should Apple do?


Strategic Management – Spring 2014

Documents

Session13: Portfolio Strategy and Unique Selling Propositions