Analyzer businesses, whether low-cost or differentiated, fall somewhere in between the two extremes. They usually have a well-established core business to defend and often their domain is primarily focused on that business. Businesses pursuing this intermediate strategy are often in industries that are still growing or experiencing technological changes. They must pay attention to the emergence of new customer segments and/or new product types. As a result, managers must review and adjust the domain of such businesses from time to time.2.Differences in Goals and ObjectivesStrategies often focus on different objectives. SBU and product-market objectives might be specified on a variety of criteria:1.Effectiveness. The success of a business’s products and programmes relative to those of its competitors in the market. Effectiveness is commonly measured by such items as sales growthrelative to competitors or changes in market share.
2.Efficiency.The outcomes of a business’s programmes relative to the resources used in implementing them. Common measures of efficiency are profitabilityas a percentage of sales and return on investment.3.Adaptability.The business’s success in responding over time to changing conditions and opportunities in the environment. Adaptability can be measured in a variety of ways, but the most common ones are the number of successful new productsintroduced relative to those competitors orthe percentage of sales accounted for by products introduced within the last five years.It is very difficult for any SBU to simultaneously achieve outstanding performance on even this limited number of dimensions, because they involve substantial trade-offs. Managers should choose a competitive strategy with a view toward maximizing performance on one or two dimensions, while expecting to sacrifice some level of performance on the others, at least in the short term. Over the longer term, the chosen strategy should promise discounted cash flows that exceed the business’s cost of capital and thereby increase shareholder value.Prospector businesses are expected to outperform defenders on both new product development and market-share growth. On the other hand, both defender strategies should lead to better returns than low-cost defenders, assuming that the greater expenses involved in maintaining their differentiated positions can be more than offset by the higher margins gained by avoiding the intense price competition low-cost competitors often face. 3.Differences in Resource DeploymentProspector businesses devote a relatively large proportion of resources to the development of new product-markets. Because such product-markets usually require more cash to develop than they produce short term, businesses pursing these strategies often need infusions of financial resources from other parts of the corporation. In portfolio terms, they are “question marks” or “stars”.
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- Spring '18
- Business, Marketing, SBUs, business units