The aim of a portfolio is: 1. Analyze its current business portfolio & decide which SBU’s should receive more or less investment, and 2. Develop growth strategies for adding new products & business to the portfolio. 3. Decide which businesses or product should no longer be retained. Mc Kinsey Matrix McKinsey Matrix has two dimensions, viz, competitive position & industry attractiveness. The criteria or factors used for judging industry attractiveness and competitive position along with suggested weights for them are as follows: Industry Attractiveness Competitive position Criteria Weight Key Success Factors Weight Industry Size 0.10 Market share 0.15 13
Industry Growth 0.30 Technological Know-How 0.25 Industry Profitability 0.20 Product Quality 0.15 Capital Intensity 0.05 After-Sales Service 0.20 Technological Stability 0.10 Price Competitveness 0.05 Competitive Intensity 0.20 Low Operating Costs 0.10 Cyclicality 0.05 Productivity 0.10 Applying the above McKinsey Matrix criteria to Tejas Networks: 14 Industry Attractiveness Criteria Weight Rating Weighted Score Industry Size 0.10 4 0.40 Industry Growth 0.30 4 1.20 Industry Profitability 0.20 4 0.80 Capital Intensity 0.05 4 0.20 Technological Stability 0.10 3 0.30 Competitive Intensity 0.20 3 0.60 Cyclicality 0.05 3 0.15 3.65 Competitive Position Key Success Factors Weight Rating Weight Score Market Share 0.15 3 0.45 Technological Know-How 0.25 5 1.25 Product Quality 0.15 4 0.60 After-Sales Service 0.20 3 0.60 Price Competitiveness 0.05 4 0.20 Low Operating costs 0.10 4 0.40 Productivity 0.10 5 0.50 4.00
Strategic Planning & Capital Budgeting Capital expenditures particularly the major ones are supposed to sub serve the strategy of the Firm. Hence relationship between strategic planning & capital budgeting should be properly recognized. Exhibit 1 presents a way of defining this relationship. As emphasized in this exhibit Capital budgeting should be squarely related to corporate strategy. 15 Strategy Plan Environmental Assessment Managerial vision, Values Corporate Appraisal
This part of the concept is drawn from the book Strategic Management-A Methodological Approach by A.J.Rowe STRATEGIC POSITION AND ACTION EVALUATION (SPACE) SPACE is an approach to hammer out an appropriate strategic posture for a firm and its individual businesses. An extension of the two- dimensional portfolio analysis, SPACE involves a consideration of four dimensions: Company’s competitive advantage Company’s financial strength Industry strength Environmental stability Strategic Postures The basic strategic postures associated with the SPACE approach are as follows: Aggressive Posture This is appropriate for a company which Enjoys a competitive advantage and considerable financial strength and Belongs to an attractive industry that operates in a stable environment. Competitive Posture This is suitable for a company which Enjoys a competitive advantage but has limited financial strength, and 16 Capital Budgeting Product Strategy Market Strategy Production Strategy And so on
Belongs to an attractive industry operating in a relatively unstable Environment.
- Summer '16
- Tejas Networks