The aim of a portfolio is 1 Analyze its current business portfolio decide which

The aim of a portfolio is 1 analyze its current

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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
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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
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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
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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
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Belongs to an attractive industry operating in a relatively unstable Environment.
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