Glossary of techniques for strategic analysis. This article provides a glossary of analytical techniques, страница 11

The life cycle position of an industry or product has many implications for strategies and competitive behaviour. Empirically, it has been observed that products, for example, pass through a number of stages, each of which may be associated with a different volume of sales, and different levels of pro®ts. One classi®cation of stages is development growth, shake-out, maturity, saturation and decline. Not only do competitors tend to behave differently at each stage of the life cycle, but there are also many implications for management in the pro®ts/cash needs of different positions, and in strategies to extend the life cycle. Marketing strategy is also likely to be different at each stage of the life cycle. Not surprisingly the concept also lies behind a number of approaches to portfolio analysis.

Barksdale, H. C. and Harris, C. E. (1982). Portfolio analysis and the product life cycle, Long Range Planning, December, 15(6).

Hofer, C. W. and Schendel, D. (1978). Strategy Formulation: Analytical Concepts, chapter 5, West Publishing, St Paul, Minnesota.

Hussey, D. E. (1994). Strategic Management: Theory and Practice, 3rd edition, Pergamon Press, Oxford.

Kotler, P. (1988). Marketing Management: Analysis, Planning, Implementation and Control, 6th edition, chapter 12, Prentice-Hall, Englewood Cliffs, New Jersey.

Yelle, L. E. (1983). Adding life cycles to learning curves, Long Range Planning, December, 16(6).

See also: portfolio analysis.

MCC decision matrix

Developed by John Nicholls (1995), this matrix looks at the use of resources and assesses the ®t with the organization's mission and core competencies. It is offered in both a basic 262 matrix and a more complex 363 matrix. The matrix uses Fit with the Mission on the vertical axis, and Fit with Core Competencies on the horizontal axis. The 262 matrix has good and poor positions on each axis: the 363 version adds a midposition. Products and projects are placed on the matrix, and the position on the matrix guides the appropriate action. Apart from its use in assessing overall strategies, this matrix has value in conjunction with discounted cash ¯ow methods of capital evaluation.

Nicholls, J. (1995). The MCC decision matrix: a tool for applying strategic logic to everyday activity, Management Decision, 33(6), Summer.

Net present value

See discounted cash ¯ow.

PIMS

This stands for pro®t impact of market strategy. It is an assessment of strategy and performance based on data provided by subscribers, which provides a sound empirical basis for deducing principles of strategy. It also provides a number of matrix analysis formats through which a ®rm might contrast its own businesses with the ®ndings from the data bank. The data allow relationships to be established between return on investment (ROI) and such factors as market share, vertical integration, capital intensity and quality.

Buzzell, R. D. and Gale, B. T. (1987). The PIMS Principles: Linking Strategy to Performance, Free Press, New York.

Nebauer, F-F. (1990). Portfolio Management, chapter E, Kluwer, Holland.

Portfolio analysis

A group of related methods of analysis of varying complexity which enables a variety of activities to be compared in strategic terms. The axes of the matrix may vary, but typically are some way of expressing market position compared with some way of expressing market prospects. There are some interesting variations, such as market prospects/corporate strengths. The approaches give a view of the relative strategic importance of a `portfolio' of strategic business areas, strategic business units, or products, and can also be extended to consider the management skills needed to be successful in each position on the matrix. Too literal an acceptance of the ®ndings has led many companies to take against portfolio analysis. However, careful usage can give considerable insight in complex situations, and can make it much easier to communicate the strategic shape of a multiactivity company. It makes sense to use the technique in conjunction with other analytical tools, and to be prepared to experiment with different types of portfolio analysis, including the devising of matrices which are useful in a particular situation. For example, the market share axis may be changed to contrast the technological position of the portfolio. Matrices may also be devised to study the portfolio on a geographical basis.