Corporate Level Strategy – Mix and Composition of Business Units, страница 6

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Dr. Schlossberg was Egypt King Faruk’s personal physician.  The last I heard about the family, his son was a nuclear physicist in the USA.  When Dr. Schlossberg’s father-in-law had to be driven to a hospital on the Sabbath, he said he wouldn’t go without my Zeide.  My Zeide went to consult his Rabbi.  The rabbi said it was clearly a matter of life and death and therefore permissible.  It was the only time my Zeide drove in a car on the Sabbath.  Part of my mother’s family lived in Egypt.  Many times I heard stories about aunt so-and-so who lived in Cairo, and uncle so-and-so who lived in Alexandria.  So when the Schlossbergs arrived from Egypt it seemed only natural.  It was the Jewish second exodus from Egypt, in 1956, after the short and unsuccessful Suez Canal affair, in which Great Britain, France and Israel tried to open the blockade of the canal imposed by General Nasser of Egypt.  This time there was no forty years of desert wandering before arriving in Israel.  It took exactly two hours. For the next thirty years I heard about Mrs. Schlossberg’s hardships.  Their financial situation and status in Egypt were very different from those of the family of a physician working for the health services in Israel.  The economy in Israel of the mid-fifties was very modest.  There was no huge mansion, servants, vacations on the French Rivera.  Mrs.

Schlossberg never got used to it. 

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The BCG approach recommends setting market-share objectives early in the product life cycle, gaining and maintaining market share through growth phases, and only in maturity sacrificing market share objectives for cash.  The optimal strategy for a business unit is to be in a strong market-share position when the market matures. Balancing a portfolio means a continuous effort to keep Stars on course and turn some of the Question Marks into Stars, which the ever-progressing life cycle will eventually turn into Cash Cows.  This is accompanied by house cleaning of Dogs when they have really proved to be expendable.

By plotting a current portfolio on the BCG matrix a pattern emerges.  The pattern reveals current cash generation and cash use tendencies.  Expected future positions, and thus some notion of overall value to the corporation, can be plotted and assessed on the grid as well.  The BCG model is not confined to large corporations.  The concept applies to small firms as well.  In large firms the portfolio can consist of business units in several industries and markets.  In a small firm the portfolio revolves around products and markets.  Thus the BCG model can be used for various sizes and structures of organizations.

The main limitation of the growth-share matrix is that by itself it is not very useful in determining strategy for a particular business.  The advice to "harvest" or "grow into a Star" is far from sufficient to guide managerial action.  Use of the BCG model does not substitute for business-level strategy making, and it does not dictate a strategy.  The growth-share matrix is best applied to portfolios whose business units make items in large quantities, and which compete strongly in simple, unsophisticated markets based on strict price competition.  In such markets competitive strategies are based on early embankment on the learning curve.  Therefore, only in such industries do relative costs strongly determine success.  In some product-market situations, the customer's needs are more complex, and can be met by a number of alternative products/technologies.  In these markets relative costs are less important than other marketing variables.  The experience curve model only holds in high volume industries.  It has been most successfully applied in situations of high growth, high value-added, continuous-process manufacturing, and capital-intensive industries.  It is less useful in mature industries where the curve is almost flat; in industries where purchased raw materials represent most of the costs; in mining and forestry; and most of all in service industries.  It is also of limited use in highly volatile high-tech businesses, where new technologies may emerge before experience-based costs become a decisive competitive factor.