Matrice di Portafoglio

Visita anche il sito del Boston Consulting Group: http://www.bcg.com/this_is_bcg/mission/growth_share_matrix.asp

Business Portfolio Models – Approaches to Managing a Portfolio for Sustainable Synergy

Business portfolio models are tools for analyzing (1) the relative position of each of an organization’s businesses in its industry, and (2) the relationships among all of the organization’s businesses. Two approaches to developing business portfolio models are the Boston Consulting Group's growth - share matrix and General Electric's multifactor portfolio matrix.

BCG Growth - Share Matrix

The Boston Consulting Group, a management consulting firm, developed and popularized an approach to multibusiness strategy making called the growth-share matrix, shown in Figure 4.3. The basic idea is that a firm should have a balanced portfolio of businesses in which some generate more cash than they use to help support others that need cash to develop and become profitable. The role of each business is determined on the basis of two factors: the growth rate of its market and its share of that market.

The vertical axis indicates the market growth rate, measured as the annual percentage growth of the market (current or forecasted) in which the business operates. Anything under 10 percent is typically considered a low growth rate and anything above 10 percent is a high growth rate. However, depending on the industries being evaluated, other percentages are used.

The horizontal axis indicates market share dominance, or relative market share, computed by dividing the firm’s market share (in units) by the market share of its largest competitor. For example, a relative market share of 0.2 means that the sales volume of the business is only 20 percent of the market leader’s sales volume; a relative market share of 2.0 means that the business produces a sales volume twice that of the next largest competitor. A relative market share of 1.0 is set as the dividing line between high and low share. Each of the circles in Figure 4.3 represents the relative revenue of a single business; a larger circle represents more sales than a smaller circle.

The growth-share matrix places businesses in four cells, which reflect the four possible combinations of high and low growth with high and low market share. These cells represent particular types of businesses, each of which has a particular role to play in the overall business portfolio. The cells are labeled:

1. Question marks (sometimes called problem children): Business that operate in high-growth markets, but have low relative market shares. Most businesses start off as question marks either entering high-growth markets that already have market leaders, or operating as one of many small competitors in emerging industries. A question mark generally needs a lot of funds; it must keep adding plant, equipment, and personnel to keep up with a fast-growing industry that it wants to overtake or become the leader. The term question mark is well-chosen, because the organization has to think hard about whether to keep investing funds in the business or to get out.

2. Stars: Question-mark businesses that have become successful. A star is a market leader in a high-growth market, but it does not necessarily provide much cash. The organization has to spend a great deal of money keeping up with the market’s rate of growth and fighting off competitors’ attacks. Stars often consume cash rather than generating it. Even so, they are usually profitable in time.

3. Cash cows: Businesses in markets with low annual growth that have large market shares. A cash cow produces a lot of cash for the organization. The organization does not have to finance a great deal of expansion because the market’s growth rate is low. Since the business is a market leader, it enjoys economies of scale and higher profit margins. The organization milks its cash-cow business to pay its bills and support other growing businesses.

4. Dogs: Businesses with weak market shares in low-growth markets. They typically generate low profits or losses, although they may bring in some cash. Such businesses frequently consume more management time than they are worth and merit elimination. However, an organization may have good reasons to hold onto a dog, such as an expected turnaround in the market growth rate or a new chance at market leadership.

Strategic Alternatives After plotting each of its businesses on the growth-share matrix, an organization’s next step is to evaluate whether the portfolio is healthy and well-balanced. A balanced portfolio has a number of stars and cash cows, and not too many question marks or dogs. This balance is important because the organization needs cash, not only to maintain existing businesses, but also to develop new businesses. Depending on the position of each business, the firm can formulate one of four basic strategic goals for it:

1. Build market share: This goal is appropriate for question marks that must increase their shares in order to become stars. Some businesses may have to forgo short-term profits to gain market share and future, long-term profits.
2. Hold market share: This goal is appropriate for cash cows with strong share positions. The cash generated by mature cash cows provides critical support for other businesses and financing innovations. However, the cost of building share for cash cows is likely to be too high to be profitable.
3. Harvest: Harvesting involves milking as much short-term cash from a business as soon as possible, even allowing market share to decline if necessary. Weak cash cows that do not appear to have promising futures are candidates for harvesting, as are some question marks and dogs.
4. Divest: Divesting involves selling or liquidating a business to invest the resources devoted to it more profitably in other businesses. Divesting is appropriate for those dogs and question marks that are not worth investments to improve their positions.

Evaluation of the Growth-Share Matrix As an innovative approach to investigating relationships among an organization’s businesses, the growth-share matrix helped stimulate interest in managing a diversified portfolio. Perhaps its main contribution came from encouraging managers to view the formulation of corporate strategy in terms of joint relationships among businesses in different stages that have different cash requirements and make different contributions to achieving organizational objectives. The growth-share matrix also provides a simple and appealing visual overview of an organization’s business portfolio.

However, a variety of problems that arise with this approach suggest that it must be used cautiously in strategy formulation. Among these problems:

• The growth-share matrix focuses on balancing cash flows, whereas organizations are more likely to be interested in the returns on investment that various businesses yield.
• It is not always clear what share of what market is relevant in the analysis. For example, the analysis of Cadillac’s market share would give much different results if it were determined on the basis of the overall car market rather than just the market for luxury cars.

• The growth-share matrix assumes a strong relationship between market share and return on investment. In fact, it is commonly believed that a 10 percent difference in market share is accompanied by a 5 percent difference in return on investment. However, other research has found a much weaker relationship; a 10 percent change in market share is associated with only a 1 percent change in return on investment. ¹⁶
• Many other factors besides market share and growth rate have critical effects on strategy formulation. For example, industry structure and the core competencies of the firm and its competitors are important influences that this method does not adequately consider.
• The growth-share matrix does not directly compare investment opportunities in different businesses. For example, it is not clear how to compare two question marks to decide which should be developed into a star and which should be allowed to decline.
• The approach offers only general strategy guidance without specifying how to implement such strategies.

Thus, although the growth-share matrix may provide a useful overview of a business portfolio, and it may point out some important relationships among an organization’s businesses, it does not provide a compete framework for corporate strategy formulation. Several other portfolio models have been developed that overcome some of the problems inherent in the growth-share matrix. We will discuss one of them: General Electric’s multifactor portfolio matrix.

GE’s Multifactor Portfolio Matrix (per vedere la figura vai al sito www.studystrategy.com)

This approach has a variety of names, including the nine-cell GE matrix, GE’s nine-cell business portfolio matrix, and the industry attractiveness-business position matrix. It was developed at General Electric with the help of McKinsey and Company, a consulting firm. The basic matrix is shown in Figure 4.4. ¹⁷ Each circle represents an industry, and the shaded portion represents the organization’s market share in that industry.

 

Each of an organization’s businesses is plotted in the matrix on two dimensions, industry attractiveness and business strength. Each of these two major dimensions represents a composite of a variety of factors. The two dimensions make good sense for strategy formulation, because a successful business typically operates in an attractive industry where it has the particular business strengths required to succeed. Both ingredients are needed to produce outstanding performance through sustainable advantage.

To use this matrix, an organization must identify the factors that are most critical to industry attractiveness and business strength. Table 4.7 lists some of the factors that analysts commonly use to locate businesses on these dimensions.

The next step in developing this matrix is to weight each variable on the basis of its perceived importance relative to the other factors. (The weights must total 1.0.) Managers must then indicate, on a scale of 1 to 5, how long low or high their business scores on that factor. Table 4.8 presents this analysis for one business. These calculations rate the business at 3.45 in industry attractiveness and 4.30 in business strength. This places the business close to the high-high cell of the matrix.

Strategic Alternatives -- Depending on where a business plots on the matrix, the organization can formulate three basic strategies: invest/grow, invest selectively, and harvest/divest. Businesses that fall in the cells that form a diagonal from lower left to upper right are medium-strength businesses that merit only selective investment. Businesses in the cells above and to the left of this diagonal are the strongest; they deserve invest/grow strategies. Businesses in the cells below and to the right of the diagonal are weak overall; these are serious candidates for harvest/divest strategies.

Evaluation of the Multifactor Portfolio Matrix -- This approach has advantages over the growth-share matrix. First, it provides an explicit mechanism for matching internal strengths and weakness with external opportunities and threats, the fundamental task of strategic management. Second, as we have noted, the two dimensions of industry attractiveness and business strength are excellent criteria for rating potential business success.

However, the multifactor portfolio matrix also suffers from some of the same limitations as the growth-share matrix. For example, it does not solve the problem of determining the appropriate market, and it does not offer anything more than general strategy recommendations. In addition, the measures are subjective and can be very ambiguous, particularly when one is considering different businesses. ¹⁸

In general, portfolio models provide graphical frameworks for analyzing relationships among the businesses of large, diversified organizations, and they can yield useful strategy recommendations. However, no model yet devised provides a universally accepted approach to dealing with these issues. Portfolio models should never be applied mechanically, and any conclusions they suggest must be carefully considered in light of sound managerial judgment and the firm’s vision and goals, which no model can replace.