Нина Пусенкова - Английский язык. Практический курс для решения бизнес-задач Страница 17

Under the growth-share matrix model, as an industry matures and its growth rate declines, a business unit will become either a cash cow or a dog, determined solely by whether it had become the market leader during the period of high growth.

While originally developed as a model for resource allocation among the various business units in a corporation, the growth-share matrix also can be used for resource allocation among products within a single business unit.

The BCG matrix can help understand a frequently made strategic mistake: having a one-size-fits-all approach to strategy such as a generic growth target or a generic return on capital for the entire corporation.

In such a scenario:

Cash Cows will beat their profit target easily; their managers have an easy job and are often praised anyhow.

Dogs fight an impossible battle and, even worse, investments are made now and then in hopeless attempts to «turn the business around».

As a result, Question Marks and Stars get mediocre investment funds. In this way they are unable to ever become cash cows and earn money.

Limitations

The BCG matrix once was used widely, but has since faded from popularity as more comprehensive models have been developed. Some of its weaknesses are:

Market growth rate is only one factor in industry attractiveness, and relative market share is only one factor in competitive advantage. The growth-share matrix overlooks many other factors in these two important determinants of profitability.

The framework assumes that each business unit is independent of the others. In some cases, a business unit that is a «dog» may be helping other business units gain a competitive advantage.

The matrix depends heavily upon the breadth of the definition of the market. A business unit may dominate its small niche, but have very low market share in the overall industry. In such a case, the definition of the market can make the difference between a dog and a cash cow.

While its importance has diminished, the BCG matrix still can serve as a simple tool for viewing a corporation’s business portfolio at a glance, and may serve as a starting point for discussing resource allocation among strategic business units (SBUs).

Source: www.netmba.com

The GE/McKinsey Matrix

The GE/McKinsey Matrix is a later and more advanced form of the BCG Matrix. It is a model to perform business portfolio analysis on the Strategic Business Units of a corporation. A business portfolio is the collection of SBUs that make up a corporation. The optimal business portfolio is one that fits perfectly to the company’s strengths and helps to exploit the most attractive industries or markets. A SBU can either be a midsize company or a division of a large corporation that formulates its own business level strategy and has separate objectives from the parent company.

The aim of a portfolio analysis is to:

– analyze its current business portfolio and decide which SBUs should be allocated more or less investment;

– develop growth strategies for adding new products and businesses to the portfolio;

– decide which businesses or products should be divested.

The GE/McKinsey Matrix is more sophisticated than the BCG Matrix:

1. Market (industry) attractiveness replaces market growth as the dimension of industry attractiveness. Market attractiveness includes a broader range of factors than just the market growth rate that can determine the attractiveness of an industry/market.

2. Competitive strength replaces market share as the dimension by which the competitive position of each SBU is assessed. Competitive strength likewise includes a broader range of factors than just the market share that can determine the competitiveness of a SBU.

3. The GE/McKinsey Matrix works with a 3*3 grid, while the BCG matrix has only 2*2.

SBUs are portrayed as a circle plotted in the GE/McKinsey Matrix whereby:

– The size of the circles represents the market size

– The size of the pies represents the market share of the SBUs

– Arrows represent the direction and the movement of the SBUs in the future.

A six-step approach to implementation of portfolio analysis using the GE/McKinsey Matrix could look like this:

1. Specify drivers of each dimension.

2. Weight drivers.

3. Score SBU’s each driver.

4. Multiply weights by scores for each SBU.

5. View resulting graph and interpret it.

6. Perform a review/sensitivity analysis using adjusted other weights and scores.

Some important limitations of the GE/McKinsey Matrix are:

– aggregation of the indicators is difficult;

– core competencies are not represented;

– interrelations between SBUs are not considered.

Source: www.valuebasedmanagement.net

Essential Vocabulary

1. product life-cycle – жизненный цикл товара

2. business unit – бизнес-единица

3. proxy n – доверенность; лицо, уполномоченное выступать за другого по доверенности; ориентир

4. industry n – промышленность, индустрия; отрасль промышленности

industrial a – промышленный, производственный; промышленная корпорация (США) – любая корпорация, которая не может быть отнесена к коммунальным, финансовым или транспортным компаниям

5. framework n – рамки

6. experience curve – кривая опыта

7. maturity n – зрелость; срок погашения (ценной бумаги), срок кредита

mature v – зреть; погашаться

mature a – зрелый; подлежащий оплате ввиду наступившего срока погашения

8. divestiture n – лишение права; реализация актива путем продажи

9. net a – чистый, нетто

net out v – вычитать, определять нетто-позицию, взаимозачитывать

10. return on assets (ROA) – доходность активов

11. service v debt – обслуживать долг

12. dividend (div) n – дивиденд

13. shareholder n – акционер

14. cash flow – денежный поток

15. present value – приведенная ценность

16. discounted cash flow (DCF) – дисконтированный денежный поток

17. allocation n – распределение, назначение; ассигнование; размещение

allocate v– распределять, назначать; ассигновать; размещать

18. one-size-fits-all – единый для всех, общий

19. generic a – родовой, общий, характерный для определенного рода или группы

20. fund n – фонд, финансовое средство, сумма денег

fund v – финансировать

21. strategic business unit (SBU) – стратегическая бизнес-единица

22. parent company – материнская компания

23. return n – возврат; доходность; налоговая декларация

24. entry barrier – барьер на выход в отрасль или на рынок

25. competency n – компетентность, умение, способность; компетенция

26. access n – доступ

access v – иметь доступ

accessible a – доступный

27. score n – счет, задолженность, долг; причина, основание; количество набранных очков; удача; истинные факты

score v – подсчитывать очки, вести счет; выигрывать, получать преимущество

28. sensitivity analysis – анализ чувствительности

29. core competency – основная сфера компетенции

Exercise 1. Answer the following questions.

1. What kind of product portfolio should a company have to ensure long-term value creation? 2. How can business units be categorized? 3. What are the characteristics of the Dog Business Units? 4. What is the potential future of Question Marks? 5. What are the specifics of Stars? 6. What is the function of Cash Cows in a company? 7. Why is it unadvisable to have a one-size-fits-all approach to strategy? 8. What are the limitations of the BCG matrix? 9. What is the basis of the GE/McKinsey matrix? 10. What is the aim of the portfolio analysis? 11. Why is the GE/McKinsey matrix more sophisticated than the BCG matrix? 12. What are the external factors that affect market attractiveness? 13. What are the internal factors that affect competitive strength? 14. What approach can be used to implement the portfolio analysis? 15. What are the limitations of the GE/McKinsey matrix?

Exercise 2. Analyze your own company using the BCG Matrix and the GE/McKinsey Matrix.

Exercise 3*. Fill in the blanks using terms given below.

Core Competence

The Core Competence model of Hamel and Prahalad is a……… model that starts the strategy process by thinking about the…….. strengths of an organization.

The Core Competence model states that in the long run competitiveness derives from an ability to build a…………, at…….. and more speedily than competitors. The real sources of advantage are to be found in management’s abilities to……… corporate-wide technologies and production skills into competencies, through which individual businesses can……. quickly to changing circumstances. A Core Competence can be any combination of specific, inherent, integrated and applied knowledge……. and attitudes.

Prahalad and Hamel dismiss the……….. perspective as a viable approach to corporate strategy. In their view, the……….. of the Strategic Business Unit is now clearly an anachronism. Hamel and Prahalad argue that a….. should be built around a core of shared competencies.

……….. must use and help to further develop the CCs. The corporate center should not be just another layer of accounting, but must……… by improving the strategic architecture that guides the process of……….

Three tests for identifying a Сore Сompetence

Provides potential……. to a wide variety of markets.

Makes a significant contribution to the benefits of the products as…….. by the customer.

A CC should be difficult for……… to imitate.

Building a Core Competence

A Core Competence is built through a process of continuous improvement and……… It should constitute the…….. for corporate strategy. At this level, the goal is to build………. in the design and development of a particular class of product functionality.

Once top management with the help of SBUs managers have………. an all-embracing Core Competence, it must ask businesses to find the projects and the people that are closely connected with it. Corporate auditors should……. an audit of the location, number and quality of the people related to the CC. CC carriers should be brought together frequently to…… ideas.

Source: www.valuebasedmanagement.com

Terms:

adapt, identified, focus, share, competitors, enhancement, corporate strategy, world leadership, primacy, perform, access, competence building, core, skills, portfolio, core competence, consolidate, business units, add value, perceived, lower cost, corporation

Exercise 4. Make 2 sentences with each term.

core – non-core:

– competence,

– assets,

– activities,

– business.

Exercise 5. Describe the core competence of your company.

Exercise 6. Translate into English.

Что могут и чего не могут управленческие модели

Вопрос о месте управленческих моделей в организации процесса стратегического планирования и их полезности в обеспечении эффективного функционирования компании до сих пор не закрыт. Причем споры о целесообразности использования любых таких моделей неизменно скатываются в одну и ту же плоскость. Широкая часть делового сообщества считает их неотъемлемой частью управления своим бизнесом. Другая, не менее многочисленная, уверяет, что данный инструментарий, завернутый в «громкие слова», – ловкий ход консультантов по рекламированию своей деятельности и выставлению напоказ своих профессиональных навыков. Кто из них прав, судить трудно, скорее всего истина, как всегда, лежит где-то посередине. Так что же необходимо знать и учитывать при использовании данного класса моделей?