BBA 3rd Year Strategy Evaluation Long Question Answer

2. Stars

The upper-left quadrant contains stars, businesses with high relative market share in high-growth markets. These businesses are very important to the company because they generate a high level of sales

And are quite profitable. However, because they are in a high growth market that is very attractive to petitors, they require a lot of resources and investments to maintain a high market share. Often the generated by stars must be reinvested in the products in order to maintain market share.

When the market growth slows dow Browth slows down, stars can take different paths, depending on their abilities hold (or gain) market share or to lose market share. If a star holds or gains market share when the growth rate slows, stars become more valuable over time, or cash cows. However, if a star loses arket share, it becomes a dog and has significantly less value (if any) to the company.

3. Cash Cows

The lower-left quadrant contains businesses that have high relative market share in low-growth markets. These businesses are called cash cows and are highly profitable leaders in their industries. The funds received from cash cows are often used to help other businesses within the company, to allow the company to purchase other businesses, or to return dividends to stockholders.

 4. Dogs

Dogs generate low relative market share in a low-growth market. They generate little cash and frequently result in losses. Management should carefully consider their reasons for maintaining dogs. If there is a loyal consumer group to which these businesses appeal and if the businesses yield relatively consistent cash that can cover their expenses, management may choose to continue their existence. However, if a dog consumes more resources than it is worth, it will likely be deleted or divested.

Strategic business units, which are often used to describe the products grouping or activities, are represented with a circle in the BCG Matrix. The size of the circle indicates the relative significance of each business unit to the organisation in terms of revenue generated (or assets used).

Q.3. Explain the importance of GE analysis cell matrix model. Define its all three zones.

Ans. In the 1980s General Electric, along with the Mc Kinsey and Company Consulting Group, developed a more involved method for analysing a company’s portfolio of businesses or product lines. This nine-cell matrix considers the attractiveness of the market situation and the strength of the particular business of interest. These two dimensions allow a company to use much more data in determining each business unit’s position.

The key to the successful implementation of this strategic tool is the identification and measurement of the appropriate factors that define market attractiveness and business strength. Those individuals involved in strategic planning are responsible for determining the factors. The attractiveness of the market may be based on such factors as market growth rate, barriers to entry, barriers to exit, industry profitability, power of the suppliers and customers, availability of substitutes, negotiation power of both customers and members of the channel of distribution, as well as other opportunities and threats.

The strength of a particular business may be based on such factors as market share position, Cost m ont in the industry, brand equity, technological position and other possible strengths and … co The development of General Electric (GE) Matrix requires assessing the criteria to h oth industry attractiveness and business strength. The calculation of scores for these dimensions is frequently based on a simple weighted sum formula.

To consider this approach as a matrix analysis, market attractiveness is placed on the vertical axis with the possible values of low, medium and high (see figure) business strength is placed on the horizontal axis with the possible values of weak, average and strong. A circle on the matrix represents each business unit (or product line). The size (area) of each circle represents the size of the relevant market in terms of sales. A portion of the circle is shaded to represent the market share of each business unit or product line within the market.

Fig.GE business strength or marker attractiveness.

The nine cells of this matrix define three general

zones of consideration for the strategic manager:

The First Zone contains businesses that are the best investment. These are units high in market attractiveness and strong in business strength, following by those that Medium are strong in business strength and medium in market attractiveness and those that are medium in business strength and high in market attractiveness. Management should pursue investment and growth strategies for these High units. Management should be very careful in determining the appropriate strategy for those business units located in any of the three cells in the diagonal of this matrix.

The Second Zone includes those business units. that have moderate overall attractiveness and those units that have medium business strength and market attractiveness, weak business strength and high market attractiveness and strong business strength and low market attractiveness. These businesses should be managed according to their relative strengths and the company’s ability to build on those strengths. Moreover, possible changes in market attractiveness should be carefully considered.

The Third Zone includes those businesses that are low in overall attractiveness. These are a good investments only if additional resources can move the business from a low overall attractiveness position to a moderate or strong overall attractiveness position. If not, these businesses should be considered for deletion or harvest.

The GE Matrix may be considered as an improvement over the BCG Matrix. The major advantage of using this matrix design is that both a business’s strength and an industry’s attractiveness are considered in the company’s decision. Generally, it considers much more information than BCG Matrix, it involves the judgements of the strategic decision-makers and it focuses on competitive position.

A major disadvantage, however, is the difficulty in appropriately defining business strength and market attractiveness. Also the estimation of these dimensions is a subjective judgement that may become quite complicated. Another disadvantage lies in the lack of objective measures available to position a company; managers making these strategic decisions may have difficulty determining their unit’s proper placement. Some people argue that the GE Matrix cannot effectively depict the positions of new products or business units in developing industries.

BBA 3rd Year Strategy Evaluation Long Question Answer
BBA 3rd Year Strategy Evaluation Long Question Answer

Q.4. What do you mean by SWOT analysis matrix? How strength is measured by SWOT analysis?

Ans. SWOT Analysis Matrix: One of the most widely used strategic planning tools is a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis. Most companies use, in one form or another, analysis as a basic guide for strategic planning. The worth of a SWOT analysis is often dependent on the objective insight of those management individuals who conduct the SWOT analysis. If management is able to

Fig. SWOT analysis
Fig. SWOT analysis

Opportunities provide objective, relevant information for the analysis,Threats the results are extremely useful for the company.

A SWOT analysis involves a company’s assessment of its internal position by identifying the company’s strengths and weaknesses. In addition, the company must determine its external position by defining its opportunities and threats.

Strengths

Strengths represent those skills in which a company exceeds or the key assets of the firm. Examples of strengths are a group of highly skilled employees, cutting edge technology and highquality products.

Weaknesses

Weaknesses are those areas in which a firm does not perform well. The examples include continued conflict between functional areas, high production costs and a poor financial position.

Opportunities

Opportunities are those current future circumstances in the environment that might provide favourable conditions for the firm. Examples of opportunities include an increase in the market population, a decrease in competition and a legislation that is favourable to the industry.

Threats

Threats are those current or future circumstances in the environment, which might provide unfavorable conditions for the firm. Examples of threats include increased supplier costs, a competitor’s new product development process and a legislation that is unfavourable to the industry.

After a firm has identified its strengths and weaknesses, it should determine the significance of each factor. A management team should review all strengths and weaknesses to determine the level (minor or major) of each strength and weakness. The importance (low or high) of each strength and weakness should also be identified. As shown in figure the combination of level of performance and importance yields four possibilities:

Cell 1: contains important areas in which the company is exhibiting poor performance. When a company identifies these areas it becomes aware of the need to improve its efforts in order to strengthen its performance.

Cell 2: contains important areas in which the company is performing very well. A company should continue its current efforts in these areas.

Cell 3: contains unimportant areas in which the firm is performing poorly. Since these areas are at low priority for the companies, they need not pay a great deal of attention to these areas.

Cell 4: includes areas in which the company is performing well, but which are unimportant. The firm may need to pull back some of its efforts in this areas, depending on how unimportant the area is to the overall picture.

In order to be most effectively used, opportunities and threats must also be classified. One way to examine opportunities is to consider how attractive (low or high) an opportunity is to a particular company. A business might also consider its probability of success (low or high) in utilising a particular opportunity. A company doesn’t need to pursure an opportunity that is not particularly attractive to it, nor does it need to pursue an opportunity for which it does not possess the requisite strengths. 

Threats should be evaluated according to their seriousness (low or high)and their probability of occurrence (low or high). A company must pay much more attention to a very serious threat that 5 quite likely to occur, than to a mild threat that is unlikely to occur.

Careful determination and classification of a company’s strengths, weaknesses, opportunities nd threats provide an excellent way for a company to analyse its current and future situation. It is ot necessary for a company to take advantage of all opportunities, nor is it necessary for a company develop methods to deal with all threats. Additionally, a company need not strengthen all of its reaknesses or be too smug about all its strengths. All of these factors should be evaluated in the ontext of each other in order to provide the company with the most useful planning information.

Tagged with: , ,

Leave a Reply

Your email address will not be published. Required fields are marked *

*