Statistics Planning

Business вЂ" must be viewed as a customer-satisfying process and not a goods-producing process.

Three dimensions to define business: (a great example, a business designing incandescent lighting systems)

1. Customer groups вЂ" [the people] = Television groups

2. Customer needs вЂ" [the benefit] = lighting

3. Technology вЂ" [new ideas to expand] = incandescent lighting

STRATEGIC BUSINESS UNITS (SBUs) вЂ" a business unit that can benefit from separate planning faces, specific competitors, and is managed as a profit center.

Three Characteristics:

1. It is a single business of collection of related businesses that can be planned separately from the rest of the company

2. It has its own set of competitors

3. It has a manager who is responsible for strategic planning and profit performance and who controls most of the factors affecting profit.

* The purpose of identifying the company’s strategic business units is to develop separate strategies and assign appropriate funding. *

BOSTON CONSULTING GROUP MODEL (BCG) developed the growth-share matrix matrix, which is used for classifying businesses by profit potential.

THE GROWTH MATRIX:

• 8 Circles вЂ" represents the current sizes and positions of 8 business units in a hypothetical company.

Dollar вЂ" Volume size of each business is proportional to the circle is area.

• Market Growth Rate (on vertical axis) indicates the annual growth rate of the market, which the business operates.

• Relative Market Share (on horizontal axis) refers to the SBU’s market share relative to that of its largest competitor, it serves a s a measure of the company’s strength in the relevant market.

Four Cells of Growth вЂ" Share Matrix:

1. Question marks вЂ" Business that operates in high-growth markets but have low relative market shares. Question marks represent thinking; in which the companies should think hard whether to keep pouring money into such business.

2. Stars вЂ" If the question mark business is successful it becomes a star. The star represents the leader in high-growth market.

3. Cash cows вЂ" When the market’s annual growth rate falls to less than 10%, the star becomes a cash cow if it still has the largest relative market share. The cash cow produces a lot of cash for the company.

4. Dogs вЂ" Dogs are business with weak market shares in low growth markets. They typically generate low profits of losses, although they may generate some cash.

Four Strategies of Strategic Business Units:

a. Build вЂ" the objective is to increase SBU’s market share.

Appropriate for question marks whose market shares must grow if they become stars.

b. Hold вЂ" preserve the SBU’s market share - for strong cash cows to continue yielding a large positive cash flow.

c. Harvest вЂ" increase SBU’s short term cahs flow regardless of long-term effect.

The company carrying out a harvesting strategy faces prickly social and ethical questions over how much information to share with various stakeholders.

d. Divest вЂ" objective is to sell or liquidate the business because the resources can better used elsewhere.

Planning new businesses allow it to project total sales and profits.

Three options to fill the strategic-planning gap:

пÑ"? To identify opportunities to achieve further growth with in the company’s current businesses. (Intensive growth opportunities)

пÑ"? To identify opportunities to build or acquire businesses that is related to the company’s current businesses. (Integrative growth opportunities)

пÑ"? Identify opportunities to add attractive businesses that are unrelated to the company’s current businesses. (Diversification growth opportunites)

MAJOR CLASSES OF GROWTH OPPORTUNITES

I. Intensive growth вЂ" corporate manager’s first course of action is to review whether any opportunities exist for improving its existing businesses performance.

3 Intensive growth strategies: (Product/market extension grid)

A. Market-Penetration Strategy вЂ" company first considers whether it could gain more market share with its current products in their current markets.

3 Major approaches to increasing products market share:

a. Encourage current customers to buy more of its products per period.

b. Attract competitors customers

c. Convince non-users to start using the product

B. Market-Development Strategy вЂ" considers whether it can find or develop new markets for its current products.

3 Approaches:

a. Identify potential user groups

b. Seek additional distribution channels in its present locations

c. Sell in new locations in its home county or abroad

C. Product Development Strategy вЂ" consider new product possibilities.

3 Approaches:

a. Develop new product features

b. Develop different quality levels

c. Research an alternative technology

II. Integrative Growth вЂ" increasing sales and profits