strategic planning tools

Strategic Planning Tools

Pre-designed Models for Presentations

01 – Boston Consulting Group Matrix02 – General Electric / McKinsey Matrix03 – SWOT / TOWS Analysis Matrix04 – Porter’s Generic Competitive Strategies05 – Porter’s Five Forces Model06 – Ansoff Matrix

Contents

Boston Consulting Group MatrixThe Growth Share Matrix

THE GROWTH SHARE MATRIX

BOSTON CONSULTING GROUP MATRIX

QuestionMarks

CashCows

To be successful, a company should have a

portfolio of products with different growth rates and

different market shares.

”-- Bruce Henderson, BCG’s founder

GROWTH

QUESTION MARKS

CASH COW

High Low

GROWTH

QUESTION MARKS

CASH COW

High Low

GROWTH

Stars QuestionMarks

CashCows Dogs

HOLD BUILD

HARVEST DIVEST

Continue doing the same things to

maintain the status quo

Utilize the cash flow from a Star or

Cash Cow to reduce the burden of investment and maximize profits

Make further investments, either

to maintain the market share of Star, or make a

Question Mark into a Star

Sell off or withdraw Dogs so that HR

and financial capital can be

invested in Star and Question Mark

products and business units

QuestionMarks

CashCows

Insert any title here

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QuestionMarks

CashCows

Lorem ipsum dolor sit amet, has meis dicta eloquentiam at. Eius forensibus usu cu impetus tamquam te cum, eu eam

Cash Cows

Question Marks

LowSHARE

GROWTH

CASH GENERATION

QuestionMarks

CashCows

Many “businesses” require

far more cash input than

they can ever generate.

”Source: The Boston Consulting Group, “The Experience Curve – Reviewed”, from www.bcg.com/accessed at http://www.bcg.com/documents/file13904.pdf

SHARE -- Bruce Henderson, BCG’s founder

QuestionMarks

CashCows

A few businesses generate

far more cash than they

can profitably reinvest.

CASH GENERATION

QuestionMarks

CashCows

A few businesses are self-sufficient in cash flow. Over

time they will become much larger and also large

net generators of cash.

CASH GENERATION

QuestionMarks

CashCows

Most businesses, however, generate very little cash even

thought they use little. The reported earnings must be

reinvested and probably always will. These businesses

are “cash traps”.

CASH GENERATION

Lorem ipsum dolor sit amet, has meis dicta eloquentiam at. Eius forensibus usu cu impetus tamquam te cum, eu

HIGH MARKET SHARE

FAST GROWTH MARKET

LOW MARKET SHARE

SLOW SHRINKING MARKET

LOW MARKET SHARE

FAST GROWING MARKET

HIGH MARKET SHARE

SLOW MARKET GROWTH

BU #10

WORKSHEET 1

Cash Cows

Question Marks

High Low

LowHigh

Relative Market Share

Market Growth Risk Level

• Entry 1• Entry 2• Entry 3• Entry 4• Entry 5

CASH COWS

WORKSHEET 2 – 1/3

Relative Market Share

Market Growth Risk Level

QUESTION MARKS

WORKSHEET 2 – 2/3

WORKSHEET 2 – 3/3

Relative Market ShareHigh Low

Market

Growth

High STARS• Entry 1• Entry 2• Entry 3• Entry 4• Entry 5• Entry 6• Entry 7• Entry 8• Entry 9

QUESTION MARKS• Entry 1• Entry 2• Entry 3• Entry 4• Entry 5• Entry 6• Entry 7• Entry 8• Entry 9

Low CASH COWS• Entry 1• Entry 2• Entry 3• Entry 4• Entry 5• Entry 6• Entry 7• Entry 8• Entry 9

DOGS• Entry 1• Entry 2• Entry 3• Entry 4• Entry 5• Entry 6• Entry 7• Entry 8• Entry 9

Harvest

Invest

Protect

Divest

Protect

Harvest

Protect

Invest

General Electric / McKinsey MatrixThe Multifactor Portfolio Matrix

THE MULTIFACTOR PORTFOLIO MATRIX

GE / MCKINSEY MATRIX

BUSINESS STRENGTH

Selectivity / Earnings

Harvest / Divest

Invest / Grow

Strong

Medium Low

ESS This matrix provides a

systematic approach for the multi-business

corporation to prioritize investments among its

business units.

”Source: McKinsey, “Enduring Ideas: The GE–McKinsey nine-box matrix”, from www.mckinsey.com/accessed at http://www.mckinsey.com/insights/strategy/enduring_ideas_the_ge_and_mckinsey_nine-box_matrix

BUSINESS STRENGTH

Selectivity / Earnings

Harvest / Divest

Invest / Grow

Strong

Medium Low

MARKETATTRACTIVENESS

BUSINESS STRENGTH

Harvest

Invest

Protect

Divest

Protect

Harvest

Protect

Invest

Strong

Medium Low

BUSINESS STRENGTH

Harvest

Invest

Protect

Divest

Protect

Harvest

Protect

Invest

Strong

Medium Low

BUSINESS STRENGTH

Strong

Medium Low

BUSINESS STRENGTH

Protect

Harvest / Divest

Invest / Grow

Strong

Medium Low

BUSINESS STRENGTHHigh Low

Harvest

Invest

Protect

Divest

Protect

Harvest

Protect

Invest

WORKSHEET 1

BUSINESS STRENGTHHigh Low

WORKSHEET 2

Business StrengthHigh Medium Low

Market Attractiveness

High • Entry 1• Entry 2• Entry 3• Entry 4• Entry 5• Entry 6

• Entry 1• Entry 2• Entry 3• Entry 4• Entry 5• Entry 6

Medium • Entry 1• Entry 2• Entry 3• Entry 4• Entry 5• Entry 6

Low • Entry 1• Entry 2• Entry 3• Entry 4• Entry 5• Entry 6

SWOT / TOWS Analysis MatrixThe Competitive Analysis Matrix

THE COMPETITIVE ANALYSIS MATRIX

SWOT / TOWS ANALYSIS MATRIX

Strengths

Threats

Weaknesses

Opportunities

SWOT analysis entails a distillation of the findings of an internal and

external audit that draws attention, from a strategic perspective, to the critical organizational strengths and weaknesses and the opportunities and threats facing the organization

”-- Kotler and Armstrong, 2011Positive NegativeEx

Positive Negative

STRENGTHS

THREATS

WEAKNESSES

OPPORTUNITIES

Positive Negative

Strengths Weaknesses

Opportunities Threats

Positive Negative

40Positive Negative

Positive Negative

Characteristics of the business or

project that give it an advantage

over others

Elements that the project could

exploit to its advantage

Characteristics that place the

business or project at a

disadvantage relative to others

Elements in the environment that

could cause trouble for the

business or project

Positive Negative

• What advantages do we have?• What do we do better than anyone else?• What unique or lowest-cost resources can we

draw upon that others can't?• What do people in our market see as our

strengths?• What factors mean that you "get the sale"?• What connections and alliances do we have?

• What good opportunities can we spot?• What interesting trends are we aware of?• What weaknesses in our competitors can we

attacks?• Useful opportunities can come from such

things as: Changes in technology and markets on

both a broad and narrow scale Changes in government policy related to

your field. Changes in social patterns, population

profiles, lifestyle changes, etc.

• What could we improve?• What should we avoid?• What are people in our market likely to see as

weaknesses?• Is our intellectual property outdated?• What connections and alliances should we

have, but don’t?

• What obstacles do we face?• What are our competitors doing / could do to

hurt us?• Are quality standards or specifications for our

job, products or services changing?• Is changing technology threatening our

position?• Do we have bad debt or cash-flow problems?• Could any of our weaknesses seriously

threaten our business?

Positive Negative

Positive NegativeEx

External

Internal

Opportunities

Strengths

Positive

Threats

Weaknesses

Negative

Strengthsinternal capabilities thatmay help the company

reach its objectives.

”Positive NegativeEx

-- Kotler and Armstrong, 2011

Internal limitations that may interfere with the

company’s ability to achieve its objectives.

External factors that the

company may be able to

exploit to its advantage.

Current and emerging

external factors that may

challenge the company’s

performance.

Lorem ipsum dolor sit amet, has meis dicta eloquentiam at. Eius forensibuscu impetus tamquam te cum, eu eam

Positive Negative

WORKSHEET

Positive Negative

Internal• Entry 1• Entry 2• Entry 3• Entry 4• Entry 5• Entry 6• Entry 7• Entry 8• Entry 9

• Entry 1• Entry 2• Entry 3• Entry 4• Entry 5• Entry 6• Entry 7• Entry 8• Entry 9

External• Entry 1• Entry 2• Entry 3• Entry 4• Entry 5• Entry 6• Entry 7• Entry 8• Entry 9

• Entry 1• Entry 2• Entry 3• Entry 4• Entry 5• Entry 6• Entry 7• Entry 8• Entry 9

Porter’s Generic Competitive StrategiesThe Competitive Advantage Matrix

THE COMPETITIVE ADVANTAGE MATRIX (ORIGINAL MATRIX)

PORTER’S GENERIC COMPETITIVE STRATEGIES

Differentiation Overall Cost Leadership

The generic strategies are approaches to outperforming

competitors in the industry; in some industries structure will mean that all firms can earn high returns, whereas

in others, success with one of the generic strategies may be necessary

just to obtain acceptable returns in an absolute sense.

”-- Michael E. Porter, 1980Uniqueness Perceived by the Customer

Low Cost PositionPa

Strategic AdvantageSt

Differentiation Overall Cost Leadership

THE COMPETITIVE ADVANTAGE MATRIX (ORIGINAL MATRIX)

The firm failing to develop its strategy in at least one of the three directions - a firm that is "stuck in the middle" - is in an extremely poor strategic

situation.

”-- Michael E. Porter, 1980

Stuck in the Middle

Uniqueness Perceived by the Customer

Low Cost PositionPa

THE COMPETITIVE ADVANTAGE MATRIX

Cost Leadership

Differentiation Focus

Differentiation

Cost Focus

Low Cost DifferentiationN

petiti

Source of Competitive Advantage

The generic strategies are approaches to outperforming

competitors in the industry; in some industries structure will mean that all firms can earn high returns, whereas

in others, success with one of the generic strategies may be necessary

just to obtain acceptable returns in an absolute sense.

Low Cost Differentiation

petiti

59Low Cost Differentiation

petiti

DIFFERENTIATIONCOST LEADERSHIP

COST FOCUS DIFFERENTIATION FOCUS

petiti

Cost Leadership Differentiation

Cost Focus Differentiation Focus

petiti

Narrow

Cost Focus

Cost Leadership

Low Cost

Differentiation

DifferentiationSOURCE

petiti

Lower costs across a broad

range of product offerings

Competitive cost leadership

in a small cluster of target

segments

Distinctly recognizable

positions across a whole range

of offerings

Unique and distinct position

in specific target

segments

petiti

Source: LaChapelle, Neil (2008) “The Structure of Concern: A Challenge for Thinkers”

Cost Leadership

Differentiation

Cost Focus

petiti

Cost Leadership

Differentiation

Cost Focus

petiti

Cost leadership requires aggressive construction of efficient-scale facilities, vigorous pursuit of cost reductions from

experience, tight cost and overhead control, avoidance of marginal customer accounts, and cost minimization in areas

like R&D, service, sales force, advertising, and so on.

Low Cost PositionPa

Approaches to differentiating can take many forms : design or

brand image, technology, features ; customer

service, dealer network, or other dimensions.

Low Cost PositionPa

The entire focus strategy is built around serving a

particular target very well, and each functional policy is developed with this in

Low Cost PositionPa

The firm failing to develop its strategy in at least one of the three directions-a firm

that is "stuck in the middle" - is in an extremely poor

strategic situation.

Stuck in the Middle

Low Cost PositionPa

petiti

Industry Competitors

Rivalry Among Existing Firms

Suppliers Buyers

Potential

Entrants

Substitutes

Porter’s Five Forces ModelEvaluating The Environment

FORCES DRIVING INDUSTRY COMPETITION – THE ORIGINAL MODEL

PORTER’S FIVE FORCES MODEL

Source: Porter, M.E., "Competitive Strategy" (1980)

Suppliers BuyersIndustry

Competitors

Substitutes

Potential Entrants

Threat of new entrants

Bargaining power of buyers

Threat of substitute products or services

Bargaining power of suppliers

FORCES DRIVING INDUSTRY COMPETITION – THE ORIGINAL MODEL

Competitors

Substitutes

Potential Entrants

FORCES DRIVING INDUSTRY COMPETITION

Suppliers Buyers

Potential Entrants

Substitutes

Suppliers Buyers

Potential Entrants

Substitutes

Threat

of substi

products or s

ervice

Threat

of new

entrants

Bargaining power

of buyers

Bargaining power

of suppliers

Industry Rivalry

Suppliers Buyers

Potential Entrants

Substitutes

Industry Rivalry

Suppliers Buyers

Potential Entrants

Substitutes

Competitors

Substitutes

Potential Entrants

The collective strength of these forces determines the

ultimate profit potential in the industry, where profit potential

is measured in terms of long run return on invested capital.

The collective strength of these forces determines the

ultimate profit potential in the industry, where profit potential

is measured in terms of long run return on invested capital.

Suppliers Buyers

Potential Entrants

Substitutes

-- Michael E. Porter, 1980

An assessment of how

easy it is for suppliers to

drive up prices

Where close substitute products exist in a

market, it increases the likelihood of customers

switching to alternatives in response to price

increases

Profitable markets

attract new entrants,

which erodes

profitability

An assessment of how

easy it is for buyers to

drive prices down

Suppliers Buyers

Potential Entrants

Substitutes

Suppliers Buyers

Potential Entrants

Substitutes

Suppliers Buyers

Potential Entrants

Substitutes

New entrants to an industry bring new

capacity, the desire to gain market share, and often

substantial resources.

Suppliers Buyers

Potential Entrants

Substitutes

Buyers compete with the industry by forcing down

prices, bargaining for higher quality or more services, and playing competitors against

each other -all at the expense of industry profitability.

Suppliers Buyers

Potential Entrants

Substitutes

Substitutes limit the potential returns of an

industry by placing a ceiling on the prices firms in the

industry can profitably charge.

Suppliers Buyers

Potential Entrants

Substitutes

Suppliers can exert bargaining power over

participants in an industry by threatening to raise

prices or reduce the quality of purchased goods and

services.

Suppliers Buyers

Potential Entrants

Substitutes

Rivalry among existing competitors takes the familiar form of jockeying for position -

using tactics like price competition, advertising

battles, product introductions, and increased customer

service or warranties.

Suppliers Buyers

Potential Entrants

Substitutes

WORKSHEET 1

PORTER’S FIVE FORCES

COMPETITIVE RIVALRY

THREAT OF NEW ENTRY

SUPPLIER POWER

BUYER POWER

THREAT OF SUBSTITUTION

WORKSHEET 2

THREAT OF NEW ENTRY – Low / Medium / High• Entry 1• Entry 2• Entry 3• Entry 4• Entry 5

COMPETITIVE RIVALRY – Low / Medium / High• Entry 1• Entry 2• Entry 3• Entry 4• Entry 5

SUPPLIER POWER – Low / Medium / High

THREAT OF SUBSTITUTION – Low / Medium / High• Entry 1• Entry 2• Entry 3• Entry 4• Entry 5

BUYER POWER – Low / Medium / High• Entry 1• Entry 2• Entry 3• Entry 4• Entry 5

Ability to control Impact Level Risk Level

COMPETITIVE RIVALRY

WORKSHEET 3 – 1/3

THREAT OF NEW ENTRY

THREAT OF SUBSTITUTION

WORKSHEET 3 – 2/3

SUPPLIER POWER

BUYER POWER

WORKSHEET 3 – 3/3

Market Penetration

Diversification

Product Development

Market Development

Ansoff MatrixThe Product-Market Growth Matrix

THE PRODUCT-MARKET GROWTH MATRIX

ANSOFF MATRIX

Market Penetration

Diversification

Product Development

Market Development

Existing NewN

isting

Products

There are four basic growth alternatives open to a business. It can

grow through increased market penetration, through market

development, through product development, or through

diversification.

”-- H. Igor Ansoff, 1957

ANSOFF MATRIX

Market Penetration

Diversification

Product Development

Market Development

Existing New

Existi

Products

ANSOFF MATRIX

Market Penetration

Diversification

Product Development

Market Development

Existing New

Existi

Products

ANSOFF MATRIX

Existing New

Existi

Products

Market Penetration

Product Development

Market Development Diversification

Low Risk

High Risk Medium Risk

Moderate Risk

ANSOFF MATRIX

Existing

Market Development

Market Penetration

Existing

Diversification

Product Development

NewPRODUCTS

MARKET

Low Risk

High Risk Medium Risk

Moderate Risk

ANSOFF MATRIX

Trying to take a greater share of

an existing market with an existing product

Finding or creating new markets for

existing products

Extending existing

products with existing markets

Creating new product lines or ranges for sale in new markets

Source: LaChapelle, Neil (2008) “The Structure of Concern: A Challenge for Thinkers”

Market Penetration

Diversification

Product Development

Market Development

Existing New

Existi

Products

ANSOFF MATRIX

Market Penetration

Diversification

Product Development

Market Development

Existing NewN

isting

Products

ANSOFF MATRIX

Market Penetration

Diversification

Product Development

Market Development

Existing NewN

isting

Products

ANSOFF MATRIX

Market penetration is an effort to increase company sales without

departing from an original product-market strategy. The company seeks to improve business performance either

by increasing the volume of sales to its present customers or by finding new

customers for present products.

Market Penetration

Diversification

Product Development

Market Development

Existing NewN

isting

Products

-- H. Igor Ansoff, 1957

ANSOFF MATRIX

A product development strategy, retains the present

mission and develops products that have new and different characteristics such as will

improve the performance of the mission.

Market Penetration

Diversification

Product Development

Market Development

Existing NewN

isting

Products

ANSOFF MATRIX

Market development is a strategy in which the company attempts to adapt its present product line (generally with

some modification in the product characteristics) to new

missions.

Market Penetration

Diversification

Product Development

Market Development

Existing NewN

isting

Products

ANSOFF MATRIX

Diversification is the final alternative. It calls for a

simultaneous departure from the present product line and the present market structure.

Market Penetration

Diversification

Product Development

Market Development

Existing NewN

isting

Products

WORKSHEET 1

ANSOFF MATRIX

ProductsExisting New

Market

Existing MARKET PENETRATION• Entry 1• Entry 2• Entry 3• Entry 4• Entry 5• Entry 6• Entry 7• Entry 8• Entry 9

PRODUCT DEVELOPMENT• Entry 1• Entry 2• Entry 3• Entry 4• Entry 5• Entry 6• Entry 7• Entry 8• Entry 9

New MARKET DEVELOPMENT• Entry 1• Entry 2• Entry 3• Entry 4• Entry 5• Entry 6• Entry 7• Entry 8• Entry 9

DIVERSIFICATION• Entry 1• Entry 2• Entry 3• Entry 4• Entry 5• Entry 6• Entry 7• Entry 8• Entry 9

EXISTING PRODUCTS Risk Level InvestmentMARKET PENETRATION

MARKET DEVELOPMENT

WORKSHEET 2 – 1/2

ANSOFF MATRIX

NEW PRODUCTS Risk Level InvestmentPRODUCT DEVELOPMENT

DIVERSIFICATION

WORKSHEET 2 – 2/2

ANSOFF MATRIX

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