Strategic Choice Growth options
Porters
Generic
Strategies
Ansoff’s
Matrix
Merger
Acquisitions Licence
Franchise
Joint Ventures
Strategic Alliances
Divestment
Sub contracting
Contract Manufacture.
Outsourcing
MBO etc.
Suitable
Appropriate
Feasibility
Financial
Decisional
Models• Pro forma
accounts
• Capital budgeting
• Capital
Investment
appraisal
• NPV etc.
• Decision trees
• (EMV) Expected
Monetary Values
Basis Means Options
Generation of Options Evaluation of
optionsSelection of Strategy
Own and
control
Shared
ownership
and control
Have use of
William Meaney MBA BSc. ACMA 2
Learning outcomes
After completing this topic you should be able to:
• Understand the purpose of strategic choice and the elements required to make suitable strategic choices
• Know where strategic choice fits on the JSW model
• Understand the different types of growth
• Understand and be able to apply Ansoffs Product Market Growth matrix
• Understand the concept of ‘Gap Analysis’ and its relationship with Ansoffs Matrix.
William Meaney MBA BSc. ACMA 3
Basis Means Options
Value
Chain
Generation of Options
Strategic Choice
Cost
Leader
Diff.
Focus
Diff.
Cost
Focus
Mkt.
PenNPD
Mkt
Dev.Div
Related Unrelated
Merger
Takeover
Licence
Franchise
Joint venture
Strategic
alliance
MBO
Divestment
Outsource etc.
Evaluation
of
Options
Suitable
Appropriate
Feasible
‘Strategic fit’
Selection of Strategy
Financial decisional
Models Pro forma income
statements
Budgeting
Capital investment
appraisal
Breakeven analysis
Sensitivity analysis
EMV
Etc.
William Meaney MBA BSc. ACMA 9
Steps in the strategic process
.Where we are now Where we want to be
Environment
Resources
2015
2020
Strategic Goals ‘BHAGS’
• Do more
• Do better
• New activities
• Strengthen position
• Improve facilities
• Any other as appropriate
A
N
A
L
Y
S
I
S
SWOT
C
h
o
i
c
e
A
c
t
i
o
n
William Meaney MBA BSc. ACMA 11
12
ABC
Ltd
2015
ABC Ltd 2020• Increase market share to 40%
• Have 30% of sales from new
products
• Have implemented CRM system in
all stores
Environment
Resources
The purpose of strategy is to enhance the long term profitability of an organisation.
Profit
€15m
Profit
€35mProfit
€18m
2017 2019
Profit
€28m
William Meaney MBA BSc. ACMA
Achieving growth – key component of strategic choice
Internal/Organic growth
• Single product, market, technology
• Based on known skills and capabilities
• Low risk (possibly low growth also!)
• Controlled growth
• Financed internally
• Builds on existing strengths
• Involves no formal arrangements with other
organisations
• Market or product development
• Innovation (new product development)
• Combination of above
External growth
• Acquisition/ Take-over
• Merger
• Joint venture
• Licensing
• Franchising
• Strategic alliances
William Meaney MBA BSc. ACMA 18
Ansoff’s Product market growth matrix – Strategic options
Present
MARKETS
New
New Product development Market Penetration
Do nothing
Consolidation
Withdrawal
Demerger
Market Development DiversificationAcquisition
Franchise
Joint ventures
Products/Services
Present New
O O
O E
William Meaney MBA BSc. ACMA 19
Ansoff’s Product market growth matrix – application
Present
MARKETS
New
New Product development
• Stages as per Booz Allen and
Hamilton model
Market Penetration• Reduce price
• Advertising
• Sales promotion
• Free trial
• Branding
• Build customer loyalty
Market Development• New Segments
• New channels of distribution
• New capabilities
• New markets regionally,
nationally, internationally
• New methods - internet
Diversification• Acquisition/Merger
• Licence
• Franchise
• Joint ventures
• Strategic Alliances
Products/Services
Present New
William Meaney MBA BSc. ACMA 20
Ansoff’s Product market growth matrix – Options
Present
MARKETS
New
New Product developmentMarket Penetration• Reduce price
• Advertising
• Sales promotion
• Free trial
• Branding
• Build customer loyalty
Market Development• New Segments
• New channels of distribution
• New markets regionally,
nationally, internationally
• New methods – internet
Diversification• Acquisition/Merger
• Licence
• Franchise
• Joint ventures
• Strategic Alliances
Products/Services
Present New Booz
Allen
Hamilton
William Meaney MBA BSc. ACMA 21
Ansoff’s Product market growth matrix – Risk?
Present
MARKETS
New
New Product development
Present products to new
customers
Market Penetration
Present products to
existing customer
Market Development
Present products to
new markets
Diversification
New products and new markets
Products/Services
Present New
2
648
16
William Meaney MBA BSc. ACMA 22
Ansoff’s Product market growth matrix – Cenit College?
Present
MARKETS
New
New Product developmentMarket Penetration
Market Development Diversification
Products/Services
Present New
William Meaney MBA BSc. ACMA 25
Ansoff’s Product market growth matrix – Your employer?
Present
MARKETS
New
New Product developmentMarket Penetration
Market Development Diversification
Products/Services
Present New
William Meaney MBA BSc. ACMA 26
Gap analysis - Ansoff’s matrix in drag!
Time (years)
Developments :existing products/services
Market Penetration
Market
development
NPD
Diversification
unrelated or
related
Sales
or
Profits
ROI
£ %
Current strategy with no changes
P
l
a
n
n
i
n
g
G
a
p
Risk Return
William Meaney MBA BSc. ACMA 27
How will this be helpful for your exam?
• Understand the importance of growth in sales, profits and market share as a key to strategic success
• In Q1 a common feature of the exam is to develop a future strategy for the organisation in question – Ansoffs matrix provides the key to this process
• Being able to identify, recommend and set out the appropriate actions to achieve the required outcomes of future strategy is a key exam skill
• Understand the concept of gap analysis and how it is similar to Ansoffs matrix.
William Meaney MBA BSc. ACMA 28