Session13: Portfolio Strategy and Unique Selling Propositions Dr. Mark H. Mortensen and 212 Tues &Thurs 2:00 to 3:15 3:30 to 4:45 Manning School of Business

Mortensen Consulting Group Today 1. Go over mid-term quiz 2. Discussion on portfolio strategy 3. Group workshop on portfolio strategy 4. Discussion on unique selling propositions 5. Assignment for next class

Mortensen Consulting Group Growth Organic – grow the business  Concentration  Diversification Inorganic – acquire new businesses

Mortensen Consulting Group Concentration Strategies 8-4

Mortensen Consulting Group Concentration Strategies 8-5

Mortensen Consulting Group Concentration Strategies 8-6

Mortensen Consulting Group Vertical Integration Strategies Vertical integration: When a firm gets involved in new portions of the value chain  Can be very attractive when a firm’s suppliers or buyers have too much power over the firm and are becoming increasingly profitable at the firm’s expense  By entering the domain of a supplier or a buyer, executives can reduce or eliminate the leverage that the supplier or buyer has over the firm  Can create risks  Can create complacency 8-7

Mortensen Consulting Group Vertical Integration Strategies Backward vertical integration: A strategy that involves a firm entering a supplier’s business  Used when executives are concerned that a supplier has too much power over their firms Forward vertical integration: A strategy that involves a firm entering a buyer’s business  Useful for neutralizing the effect of powerful buyers 8-8

Mortensen Consulting Group Diversification Strategies Diversification strategies: Involve a firm entering entirely new industries  Requires moving into new value chains Three tests for diversification:  How attractive is the industry that a firm is considering entering?  How much will it cost to enter the industry?  Will the new unit and the firm be better off? 8-9

Mortensen Consulting Group Diversification Strategies Related diversification: When a firm moves into a new industry that has important similarities with the firm’s existing industry or industries Core competency: A skill set that is difficult for competitors to imitate, can be leveraged in different businesses, and contributes to the benefits enjoyed by customers within each business 8-10

Mortensen Consulting Group Diversification Strategies Unrelated diversification: When a firm enters an industry that lacks any important similarities with the firm’s existing industry or industries  Most unrelated diversification efforts do not have happy endings 8-11

Mortensen Consulting Group Strategies for Getting Smaller Retrenchment: Reducing the size of part of a firm’s operations, often through laying off employees  Firms following a retrenchment strategy shrink one or more of their business units  Firms using this strategy hope to make just a small retreat rather than losing a battle for survival 8-12

Mortensen Consulting Group Strategies for Getting Smaller Divestment: Selling off part of a firm’s operations  It reverses a forward vertical integration strategy Spin-off: Creating a new company whose stock is owned by investors out of a piece of a bigger company 8-13

Mortensen Consulting Group Portfolio Planning and Corporate Level Strategy Portfolio planning: A process that helps executives make decisions involving their firms’ various industries  Offers suggestions about what to do within each industry, and provides ideas for how to allocate resources across industries.  It first gained widespread attention in the 1970s and it remains a popular tool among executives today 8-14

Mortensen Consulting Group Portfolio Planning and Corporate Level Strategy The Boston Consulting Group (BCG) matrix  Best-known approach to portfolio planning  Using the matrix requires a firm’s businesses to be categorized as high or low along two dimensions: Its share of the market The growth rate of its industry 8-15

Mortensen Consulting Group Managing a portfolio of products

Mortensen Consulting Group Workshop on Product Portfolio Come up with some examples of products that occupy the various positions on the matrix. Discuss in your groups how you would manage the different products in the matrix.

Mortensen Consulting Group Unique selling proposition Step 1: Market  Who will buy your product? Step 2: Need  What simple need does your product satisfy? Step 3: Pain (starts to differentiate your product)  What "pain" does your product relieve for the buyer? Step 4: Solution  How does your product relieve that pain and therefore separate itself from the competition that still inflicts the pain?

Mortensen Consulting Group Product Differentiation Sometimes, you are not unique. What then? Understand the Characteristics that Customers Value: First, brainstorm what customers value about your product or services and those of your competitors. Move beyond the basics common to all suppliers in the industry, and look at the criteria customers use to decide which product or service to buy. As with all brainstorming, by involving knowledgeable people in the process, you'll improve the range of characteristics you'll identify. So talk to sales people, customer service teams and, most importantly, talk to customers themselves. Rank Yourself and Your Competitors by These Criteria: Now identify your top competitors. Being as objective as you can, score yourself and each of your competitors out of 10 for each characteristic. Where possible, base your scores on objective data. Where you can't, do your best to see things from a customer's perspective and make your best guess. Identify Where You Rank Well: Now plot these points on a graph. This helps you spot different competitors' strengths and weaknesses. And from this, develop a simple, easily communicated statement of what differentiates you from your competitors.

Mortensen Consulting Group For Thursday Look up “game theory” on line Think through the “Prisoners’ Dilemma” game

Mortensen Consulting Group For Next Tuesday Use the Apple Case Study that you bought. Has Apple finally solved its long-standing problems a. With respect to the Macintosh business? b. With respect to its broader strategic position?  Going forward, what should Apple do?

Mortensen Consulting Group Strategic Management – Spring 2014