LEARNING MODULE – WEEK 5
SUBJECT: PRINCIPLES OF MARKETING
UNIT 2 : COMPANY AND MARKETING STRATEGY
PARTNERING TO BUILD CUSTOMER ENGAGEMENT,
VALUE, AND RELATIONSHIPS
Lesson 2: Designing the Business Portfolio (Step 3 in Corporate Strategic Planning Process)
Corporate Strategic Planning Process:
Step 1 - Defining its overall purpose and mission.
Step 2 - This mission is then turned into detailed supporting objectives that guide the entire company.
Step 3 - Company decides what portfolio of businesses and products is best for the company and how
much support to give each one.
Step 4 - In turn, each business and product develops detailed marketing and other departmental
plans that support the company-wide plan.
Guided by the company’s mission statement and objectives, management now must plan its
business portfolio.
I. Business Portfolio - the collection of businesses and products that make up the company.
The best business portfolio is the one that best fits the company’s strengths and weaknesses to
opportunities in the environment.
Most large companies have complex portfolios of businesses and brands. Strategic and
marketing planning for such business portfolios can be a daunting but critical task.
Example of Business Portfolio of Ayala:
II. TWO (2) STEPS IN BUSINESS PORTFOLIO PLANNING
Step 1: Analyzing the Current Business Portfolio
o Portfolio analysis- The process by which management evaluates the products and
businesses that make up the company.
major activity in strategic planning
the company will want to put strong resources into its more profitable
businesses and phase down or drop its weaker ones
(a) Management identify the key businesses that make up the company, called
Strategic Business Units (SBUs). An SBU can be a company division, a product line
within a division, or sometimes a single product or brand.
(b) Then, assesses the attractiveness of its various SBUs and decides how much support
each deserves.
When designing a business portfolio, it’s a good idea to add and support
products and businesses that fit closely with the firm’s core philosophy and
competencies.
The purpose of strategic planning is to find ways in which the company can best
use its strengths to take advantage of attractive opportunities in the
environment.
To assess the attractiveness of its various SBUs and decides how much support
each deserves management uses: Standard Portfolio Analysis Method : The
Boston Consulting Group (BCG) Approach: Growth-share Matrix - A portfolio-
planning method that evaluates a company’s SBUs in terms of market growth
rate and relative market share
Figure: The BCG Approach : Growth-share Matrix
• Market growth rate provides a measure of market attractiveness
• Relative market share serves as a measure of company strength in the market
The growth-share matrix defines four types of SBUs:
1. Stars. Stars are high-growth, high-share businesses or products. They often need heavy
investments to finance their rapid growth. Eventually their growth will slow down, and they will turn
into cash cows.
2. Cash cows. Cash cows are low-growth, high-share businesses or products. These established
and successful SBUs need less investment to hold their market share. Thus, they produce a lot of
the cash that the company uses to pay its bills and support other SBUs that need investment.
3. Question marks. Question marks are low-share business units in high-growth markets. They
require a lot of cash to hold their share, let alone increase it. Management has to think hard about
which question marks it should try to build into stars and which should be phased out.
4. Dogs. Dogs are low-growth, low-share businesses and products. They may generate enough
cash to maintain themselves but do not promise to be large sources of cash.
Problems with Matrix Approaches:
• The BCG and other formal methods revolutionized strategic planning. However they can be
difficult, time consuming, and costly to implement.
- Management may find it difficult to define SBUs and measure market share and growth.
• These approaches focus on classifying current businesses but provide little advice for future
planning.
• Because of such problems:
many companies have dropped formal matrix methods in favor of more customized approaches
that better suit their specific situations.
- In this digital age, managers have rich and current data at their fingertips and can adapt
their plans quickly to meet changing conditions and events in their markets.
Step 2: Developing Strategies for Growth and Downsizing
• Designing the business portfolio involves finding businesses and products the company should
consider in the future.
• Companies need growth if they are to compete more effectively, satisfy their stakeholders, and
attract top talent. At the same time, a firm must be careful not to make growth itself an
objective. The company’s objective must be to manage “profitable growth.”
Product/market expansion grid - device for identifying growth Opportunities
Market penetration
Company growth by increasing sales of current products to current market segments without
changing the product.
Market development
Company growth by identifying and developing new market segments for
current company products.
Product development
Company growth by offering modified or new products to current market segments.
Diversification
Company growth through starting up or acquiring businesses outside the company’s current products
and markets.
