Evaluating Strategies of

Diversified Companies

Evaluation Steps
1.
2.
3.
4.
5.
6.
7.
8.

Identify current strategy

Evaluate long-term industry attractiveness
Evaluate competitive strengths of business units
Identify cross-business strategic fits
Determine whether strengths match requirements
Rank business units on performance and
prospects
Decide prospects for resource allocation
Craft strategy to improve corporate performance

Present Corporate Strategy

The extent to which the firm is diversified
Pursuing related or unrelated diversification
Scope- domestic to global
Moves to add new businesses
Moves to divest businesses
Recent moves to boost key businesses
Management efforts to capture synergy
Percentage of resources allocated to each
unit

Industry Attractiveness
Evaluate the industries in which
the firm is invested from three
angles
Each industry in and of itself
In comparison with other industries in
the portfolio
The portfolio of industries as a whole

Industry Attractiveness
Market size and growth rate
Intensity of competition
Opportunities and threats
Seasonal and cyclical factors
Resource requirements
Presence of strategic fits
Industry profitability
Social, political, regulatory and environmental
factors
Uncertainty and business risk

Competitive Strengths of
Business
Units
Relative market share
Costs relative to competitors
Ability to match or beat rivals on product attributes
Ability to exercise bargaining leverage
Caliber of partnerships and alliances
Ability to develop synergy
Technology and innovation capabilities
How well business matches industrys KSF
Brand name recognition and reputation
Profitability relative to competitors

BCG Matrix
A method of evaluating businesses relative to
the growth rate of their market and the
organizations share of the market
The matrix classifies the types of businesses
that a diversified organization can engage as
Dogs have small market shares and no growth prospects
Cash cows have large shares of mature markets
Question marks have small market shares in quickly
growing markets
Stars have large shares of rapidly growing markets

BCG Matrix

GE Business Screen
A method of evaluating business in a
diversified portfolio along two dimensions,
each of which contains multiple factors
Industry attractiveness
Competitive position (strength) of each firm in
the portfolio

In general, the more attractive the industry

and the more competitive a business is,
the more resources an organization should
invest in that business

GE Business Screen