Product Life Cycle

and the Boston Matrix

• By
• K. P
 Product Life Cycles

• Product Life Cycle – shows the stages that

products go through from development to
withdrawal
from the market
• Product Portfolio – the range
of products a company has in development or
available for consumers at any one time
• Managing product portfolio
is important for cash flow
 Product Life Cycles

• Product Life Cycle (PLC):

– Each product may have a different life cycle
– PLC determines revenue earned
– Contributes to strategic marketing planning
– May help the firm to identify when
a product needs support, redesign,
reinvigorating, withdrawal, etc.
– May help in new product development planning
– May help in forecasting and managing cash flow
 Product Life Cycles

• The Stages of the Product Life Cycle:

– Development
– Introduction/Launch
– Growth
– Maturity
– Saturation
– Decline
– Withdrawal
 Product Life Cycles

• The Development Stage:

• Initial Ideas – possibly large number
• May come from any of the following –
– Market research – identifies gaps in the market
– Monitoring competitors
– Planned research and development (R&D)
– Luck or intuition – stumble across ideas?
– Creative thinking – inventions, hunches?
– Futures thinking – what will people be using/wanting/needing
5,10,20 years hence?
 Product Life Cycles

• Product Development: Stages

– New ideas/possible inventions
– Market analysis – is it wanted? Can it be produced at a
profit? Who is it likely
to be aimed at?
– Product Development and refinement
– Test Marketing – possibly local/regional
– Analysis of test marketing results and amendment of
product/production process
– Preparations for launch – publicity, marketing campaign
 Product Life Cycles

• Introduction/Launch:
– Advertising and promotion campaigns
– Target campaign at specific audience?
– Monitor initial sales
– Maximise publicity
– High cost/low sales
– Length of time – type of product
 Product Life Cycles

• Growth:
– Increased consumer awareness
– Sales rise
– Revenues increase
– Costs - fixed costs/variable costs, profits may
be made
– Monitor market – competitors reaction?
 Product Life Cycles

• Maturity:
– Sales reach peak
– Cost of supporting the product declines
– Ratio of revenue to cost high
– Sales growth likely to be low
– Market share may be high
– Competition likely to be greater
– Price elasticity of demand?
– Monitor market – changes/amendments/new
strategies?
 Product Life Cycles

• Saturation:
• New entrants likely to mean market is ‘flooded’
• Necessity to develop new strategies becomes more pressing:
– Searching out new markets:
• Linking to changing fashions
• Seeking new or exploiting market segments
• Linking to joint ventures – media/music, etc.
– Developing new uses
– Focus on adapting the product
– Re-packaging or format
– Improving the standard or quality
– Developing the product range
 Product Life Cycles

• Decline and Withdrawal:

– Product outlives/outgrows its usefulness/value
– Fashions change
– Technology changes
– Sales decline
– Cost of supporting starts to rise too far
– Decision to withdraw may be dependent on
availability of new products and whether
fashions/trends will come around again?
 Product Life Cycles

Sales
Development Introduction Growth Maturity Saturation Decline

Time
 Product Life Cycles
Sales

Effects of Extension
Strategies

Time
 Product Life Cycles
Sales/Profits PLC and Profits

PLC

Profits

Time
Losses
Break Even
 The Boston Matrix

• The Boston Matrix:

– A means of analysing the product portfolio
and informing decision making about possible
marketing strategies
– Developed by the Boston Consulting Group –
a business strategy and marketing
consultancy in 1968
– Links growth rate, market share and cash flow
 The Boston Matrix

• Classifies Products into four simple

categories:
• Stars – products in markets experiencing
high growth rates with a high or increasing
share of the market
- Potential for high revenue growth
The Boston Matrix

• Cash Cows:
– High market share
– Low growth markets –
maturity stage of PLC
– Low cost support
– High cash revenue –
positive cash flows
 The Boston Matrix

• Dogs:
– Products in a low growth
market
– Have low or declining
market share (decline
stage of PLC)
– Associated with negative
cash flow
– May require large sums of
money to support
Is your product starting to
embarrass your company?
 The Boston Matrix

• Problem Child:
- Products having a low
market share in a high
growth market
- Need money spent to
develop them
- May produce negative
cash flow
- Potential for the future?
Problem children – worth spending
good money on?
 The Boston Matrix
Market Growth
Problem Children
High
Stars

Dogs Cash Cows

Market Share
Low High
 The Boston Matrix

• Implications:
• Dogs:
– Are they worth persevering with?
– How much are they costing?
– Could they be revived in some way?
– How much would it cost to continue
to support such products?
– How much would it cost to remove
from the market?
 The Boston Matrix

• Implications:
• Problem Children:
– What are the chances of these products
securing a hold
in the market?
– How much will it cost to promote them to a
stronger position?
– Is it worth it?
 The Boston Matrix

• Implications:
• Stars:
– Huge potential
– May have been expensive to develop
– Worth spending money to promote
– Consider the extent of their product life cycle in
decision making
 The Boston Matrix

• Implications:
• Cash Cows:
– Cheap to promote
– Generate large amounts of cash –
use for further R&D?
– Costs of developing and promoting
have largely gone
– Need to monitor their performance –
the long term?
– At the maturity stage of the PLC?
 The Product Life Cycle and the Boston
Matrix
Importance of
Sales (3)
(2) Cash
Cash
maintaining from
a ‘C’
from ‘B’
(1)
The ‘A’ is at
product
used
used
balance
maturityto support
to of
support
products
stage –
portfolio
growth
in the –
portfoliofour
of ‘D’ and
at
(1) (2) (3) ‘C’
cashthrough
cow. growth
products
possibly
different
Generates in
stages the
tofunds
finance
of
for
stage and to
portfolio
the PLC
extension – Boston
developmentstrategyof
launch ‘D’. ‘A’ now
Matrix
for
‘D’ ‘B’?helps with the
possibly a dog?
analysis

B
A C

Time
DEALING WITH COMPETITION
Kotler on
Marketing

Poor firms ignore

their competitors;
average firms copy
their competitors;
winning firms lead
their competitors.

1-28
 Chapter Objectives
– Who the primary competitors are
– How to ascertain their strategies, objectives,
strengths and weaknesses, and reaction patterns
– How to design a competitive intelligence system
– Whether to position as market leader, challenger, follower or
nicher
– How to balance a customer versus
competitor orientation

1-29
 Competitive Forces
Figure 9-1: Porter’s Five Forces Determining Segment
Attractiveness

Threat of:
1. Intense segment
rivalry
2. New entrants
3. Substitute products
4. Buyers’ growing
bargaining power
5. Suppliers’ growing
bargaining
power

1-30
 Identifying Competitors

• Industry Concept of Competition

– Number of Sellers and Degree of Differentiation
• Pure monopoly –

• Oligopoly –
– Pure oligopoly – few firms, same products
– Differentiated oligopoly – few firms, different products e.g. cars,

• Monopolistic competition –

• Pure competition

1-31
 Identifying Competitors

– Entry, Mobility and Exit Barriers

– Cost Structure of different companies

– Degree of Globalization

1-32
• Market Concept of Competition

– Competitors are companies that satisfy the

same customer need in a given market
 Identifying Competitors

• Direct Competitors
– Offer similar products and services to the same
customers.

• Indirect Competitors
– Sell different products to the same industry.

1-34
 Figure 9-3: Competitor Map – Eastman Kodak

Customer
Activities

1-35
 Analyzing Competitors

• Strategies
– Strategic Group is a group of firms following the
same strategy in a given target market.

1-36
 Analyzing Competitors

• Objectives –Figure
what9-5:
areAthe
Competitor’s Expansion Plans
competitors’
objectives?

1-37
 Analyzing Competitors

• Strengths and Weaknesses

– A firm will occupy one of six competitive positions:
• Dominant
• Strong/Independent
• Favorable – opportunity to improve position
• Tenable – can be maintained or defended against
possible attack
• Weak
• Nonviable – no opportunity for improvement

1-38
 Analyzing Competitors

– Three Variables to Monitor When Analyzing

Competitors:
• Share of market
• Share of mind/Top of mind recall
• Share of heart/Customer preference

1-39
Designing The Competitive Intelligence
System

– Classes of Competitors
• Strong versus Weak
• Close versus Distant
• “Good” versus “Bad”

1-40
 Designing Competitive Strategies
Figure 9-6: Hypothetical Market Structure

1-41
Vs.
 Competition tactics..

• Adidas-Salomon AG acquired Reebok in a

friendly takeover worth euro3.1 billion
(US$3.8 billion
• Adidas has its roots in soccer and track
and field,
• while Reebok's line of footwear and
athletic gear is visible across American
sports…
 Designing Competitive Strategies

• Market-Leader Strategies (e.g. Microsoft, P&G,

Coca Cola, Wal-Mart)
– Expanding the Total Market by looking for the following:
• New Users
– Market-penetration strategy
– New-market segment strategy
– Geographical-expansion strategy
• New Uses
• More Usage
– Defending Market Share against competition

1-44
Designing Competitive Strategies

– Defense Strategies
• Position Defense – building superior brand
• Flank Defense – erecting outposts to protect a weak front
• Preemptive Defense – attack before enemy starts its offence
• Counteroffensive Defense – meet attacker frontally or hit its flank,
invade market territory, exercise political or economic clout
• Mobile Defense
– Market broadening – shift in focus to underlying generic need
– Principle of the objective – clearly defined attainable objective
– Principle of mass – concentrate efforts on enemy's weakness
– Market diversification – move into unrelated industries
• Contraction Defense
– Planned contraction (Strategic withdrawal)

1-45
Designing Competitive Strategies

– Brand-extension strategy
– Multibrand strategy
– Heavy advertising and media pioneer
– Aggressive sales force
– Effective sales promotion
– Competitive toughness
– Manufacturing efficiency and cost cutting
– Brand-management system

1-46
 Designing Competitive Strategies

• Market-Challenger Strategies (e.g.

PepsiCo, Ford)
– Defining the Strategic Objective and
Opponent(s)
• It can attack the market leader
• It can attack firms of its own size that are not doing
the job and are underfinanced
• It can attack small local and regional firms
• Choosing a General Attack Strategy
1-47
Designing Competitive Strategies

– Choosing a General Attack Strategy

• Frontal Attack – matches the 4Ps
• Flank Attack – targets opponent weaknesses
• Encirclement Attack – “blitz” or grand
offensive on several fronts
• Bypass Attack – attacking easier markets
• Guerilla Warfare – small, intermittent attacks
aimed at demoralising opponent

1-48
Figure 9-10: Attack Strategies

1-49
Designing Competitive Strategies

– Choosing a Specific Attack Strategy

• Price-discount
• Lower price goods
• Prestige goods (Value pricing)
• Product proliferation
• Product innovation
• Improved services
• Distribution innovation
• Manufacturing cost reduction
• Intensive advertising promotion
1-50
 Designing Competitive Strategies

• Market-Follower Strategies (Fast-second)

• Product imitation
• Product innovation
• Four Broad Strategies:
– Counterfeiter – duplicates leader’s product and sells it on
black market or through disreputable dealers
– Cloner – emulates leader’s products, name & packaging
with slight variations
– Imitator – copies some things from leader but maintains
differentiation in packaging, advertising, pricing, location
– Adapter – takes lead products and adapts or improves
them
1-51
 Designing Competitive Strategies

• Market-Nicher Strategies
– High margin (niche) vs. high volume (mass market)
– Nicher Specialist Roles
• End-user specialist
– Value-added reseller
• Vertical-level specialist
• Customer-size specialist
• Specific-customer specialist
• Geographic specialist

1-52
 MBA 296-1 Fundamentals of Business

Haas School
Marketing: of Business
David Robinson
• Class 5:An Introduction to
Competitive Strategy
• © D. Robinson, 2006
 © David Robinson, 2006

• Limited right to reproduce granted to

students enrolled in MBA296-1 UC
Berkeley, Spring 2006 only
 Competitive Strategy

• Adding complexity to the Marketing Mix

 Competitive Strategy

• Taking decisions under conditions of uncertainty

• Situation analysis
• Porter’s Five Factor Model of Industry
Competitiveness
• SBUs and Strategic Planning Models
• Competition, and why it is good for us

• What we’d like you to remember about

Marketing
 Taking decisions under
conditions of uncertainty

• Most managerial situations involve incomplete

(or perhaps untrustworthy information)
• We have no control over much of the future
• We do have choices about our strategy
• Firms use various techniques to handle the
uncertainty.
 1. Risk Assessment

• What could go wrong?

 Risk Assessment
1. Identify what could go wrong
– Is our stadium built on an active earthquake
fault?
1. Consider the timeframe
2. Evaluate the impact
 Timeframe

Will depend
upon the
industry

Now Soon Far Distant

Immediacy
 Impact

Drug found to have

Catastrophic lethal complications

Patent challenged
successfully; we
have to split profits
Moderate
Impact

Competitor entry
into a market where
we are Leader
Noticeable
Now Soon Far Distant

Immediacy
 What to do

Catastrophic Plan exit

strategy

Research
strategy options
Moderate
Impact

Monitor,
continue to
assess likelihood

Noticeable
Now Soon Far Distant

Immediacy
 What to do

Manage with
Catastrophic
this in mind:
Don’t over-invest

Pre-plan reaction:
“no surprise”
Moderate
Impact

Plan possible
resource shift

Noticeable
Now Soon Far Distant

Immediacy
 What to do

Catastrophic Abandon
current strategy

Allocate significant
resources to
counteract
Moderate Example:
Impact

Small shift Increase ad

in resources spending

Noticeable
Now Soon Far Distant

Immediacy
 Risk Analysis: Likelihood

• Clearly some bad events are more-likely than

others
• It’s reasonable to make an assessment of
likelihood (a “forecast”):
– Competitor will eventually enter our market
– Sky will fall in
• Be careful not to replace a probability estimate
with “hope”
– Hope is not a strategy
 [A parenthetical note about
forecasts]
• Many “industry experts” are wrong
• The market for DVD recorders for 2005
was estimated at

47 million units*
Actual sales ? About 3 million, worldwide

* WSJ this 11/05

 Risk Analysis: Planning

Once risks have been identified and

assessed:
– Consider alternative courses of action that will
avoid the risk (risk avoidance)
– Consider mitigation
– Make contingency plans
 2. Scenario Planning

• We can’t control the future,

but we can anticipate it
 Scenario Planning: Two Sets of
Variables

1. Things we can do: strategy choices

2. Things that happen to us
– We have no control over them
– They are in the future
– They are “States of Nature”
(or “True State of the World”)
Scenario Planning: How to do it

1. Identify key variables (drivers) such as:

1. Market entry / non-entry by competitor
2. Prices of raw materials
2. Constrain continuous variables into ranges,
e.g. “High, medium, low”
3. Gather together sets of variables into specific
scenarios and give them cute names:
“Good times roll”
“All hell breaks loose”
1. What can happen in the Real World?

Scenario 1
These are future
“states of
Scenario 2 Nature”

Scenario 3
2. What are the firm’s strategy options?

Strategies
1 2 3 4

Exhaustive but
not exhausting
(infinite)
3. Estimate of the payoffs

Potential Strategies

A B C D

Scenario 1    

Scenario 2    

Scenario 3    
 3. Estimate of the payoffs Note:
If we choose D,
we have a great
payoff, but only if
Note: the TSotW is 3
If we choose A,
we do well . . .
unless the TSotW Potential Strategies
is 3
A B C D

Scenario 1    

Scenario 2    

Scenario 3    
 4. Develop an algorithm to choose

1. Which strategy is most-good, under most

scenarios?
2. Which strategies lead to really-bad outcomes
under some scenarios?
[Most firms will opt for a strategy that gives a pretty-
good payoff and small downside, rather than the
strategy that gives the single highest payoff.]
3. Are some scenarios more likely than others?
[Note: this comes late in the process. Warning: Don’t
let “hope” substitute for judgment.]
4. Choose a strategy
 5. Risk Analysis and Regret
Analysis
1. Risk analysis: Re-test the chosen strategy and
be sure we are prepared for the worst:
a. Is there any possible mitigation?
b. What is the contingency plan
2. Regret analysis: How much are we losing from
the path-not-taken, if the True State of the
World is not what we expect?
Example: US Producer entering Asian
Markets With a well-heeled competitor
Forecast
Regret analysis

How likely is this? Our Firm’s Possible Actions

Country’s Competitor’s Market 1 2 3 4
Economic Entry Behavior Enter using Enter with Delay Exit
Situation distributors our own do nothing this line of
retail chain business

a. Enters hi price  
Scenario 1
------------------ etc
Strong b. Enters low price  
a. Enters hi price
Scenario 2
------------------  etc
Terrific b. Enters low price

Scenario 3 a. Enters hi price

------------------
Craters b. Enters low price
Risk
 A summary on uncertainty

• Most risks can be identified and assessed in

advance
– Consider avoidance, mitigation and contingencies
• We can assess the effect of an uncertain world
using sensitivity analysis
• Scenario planning enables the firm to choose a
robust strategy
– Most future evens will come as no surprise
Planning Strategy
 Defining Strategy

• Strategy is the work of Generals

(Strategos)
• Setting the broad objectives of the firm
• Combines planning and implementation
• Good strategy seeks synergies
• Strategy invariably involves choices
– The middling way is usually a muddle
A Situation Analysis Defines Where
We Stand (as a firm
• A way to gather together facts
• Colloquially a “SWOT” analysis (but don’t
use this term—it’s a cliché)
 “SWOT” Analysis

“good” “bad”

Internal Strength Weakness

External Opportunity Threat

 “SWOT” Analysis

“good” “bad”
Culture/wishes of owners

Internal Strength Weakness

External Opportunity Threat

Industry structure
WSJ Page A1, 4 May 2004
 Limitations of a “SWOT”
analysis
• It’s a cliché
• Usually a laundry list, rather than
identifying “most important,” etc
• Some facts can be both +ve and -ve
 Michael Porter’s Five Factor
Model
• Think of this as “should we enter this
industry”
 Industry Structure

• Some industries seem to have

“gentlemanly” competition – others are
more rivalrous – why?
• Should we enter this industry?
– Yes, Exxon (briefly) made word processors!
– GE just exited the re-insurance business
 Industry Structure
Threat of new
entrants

Industry rivalry
Power of suppliers
Power of buyers

[Michael Porter] Threat of

substitutes
 An Attractive Industry

• Has unserved, price insenitive customers,

and a growing market
• Has huge barriers to entry, and no barriers
to exit
• Has low supplier power, and low buyer
power
• Has no foreseeable substitute
 The Three Generic Strategies
[M. Porter]
1. Cost leadership (not price leadership)
Wal-mart, SouthWest Airlines, Home
Depot
1. Differentiation
Harley Davidson, Nextel (Direct Connect)
1. Focus
Cross pens, Mita (copiers), Starbucks
 Critique of Porter

• Good for industries, which ones to enter

• Less good for assessing a firm’s specific
problems
• Are there more than
just the three strategies?
Strategic Business Units
 Strategic Business Units

• SBUs are the genius of the American system

• Running each line of business as a small
company
• What do we need to make a Division an SBU?
• Why don’t we just spin them off as a small
company?
• Can be acquired and divested
 Strategy Decisions

• Acquisitions & Alliances

• Divestitures
• Entering new markets
• Should John Deere (tractors) make lawn mowers?
• Entering new “attractive industries”
• Should Apple sell tunes online?
 SBU’s are the Key to
Strategy Planning
• Johnson & Johnson has almost 200 units
(similarly 3M)
• GE has several major business units, e.g.
– Finance
– Medical Scanners
– Locomotives
• Did the Korean firms trip up over this?
 BCG Matrix is popular

• When looking at the whole firm

• When deciding what lines of business to
enter (e.g. IBM consulting) or exit (IBM
printers, & ? PCs)
 The Boston Consulting Group’s
Growth-Share Matrix
20%-
Market Growth Rate

Stars Question marks

18%-
16%-
14%-
4
3
?? ? 1
12%- 5 2
10%-
Cash cows Dogs
8%- 8
6%-
4%- 7
2%- 6
0
10x 4x 2x 1.5x 1x .5x .4x .3x .2x .1x
Relative Market Share
 Invest heavily Divest
“Nurture” Sort out

20%-
Market Growth Rate

Stars Question marks

18%-
16%-
14%-
4
3
?? ? 1
12%- 5 2
10%-
Cash cows Dogs
8%- 8
6%-
4%- 7
2%- 6
0
10x 4x 2x 1.5x 1x .5x .4x .3x .2x .1x
Relative Market Share
 How firms use BCG matrix
Should Disney have a Cruise Ship
Line?

Cruise lines are fast-

growing, but we have
low market-share

“TPR”, movies and stores

The “Go” network—a
are likely Cash Cows
Question Mark or a Dog?
 GE Planning Grid is similar (Fig 4.3)
The axes are multi-dimensional

Market attractiveness (more than just size)

High Build

Focus and
manage
Harvest or
divest
Low Strong Medium Weak

Competitive strength (more than just share)

 Limitations to the Business
Strategy Models
• Great at the CEO level
• Assume you have a portfolio of
products/divisions
• Most marketing managers have to
manage a division within what is given
 Dealing with the Competition

• Competition is good for us

• We can choose whom to attack and how
to attack
• We should anticipate attacks and have
some responses pre-planned
 Competition is good
• Not just for the economy as a whole,
but also for us as a firm
• Promotes
– Innovation
– Cost cutting and efficiency
• Examples:
– WWF acquires WCW
– French Post Office Camionnettes
• Peugeot
• Citroën
• Renault
 General Rules for
Managing Competition
• A few quick ideas
 1. Identify Competitors

• Existing
• Their exit barriers
• Their “personality” (history)
• Competitive strengths and weaknesses
• Likely future competitors (or substitutes)
• Entry barriers
• How attractive is our market?
 2. Be Clear about our position

• Market share (and hence our position)

• Market leader, (Campbells soup 70%)
• Challenger (Avis), or
• Follower (DHL)
• Competitive strengths
• Are they “sustainable” or can they be cloned?
 Do you believe in “The Rule of Three?”
Hypothetical Market Structure & Strategies

Market
nicher
Market Market Market
leader challenger follower

40% 30% 20% 10%

Expand Market Attack leader Imitate Special-

Defend Market Share Status quo ize
Expand Market Share
 Why would profitability drop if we
go after a very large market share?
Optimal market share
Profitability

0% 25% 50% 75% 100%

Market share
 3. Define the Competition

• Good versus bad competitors

Microsoft … Starbucks
• Close versus distant
Does it affect Haas if DVC adds a course on
Insurance Management? (Should we match?)
• Strong vs. Weak
Should American Airlines try to “kill” UA or
America West?
 4. Choose whom to attack

• Which markets we enter

– Geographic and other segmentations
(e.g. stay out of “hospital” customers)
• Which lines of business to be in
(stay, divest or enter)
• Which products to imitate (or leap-frog)
And, of course, competitors will try and do this to
us too!
 Defensive Strategies

• Be prepared for an attack

• Assess it’s seriousness
• Take action:
– Withdraw, abandon
• E.g. UPS and Eastern Europe
– Defend in part
• E.g. UA withdraws from Ontario, consolidated SFO
– Defend “to the death”
• E.g. e-Bay vs Amazon’s auction business
 Possible Defensive Actions

• Reinforce our position

– Product superiority
– Channel “locked up”
– Keeping our loyal customers
• Broaden the market
• Counter-offense:
– Go after their home market (or “loyals”)
– Beat you at your own game (SBC + Dish Network)
 Summary

• The key to competitive strategy

– Be very self-aware as a firm
– Be “paranoid” about competitors
– Anticipate competitor moves
 What We’d Like You to
Remember about Marketing
1. There’s much more to Marketing
than just promotion
• We focus on the value proposition
• We avoid a “product focus”
• We aim to give a customer a
reason to buy
 2. There’s no such thing as
Mass Marketing
• All markets are segmentable
• The one with the tightest segments wins
– Narrowly defined
– Completely meet their needs
(example: Netflix)
 3. Live and die by your brand

• Make sure that the brand has meaning

– Underlying product benefits are a real value to
consumers
• Manage all of the images and associations
• Above all, consistency

• Nothing succeeds like success

 4. In any market, someone wants
to pay more
• It’s the job of the firm to meet that need
– Many firms don’t charge enough
– Competing on price alone is a guarantee of “profitless
prosperity”
• Example: JC Penney
• Corollary: In any market, some people can only
afford to pay less
– Come up with a way to meet their needs profitably
 5. Be good to your channel
and your channel will be good to you

• Nurture channel members—“walk in their

moccasins”—try to think what motivates them
• Think win-win:
Develop appropriate incentives
• Don’t be afraid to reconfigure the channel
• A little bit of transparency will go a long way

• It’s nice to be nice

 6. Cute ads win competitions,
not customers
• There’s much more to promotion than mass
media advertising—question the media plan

• Ask:
“What’s the promotional task?” then develop an
integrated promo-mix to achieve the goal
 Patching & coevolving
strategies.
• Patching Strategies & approach
• Coevolving through patching.
 Patching approach

• Focuses on realizing synergies from

shared capabilities & core competencies'.
• Through this value is added in multi-
business companies.
 Two related frameworks
Parental Framework & Patching Approach

• Multi-business co’s create value by

influencing the business they own.
• Best parent co’s create more value than
rivals.
 Where Opportunities exist

• Size & Age

• Management
• Outsourcing & strategic alliances at strategic points of value
chain can add value.
• Linkages with other businesses
• Common capabilities
• Specialized expertise

• ou
Value Chain (seeking gaps & opportunities)
Adding synergies
 Patching

• Role & ability of corporate managers to create value in

the mgt. of multi-busines co’s.
• Process through which CEO’s etc routinely remap
businesses to match rapidly changing mkt’ ing
opportunities.
• Can take from of adding, splitting, controlling,
transferring or exiting chunks of tasks or businesses.
 Patching

• More useful when markets are rapidly

changing.
• Only way to add value beyond the sum of
businesses within a company.
• Based on the postulate that strategic
analysis should center on strategic
processes more than stgic’ Planning.
• Focuses on making quick small frequent
changes in parts of businesses &…
• Organizational processes that enable
dynamic stgic’ repositioning….
• rather than building long term defensible
positions