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Formulating strategies: corporate level

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    FORMULATING STRATEGIES: Corporate level

    Multi-business corporations have to consciously decide as to what lines of businesses they would like to be in. If, at the same time, they are Multi-national corporations then they have to also decide which countries they would like to do business in. These decisions are of crucial importance which have a direct bearing on the fortunes of the enterprise and are made at the Corporate level.

    Corporate level Strategies

    PORTFOLIO STRATEGY
    The firm decides on a mix of business units and product-lines that fit together in a logical way to provide synergy and competitive advantage for the corporation. Such a balanced mix of business divisions are called Strategic Business Units (SBUs). Each SBU may have a unique business mission, product-lines, competitors and markets relative to the other SBUs (eg. SBUs of Hindustan Lever are Soaps & Detergents; Personal products; Fats & culinary items; Animal feeds; Beverages; Frozen foods; Speciality chemicals; Agribusiness; and Exports.)

    Bruce Henderson, President, The BOSTON CONSULTING GROUP (BCG) and his team in 1970, evaluated SBUs with respect to two dimensions, namely – Business growth rate, i.e., how rapidly is the entire industry increasing, and – Market share, showing whether a business unit has larger or smaller share than its competitors. The combinations of Growth and Share provide four categories of SBUs for a Corporate portfolio.

    The BCG Matrix

    The BCG Growth-Share Matrix, 1970

    Analysis of the BCG Matrix

    The combinations of Growth and Share, as seen in the BCG Matrix, provide four categories of SBUs for a Corporate Portfolio: 1. The ‘STAR’ enjoys large
    market share in a rapidly growing industry – important because of additional growth potential. Profits should be ploughed back into the business for future growth and profits. Stars are visible and attractive, hence to be nurtured and developed. 2. The ‘CASH COW’ is a dominant business in a mature, slow-growth industry with a large market share, hence heavy investments in advertising and expansion are no longer required. Profits to be invested in other riskier businesses.

    3. The ‘QUESTION MARK’ exists in a new, rapidly growing industry but has only a small market share. Hence risky, could become a Star or could fail. Profits from Cash Cows may be invested in QMs in order to nurture them into future Stars. 4. The ‘DOG’ is a poor performer, enjoys small share of a slow-growth market and brings in little profit to the company. May be divested. Most corporations have businesses in more than one quadrant, where circle size represents the relative size of each business.

    Business level Strategies

    Porter’s Five Forces Model

    1. Threat of Potential new entrants: Capital requirements and economies of scale are examples of two potential “barriers to entry”, eg,Automobile industry v/s small mail-order business, Times of India v/s Hindustan Times and DNA. 2. Bargaining power of buyers: ‘Informed’ customers become empowered customers because they now have a range of options at the market-place, eg, Eco-labeling. This situation is more pronounced if there are one or two large, powerful customers. 3. Bargaining power of Suppliers: Concentration of suppliers and availability of substitute suppliers are significant factors – whether supplier can survive without a particular purchaser or whether purchaser can threaten to self-manufacture the product. 4. Threat of substitute products: If the industry has a few close substitutes (eg, Coffee industry v/s Tea, Soft drinks or Fruit juices, all serving the customer needs for non-alcoholic drinks), then the customer may switch preferences due to cost changes, increased health-consciousness or any other such reason.

    5. Rivalry among competitors: Scrambling and jockeying for position, eg, Pepsi v/s Coke ad campaigns.

    Functional level Strategies

    The Porter’s Value Chain (“Competitive Advantage”, 1985)provides a valuable tool for identifying ways to create more customer value. Every firm is a collection of activities performed to design, produce, market, deliver and support its product. The Value Chain identifies nine strategically relevant activities that create value and cost in a business.

    The Porter’s Value Chain

    PRIMARY ACTIVITIES
    These comprise of the sequence of bringing materials into the business (Inbound Logistics), converting them to final products (Operations), shipping out final products (Outbound Logistics), marketing them (Marketing & Sales), and servicing them (Service). All these are Line functions.

    SUPPORT ACTIVITIES
    These are activities handled for the entire organization by certain specialized departments, hence these are Staff functions. Infrastructure covers the costs of general management, planning, finance, accounting, legal, and govt. affairs that are borne by all the primary and support activities. Procurement involves the sourcing of various inputs for each primary activity. Similarly, Human Resources Mgmt and Technology Development are specialized activities covering all areas of the firm’s business.

    The Porter’s Value Chain (contd.)

    COMPETITIVE ADVANTAGE
    The firm’s task is to examine its costs and performance in each value-creating activity and look for ways to improve it. This is done by estimating its competitor’s costs and performance as “benchmarks”. To the
    extent it can improve its performance vis-à-vis competitors, it can achieve competitive advantage.

    HOW TO LEVERAGE COMPETITIVE ADVANTAGE
    Emphasis on close coordination and cooperation in areas involving cross-functional inputs, eg, marketing and production. Close monitoring and sustained improvements in core business processes, such as: New product realization process

    Inventory management process
    Order-to-remittance process
    Customer service process.

    Introduction:
    Ford motor company, one at the world’s largest manufacturers at automobiles and the world’s largest producer at trucks. Under the leadership at the Henry ford, the company implemented the assembly lime method of mass production and made the cars affordable for middle-class consumers. Ford is the second largest automaker in the United States based on overall sales, trading only general motors’ corporation. Ford’s subsidiaries include the Hertz corporation, the world’s largest car rental company, and the world’s largest provider at automotive financing. Ford markets vehicles under the brands of ford, Lincoln, Mazda, Mercury and Volvo. Product Portfolio:

    Ford Company have different product under different brand. The ford, Lincoln, Murcury, Mazda, Volve , Jaguar , Aston, Martin and Land Rover have different position in the market. The brand can be take in consideration of it development in different product portfolio model. They are: BCG Matrix

    Ans off Matrix:-
    Various strategy models and tools can be employed to analyze and make marketing standard for capability, reliability and quality, ford is now offering even more truck for the money with the new 2004 F-150- including unsurpassed fuel economy. Market Development Strategy:

    Ford motor company has applied different market strategy for the maintaining the new market position in new market for the current product. Ford continues to plan the special edition models of Mustang. The Shelby GTSOOKR will goon sale in spring 2008. A built in model also planned sometime in 2008. Ford could put the next generation Mustang on the global rwd platform being developed in Australia around the 2012 or 2013. The fusion, which is now rides modified Mazda 6 platform, is likely to move to frods global EUCD platform around the 2018 or 218 modal year. The north American from and BCG uropean madeo are likely to become are global uehicle , with local market tweaks. Diversifacation:-

    Frod mator company is that which try to developnew product and expand the product in new market area for this the company have to face the different risk for eg. 4th September 2009. Ford motor indoresia (FMI) , Jakarta has recently opened a new us $500 million passenger car plant at their joint uenture manufacturing facility , autoalliance Thailand (AAT), in Rayong, Tailand. This additional investment and expansion program of this global manufacturing hud was announced in 2007.At the at ramadhan Jakarta police for sales 600 ford focus vehicles and 591 Ford rangers and will be developed in 2009.This seems positive supports towards the product from customers.Indonesia the great quality at vehicles and services are provided for the customers.FMI is preparing to welcome the fiestia in 2010. BCG MATRIX

    BCG (Boston consulting Group) is produced by the Harvard Business school,portfolio Management based on market growth .BCG matrix is use to prioritize opportunities and get the best return or company effort.Under this model.Ford motor companys brand can be measured and valued properly.This helps to know the actual position of the company. Star

    Accordingto the BCGmodel the ford motor company Mustand brand growth is in the top position which have high market share and profit.Mustang remains the number one sport car by a wide margin, with the new 2010 model driving showroom traffic.In april. Mustang had a 40% share of the retail sports car segment. Cash cow

    Cash cow shows the high market share and low market growth rate.ford motor companysbrand are profitable and reliable.The product development costs are relatively law.ford motor company product are focused for economic class people so it has high market share get low growth rate. Question marks

    Ford motor company have the law market share and high mix growth rate. There are more competitive for this types at market or product. The product is sale in less number for the selective people or area. For example Ferrari which is high price car for high class people. So that the product should be product with carefully .The loss mistake in decision making create more problem. Dogs

    In these characteristics the market share and market growth rate is low. The product in this characters market is existing for doing competition to the competitors products. Ford motor company brand Jaguar and land Rover had faced the problem and connate generated profit at 2006, to early at 2008 but finally the Ford motor company sale the brand to Tata company on 2008 march. Ford motor company sales its brand or liquidate too solve the financial difficulties. Posters generic strategies

    Michael Porter has described a catagory of scheme which consist of three general types of strategies to maintain and achieve competitive advantages in the business which can be achieve by core competency product differentiation strategies and product cost. The strategies based as product differentiation, cost leadership and focus. Product differentiation

    Differentiation is aimed at the bread market that involves the creation of a product or services that is perceived through out , dealers ,networks or customers and increase the loyalty of buyer product differentiation is helpful to complete successfully. It creates a better barrier. For example ford motor company combinations at auto manufacturing and financing .It has differentiated on vehicles development and engineering control. COST LEADERSHIP

    This strategy emphasizes efficiency. The product are produced in high or mass
    with economic which is available for consumer to a very large base. To compete with competitior the mass production helps to lower the cost and lead the market .For example Ford motor company have to maintain a low cost base by controlling production cost ,increasing their capacity utilization, controlling material supply or product design, work force dedicated for low cost production ,less spending on marketing helps a company lower the cost .which is support for cost leadership. FOCUS

    On this strategy business firm or company concentrates on a select few target market .It target the certain age group , class people for the better market .It is also called segmentation strategy or rich strategy. A focus strategy should target market segments that are less valuable to substitutes or where a competition is weakest to earn above average return on investment .For example Ford motor company focused named a top campus car as consumers seek back to school values.(which have features such as CONCLUSION

    * In conclusion Ford motor company is suffered by lack of proper management .The Ford company had sell its brands Jagaur and land Rover to Tata motor company on 2008.The company cannot focus its particular area and differentiate product to compete the competitiors. Ford motor company have to apply different marketing strategies and analysis the product portfolio o know which area of the company is better and what technique or strategy should be apply for product development. Ford motor company have to focus the target market by doing product portfolio analysis achieve good market position.

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