What makes a strategy a winner? Please provide some examples.
1. Three questions can be used to test the merits of one strategy versus another and distinguish a winning strategy from a losing or mediocre strategy:
a. How well does the strategy fit the company’s situation?
i. To qualify as a winner, a strategy has to be well matched to industry and competitive conditions, a company’s best market opportunities, and other aspects of the enterprise’s external environment. Unless a strategy exhibits a tight ft with both the external and internal aspects of a company’s overall situation, it is likely to produce less than the best possible business results.
b. Is the strategy ...view middle of the document...
Business units with leading market positions in mature industries may be cash cows – businesses that generate substantial cash surpluses over what is needed for capital reinvestment and competitive maneuvers to sustain their present market position.
CORE CONCEPT: A cash hog is a business whose internal cash flows are inadequate to fully fund its needs for working capital and new capital investment.
CORE CONCEPT: A cash cow is a business that generates cash flows over and above its internal requirements, thus providing a corporate parent with funds for investing in cash hog businesses, financing new acquisitions, or paying dividends.
Viewing the diversified group of businesses as a collection of cash flows and cash requirements is a major step forward in understanding what the financial ramifications of diversification are and why having businesses with good financial resource fit is so important.
Star businesses have strong or market-leading competitive positions in attractive, high-growth markets and high levels of profitability and are often the cash cows of the future.
(2) Once a diversified company’s strategy has been evaluated from the perspectives of industry attractiveness, competitive strength, strategic fit, and resource fit, the next step is to rank the performance prospects of the businesses from best to worst and determine which businesses merit top priority for new investments by the corporate parent.
The most important considerations in judging business-unit performance are sales growth, profit growth, contribution to company’s earnings, and the return on capital.