The growing and brisk market during the 1950s and 1960s made
companies to operate more and more businesses and led not only to
larger and complex firms but also to a high number of divisions. The
overall corporate strategy was therefore insufficient, especially when
divisions led on to diversifications different strategies, business unit strategies, were required. In order to find out in which business a company should be in and how resources can be allocated amongst them, different portfolio analyses are developed in the 1970s. The idea goes back to the Portfolio Selection Theory from Markowitz (1959) in which a portfolio is described
as an ideal mix of different securities. The portfolio analysis in this context can be described as a framework to analysis the balance of an organization’s strategic business units (Johnson and Scholes, 1999, p.186). The objective of this piece of work is to explain the two best-known portfolio analysis approaches: The Boston Consulting Group’s growthshare and growth-gain matrix and the General Electric Company business screen in regard to advantages and disadvantages, generated strategies, interdependence of products, opportunities for synergy as well as the problems which can occur when applying those models in practice. In the first chapter both models and the different strategies will be explained and definitions will be given.
A comparison of both models in relation to their advantages and
disadvantages can be found in the second chapter. In the third chapter the relevance of synergy will be discussed. Chapter four contains a GE matrix for Nestlé Waters and the validity of the possible strategies is critically evaluated. The conclusion can be found in chapter five.
Table of Contents
Introduction
1.Portfolio Analysis
1.1 The BCG growth – share matrix
1.2 The GE business screen
2. Comparison
2.1 Review of both models
3. Synergies and the portfolio models
4. Application of the GE business screen
5. Conclusion
Objectives and Topics
This work examines the two most prominent portfolio analysis frameworks, the BCG growth-share matrix and the GE business screen, to evaluate their efficacy in strategic decision-making. The primary research goal is to explain the mechanics of these models while critically analyzing their advantages, disadvantages, and the practical challenges associated with managing corporate portfolios, specifically regarding product synergy and strategic resource allocation.
- Theoretical foundations of the BCG growth-share matrix
- Mechanics and multifactor assessment of the GE business screen
- Comparative analysis of portfolio planning tools
- The role and complexity of synergy in corporate strategy
- Practical application of the GE model using a Nestlé Waters case study
Excerpt from the Book
Introduction
The growing and brisk market during the 1950s and 1960s made companies to operate more and more businesses and led not only to larger and complex firms but also to a high number of divisions. The overall corporate strategy was therefore insufficient, especially when divisions led on to diversifications different strategies, business unit strategies, were required.
In order to find out in which business a company should be in and how resources can be allocated amongst them, different portfolio analyses are developed in the 1970s. The idea goes back to the Portfolio Selection Theory from Markowitz (1959) in which a portfolio is described as an ideal mix of different securities.
The portfolio analysis in this context can be described as a framework to analysis the balance of an organization’s strategic business units (Johnson and Scholes, 1999, p.186).
The objective of this piece of work is to explain the two best-known portfolio analysis approaches: The Boston Consulting Group’s growth share and growth-gain matrix and the General Electric Company business screen in regard to advantages and disadvantages, generated strategies, interdependence of products, opportunities for synergy as well as the problems which can occur when applying those models in practice.
Summary of Chapters
Introduction: Provides the historical context for the rise of portfolio analysis and outlines the objectives of the work regarding BCG and GE models.
1.Portfolio Analysis: Defines strategic business units and details the functional mechanics of the BCG matrix and the GE business screen.
2. Comparison: Evaluates the relative strengths and weaknesses of both models, highlighting their shared reliance on life cycle and experience curve assumptions.
3. Synergies and the portfolio models: Discusses the necessity of synergy in corporate strategy and the limitations of portfolio models in capturing cross-unit potential.
4. Application of the GE business screen: Demonstrates the practical implementation of the GE matrix through a case study of Nestlé Waters.
5. Conclusion: Summarizes the current relevance of portfolio matrices in an increasingly complex and globalized business environment.
Keywords
Portfolio Analysis, BCG Matrix, GE Business Screen, Strategic Business Unit, Corporate Strategy, Synergy, Resource Allocation, Market Growth, Relative Market Share, Competitive Advantage, Industry Attractiveness, Strategic Planning, Nestlé Waters, Diversification, Cash-flow Balance.
Frequently Asked Questions
What is the core focus of this publication?
The work focuses on analyzing the most well-known portfolio management tools, specifically the Boston Consulting Group’s matrix and the General Electric Company business screen.
What are the central thematic areas covered?
The primary themes include strategic resource allocation, the distinction between business and corporate strategies, the identification of product synergies, and the practical challenges of applying strategic matrices.
What is the primary objective of this work?
The objective is to explain these two models, compare their utility, and examine the problems that arise when they are used in real-world corporate decision-making.
Which scientific methodology is utilized?
The author uses a comparative theoretical approach combined with a practical case study application of the GE business screen to a specific industry unit.
What topics are discussed in the main section of the book?
The main sections cover the definitions of portfolio models, a critical comparison of their features, an in-depth look at synergy, and an applied study of the Nestlé Waters brand.
What defines the core terminology of the work?
Key terms include Strategic Business Units (SBU), industry attractiveness, competitive strength, and the "shared resource problem," which are fundamental to understanding portfolio balance.
How does the author categorize the GE business screen?
The author refers to the GE business screen as a "multifactor portfolio model" because it incorporates a broader range of variables compared to the simpler BCG model.
What specific practical application is provided?
The author provides a step-by-step application of the GE business screen to the Nestlé Waters unit in the Euro Zone, assessing brands like Perrier, Aquarell, Vittel, and San Pellegrino.
- Quote paper
- Minea Linke (Author), 2003, Portfolio Models, Munich, GRIN Verlag, https://www.grin.com/document/21583
