Manning School of Business
Session13: Portfolio
Strategy and Unique
Selling Propositions
Dr. Mark H. Mortensen
66.490.211 and 212
Tues &Thurs 2:00 to 3:15
3:30 to 4:45
Mortensen Consulting Group
Today
1.
2.
3.
4.
5.
Go over mid-term quiz
Discussion on portfolio strategy
Group workshop on portfolio strategy
Discussion on unique selling propositions
Assignment for next class
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Growth

Organic – grow the business
 Concentration
 Diversification

Inorganic – acquire new businesses
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Concentration Strategies
8-4
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Concentration Strategies
8-5
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Concentration Strategies
8-6
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Vertical Integration Strategies

Vertical integration: When a firm gets involved
in new portions of the value chain
 Can
be very attractive when a firm’s suppliers or
buyers have too much power over the firm and are
becoming increasingly profitable at the firm’s expense
 By
entering the domain of a supplier or a buyer,
executives can reduce or eliminate the leverage that
the supplier or buyer has over the firm
 Can
create risks
 Can
create complacency
8-7
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Vertical Integration Strategies

Backward vertical integration: A strategy that
involves a firm entering a supplier’s business
 Used
when executives are concerned that a supplier
has too much power over their firms

Forward vertical integration: A strategy that
involves a firm entering a buyer’s business
 Useful
for neutralizing the effect of powerful buyers
8-8
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Diversification Strategies

Diversification strategies: Involve a firm
entering entirely new industries
 Requires

moving into new value chains
Three tests for diversification:
 How
attractive is the industry that a firm is
considering entering?
 How
 Will
much will it cost to enter the industry?
the new unit and the firm be better off?
8-9
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Diversification Strategies

Related diversification: When a firm
moves into a new industry that has
important similarities with the firm’s
existing industry or industries

Core competency: A skill set that is
difficult for competitors to imitate, can be
leveraged in different businesses, and
contributes to the benefits enjoyed by
customers within each business
8-10
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Diversification Strategies

Unrelated diversification: When a firm
enters an industry that lacks any important
similarities with the firm’s existing industry
or industries
 Most
unrelated diversification efforts do not
have happy endings
8-11
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Strategies for Getting Smaller

Retrenchment: Reducing the size of part
of a firm’s operations, often through laying
off employees
 Firms
following a retrenchment strategy shrink
one or more of their business units
 Firms
using this strategy hope to make just a
small retreat rather than losing a battle for
survival
8-12
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Strategies for Getting Smaller

Divestment: Selling off part of a firm’s
operations
 It
reverses a forward vertical integration
strategy

Spin-off: Creating a new company whose
stock is owned by investors out of a piece
of a bigger company
8-13
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Portfolio Planning and
Corporate Level Strategy

Portfolio planning: A process that helps
executives make decisions involving their
firms’ various industries
 Offers
suggestions about what to do within
each industry, and provides ideas for how to
allocate resources across industries.
 It
first gained widespread attention in the
1970s and it remains a popular tool among
executives today
8-14
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Portfolio Planning and
Corporate Level Strategy

The Boston Consulting Group (BCG)
matrix
 Best-known
approach to portfolio planning
 Using
the matrix requires a firm’s businesses
to be categorized as high or low along two
dimensions:

Its share of the market

The growth rate of its industry
8-15
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Managing a portfolio of products
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Workshop on Product Portfolio
Come up with some examples of products
that occupy the various positions on the
matrix.
 Discuss in your groups how you would
manage the different products in the
matrix.

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Unique selling proposition

Step 1: Market


Step 2: Need


What simple need does your product satisfy?
Step 3: Pain (starts to differentiate your product)


Who will buy your product?
What "pain" does your product relieve for the buyer?
Step 4: Solution

How does your product relieve that pain and therefore separate
itself from the competition that still inflicts the pain?
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Product Differentiation
Sometimes, you are not unique. What then?





Understand the Characteristics that Customers Value:
First, brainstorm what customers value about your product or services and those of
your competitors. Move beyond the basics common to all suppliers in the industry,
and look at the criteria customers use to decide which product or service to buy.
As with all brainstorming, by involving knowledgeable people in the process, you'll
improve the range of characteristics you'll identify. So talk to sales people, customer
service teams and, most importantly, talk to customers themselves.
Rank Yourself and Your Competitors by These Criteria:
Now identify your top competitors. Being as objective as you can, score yourself and
each of your competitors out of 10 for each characteristic. Where possible, base your
scores on objective data. Where you can't, do your best to see things from a
customer's perspective and make your best guess.
Identify Where You Rank Well:
Now plot these points on a graph. This helps you spot different competitors' strengths
and weaknesses.
And from this, develop a simple, easily communicated statement of what
differentiates you from your competitors.
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For Thursday
Look up “game theory” on line
 Think through the “Prisoners’ Dilemma”
game

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For Next Tuesday


Use the Apple Case Study that you
bought.
Has Apple finally solved its long-standing
problems
With respect to the Macintosh business?
b. With respect to its broader strategic position?
a.

Going forward, what should Apple do?
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Strategic Management – Spring 2014