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Shareholder value in multi-product firm - Coggle Diagram
Shareholder value in multi-product firm
Growth share matrix
Organizational architecture &
portfolios
An entrepreneurial architecture creates:
An ability to change & innovate - a flexibility & speed of reaction that is difficult to copy
An ability to assimilate new technologies & markets through diversification creep
A diversified but balanced portfolio of product/markets allows investment with a longer-term horizon & offers opportunities for synergy
Constructing an appropriate organizational architecture is the key to success
Strategy Implications
Star
Invest in growth
Sell aggressively & penetrate market ,
wide distribution
Differentiate & promote brand loyalty
Modify & expand product range
Price competitively
Dog
Generate cash
Monitor and discontinue
Retain customer loyalty
Reduce costs
Live with low growth
Improve productivity
Look for easy growth segments
Problem child
Develop opportunities
Be critical of prospects
Invest selectively
Encourage trials
Develop brand
Selective distribution
Cash cow
manage for earnings
Maintain market position
Differentiate & maintain brand loyalty
Heavy promotion
Price defensively
Heavy push on distribution
Cash Flow
Implications
Shareholder value & diversification
An entrepreneurial architecture lends itself to successful diversification
Diversification may be needed in rapidly changing product/markets to keep breast of innovation & ahead of competitors
Incremental & radical product/market innovation, internal & external corporate venturing can be combined to form an effective, lower-risk growth strategy - diversification creep
This is particularly the case when synergy can be achieved across the product/market portfolio
Public vs private conglomerates
CAPM says publicly quoted conglomerates do not create shareholder value
In private companies conglomerates spread risk & create value for the private owners
Publicly quoted companies are often focused more on the short-term (e.g. dividends) & investment in innovation can suffer
In private companies control (& privacy) is retained by the entrepreneur - also the case when voting rights are restricted. Focus can be longer-term
A balanced
portfolio
A specimen
risk portfolio
An unbalanced
portfolio
