© 2007 John Wiley & Sons Chapter Fourteen Setting Priorities for Businesses and Brands – The Exit, Milk, and Consolidate Options Copyright © 2010 John Wiley & Sons, Inc All rights reserved Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful Requests for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc The purchaser may make back-up copies for his/her own use only and not for distribution or resale The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein Chapter 14 – Setting Priorities for Businesses and Brands PPT 14-1 The Growth-Share Matrix High Low Market Growth Rate © 2007 John Wiley & Sons R&D Stars Problem Children Cash Cows Dogs High Low Competitive Position (Ratios of Share-to-Share of Largest Competitor) Chapter 14 – Setting Priorities for Businesses and Brands Figure 14.1 PPT 14-2 The Market Attractiveness-Business Position Matrix Market Attractiveness High Low Invest/ Grow Medium Medium Selective Investment Low Business Position © 2007 John Wiley & Sons High Harvest/ Divest Chapter 14 – Setting Priorities for Businesses and Brands Figure 14.2 PPT 14-3 © 2007 John Wiley & Sons Evaluating Ability to Compete • • • • • Organization Growth Share by Segment Customer Loyalty Margins Chapter 14 – Setting Priorities for Businesses and Brands • • • • • Distribution Technology Skills Patents Marketing Flexibility Figure 14.2 PPT 14-4 © 2007 John Wiley & Sons Evaluating Market Attractiveness • Size • Growth • Customer satisfaction Levels • Competition: Quantity, Types, Effectiveness, Commitment Chapter 14 – Setting Priorities for Businesses and Brands • • • • • Price levels Profitability Technology Governmental regulations Sensitivity to economic trends Figure 14.2 PPT 14-5 The Exit Decision © 2007 John Wiley & Sons • Business position • Market attractiveness • Strategic fit – Firm’s strategic direction has changed – Firm’s resources could be better employed elsewhere • Exit barriers Biases Inhibiting the Exit Decision © 2007 John Wiley & Sons • Reluctance to give up • Confirmation bias—seek out optimistic information • Escalation of commitment © 2007 John Wiley & Sons Milk Strategy • • • • • Enough loyalty to support a business Business is not central Demand is stable Price structure is stable Milting strategy can be managed © 2007 John Wiley & Sons Prune the Brand Portfolio • Prioritize resources • Remove confusion • Remove strategic paralysis—so many options that branding new products is difficult The Strategic Brand Consolidation Process © 2007 John Wiley & Sons Brand BrandAssessment Assessment ••Brand BrandEquity Equity ••Business BusinessStrength Strength Strategic StrategicFit Fit Prioritize Prioritizethe theBrands Brands ••Strategic StrategicBrand Brand ••Brands Brandswith withspecialized specializedroles roles ••Cash Cashcow cowrole role ••Eliminate Eliminate ••On-notice On-notice Develop Developthe theRevised RevisedBrand BrandPortfolio PortfolioStrategy Strategy Design Designand andImplement Implementthe theMigration MigrationStrategy Strategy Chapter 14 – Setting Priorities for Businesses and Brands Figure 14.3 PPT 14-10 © 2007 John Wiley & Sons Key Learnings • The exit decision, even though it is psychologically and professionally painful, can be healthy both for the firm because it releases resources to be used elsewhere, but even for the divested business, which might thrive in a different context • A milking or harvest strategy (generating cash flow by reducing investment and operation expenses) works when the involved business is not crucial to the firm financially or synergistically For milking to be feasible, though, sales must decline in an orderly way • Prioritizing and trimming the brand portfolio provides another perspective on prioritizing businesses, even clarify brand offerings, and can remove the paralysis of not being able to brand new offerings A five-step prioritization process involves identifying the relevant brand set, assessing the brands, prioritizing brands, creating a revised brand portfolio strategy, and designing a transition strategy Chapter 14 – Setting Priorities for Businesses and Brands PPT 14-11 © 2007 John Wiley & Sons Brand Equity • • • • • Awareness Reputationl Differentiation Relevance Loyalty Strategic Fit © 2007 John Wiley & Sons • Extendibility • Business fit Business Prospects © 2007 John Wiley & Sons • • • • Sales Share Profit Growth © 2007 John Wiley & Sons Ancillary Slides Chapter 14 – Setting Priorities for Businesses and Brands PPT 14-15 © 2007 John Wiley & Sons “There is nothing so useless as doing efficiently that which should not be done at all.” - Peter Drucker Chapter 14 – Setting Priorities for Businesses and Brands PPT 14-16 © 2007 John Wiley & Sons “If you want to succeed, double your failure rate.” -Thomas Watson founder, IBM Chapter 14 – Setting Priorities for Businesses and Brands PPT 14-17 “Anyone can hold the helm when the sea is calm.” © 2007 John Wiley & Sons - Publilius Syrus Chapter 14 – Setting Priorities for Businesses and Brands PPT 14-18 ... Margins Chapter 14 – Setting Priorities for Businesses and Brands • • • • • Distribution Technology Skills Patents Marketing Flexibility Figure 14. 2 PPT 14- 4 © 2007 John Wiley & Sons Evaluating Market. .. Drucker Chapter 14 – Setting Priorities for Businesses and Brands PPT 14- 16 © 2007 John Wiley & Sons “If you want to succeed, double your failure rate.” -Thomas Watson founder, IBM Chapter 14 –... Chapter 14 – Setting Priorities for Businesses and Brands Figure 14. 1 PPT 14- 2 The Market Attractiveness-Business Position Matrix Market Attractiveness High Low Invest/ Grow Medium Medium Selective