Diversification "out of the box" - Roland Berger

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1.1 EXAMPLESThe correct portfolio segmentation can lead to insights, whilstincorrect segmentation can result in serious consequencesINSIGHTS FROMCORRECT PORTFOLIO SEGMENTATIONSTRATEGIC> Should we buy or sell the attractive business?> Should we expand into new geographies?> Are we vulnerable to low cost countries?> Should we vertically integrate into growingdownstream/upstream?> Can we exit a business without weakening the corebusiness?> Do we have to grow through M&A to be successful inthe future?OPERATIONAL> Should we drop this product line?> Should we merge our salesforce?> How should we plan our manufacturing footprint?> Should we centralize our activities to achieve higherscale? (e.g. distribution centers; salesforce)STRATEGIC CONSEQUENCES OFINCORRECT PORTFOLIO SEGMENTATIONCUSTOMERS> Neglect profitable customer segments or over-investin unprofitable customers> Give away opportunities to capture synergies> Misjudge relevant trends> Overlook relevant geographiesCOSTS> Induce unnecessary costs> Give away opportunities to capture synergies> Do not transfer experience> Under invest in important R&D initiativesCOMPETITORS> Overlook threats from competition> Miscalculate "real market share" (as proxy for scale andachievable profits)> Set inappropriate targets> Overlook relevant capacity changes in the industry> Misjudge true cost position10
1.1BACKUPWrong business definition can result in major strategic failuresCOMPANYCORE DEFINITION MISTAKEOUTCOMETOO NA ARROWTOO BROAD> Polaroid defined it's core aschemical/paper based processing andmissed the broader definition of imagecapture in the digital age> American Express believed charge cardsand credit cards were separatebusinesses. Charge card division lostmoney due to poor cost position and failedmarketing strategyt> Gillette viewed its core as "checkoutpurchases" and thus diversified intobatteries (Duracell) and writing instrumentst(Parker)> Saatchi viewed advertising and consultingas one business; failed to transferexpertise and suffered from lack of focus> Went Bankrupt in 2001> 50% drop in market value(1986-1991)> Stock price reduced by greater than 50%(1998-2001)> Company suffered severe losses due toinability to transfer experience, lack offocus, and tainted imageSource: Roland Berger11
Page 1 and 2: Diversification "out of the box"Mun
Page 3 and 4: A. OUR APPROACH -A structured conce
Page 5 and 6: Our modular approach consists of fo
Page 9: 1.1A proper bottom-up portfolio seg
Page 13 and 14: 1.3 EXAMPLEThe definition of core b
Page 15 and 16: 1.4ILLUSTRATIVEPortfolio options sh
Page 17 and 18: 1.4ILLUSTRATIVETop-down targets for
Page 21 and 22: 2.1BACKUPThe portfolio logic need t
Page 23 and 24: 2.2ILLUSTRATIVEThe arithmetic for v
Page 25 and 26: 2.2EXAMPLE"Underperformer" business
Page 27 and 28: 2.3RELATED DIVERSIFICATIONIdentifyi
Page 29 and 30: 2.3RELATED DIVERSIFICATIONOdds of s
Page 31 and 32: 2.3RELATED DIVERSIFICATIONIdentifie
Page 33 and 34: 2.3RELATED DIVERSIFICATIONIndicator
Page 35 and 36: 2.3UNRELATED DIVERSIFICATIONConglom
Page 37 and 38: The ability of the holding to contr
Page 39 and 40: Successful organizations design a c
Page 41 and 42: … that vary by the adopted modelO
Page 43 and 44: BACKUPResources needed at the cente
Page 45 and 46: ILLUSTRATIVEThe role of the corpora
Page 47 and 48: EXAMPLEAustralian conglomerate Wesf
Page 49 and 50: E. ROLAND BERGER - Our experienceRo
Page 51 and 52: Excellence in strategy consultancy
Page 53 and 54: Our expertsHauke MojePartnerFlorian

Diversification "out of the box" - Roland Berger

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