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Transcript of Module 3 Edited
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PROJECT MANAGEMENT
MODULE 3
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TYPES OF ORGANIZATIONAL
PROJECTS Green Field Project
Brown Field Projects
Expansion Project
Integration Project
Diversification Project
Modernization/ Replacement Project
Divestment Project
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Capital Allocation
If we analyze the size and scale of most of the organization,
it seems to be large and widely spread.
And the requirement of the investment is immense.
But the availability of the capital is limited and a company
cannot invest this into each and every project. So they need
to be selective and decide judiciously and strategically.
And thus we require the techniques of capital budgeting to
implant.
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CAPITAL BUDGETING
Stage 1
Promising growth opportunitiesidentified through StrategicPlanning Techniques
Stage 2
Individual Investment Proposal
are Analyzed & Evaluated
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STRATEGIC PLANNING
Strategy is well defined as the determination of the
basic long term goals and objectives of an enterprise,
and the adoption of courses of action and the allocation
of resources necessary for carrying out those goals.
Strategic planning is an organization's process of
defining its strategy, or direction, and making decisions
on allocating its resources to pursue this strategy,
including its capital and people.
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STRATEGIC PLANNING
TECHNIQUES PORTFOLIO STRATEGIES
BCG Matrix
GEs Stoplight Matrix
SPACE
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SBUs
A business unit within the overall corporate identity
which is distinguishable from other business because it
serves a defined external market where management can
conduct strategic planning in relation to products and
markets.
A SBU can be one or more company division, a product
line within a division, or sometimes a single product or a
brand.
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CHARACTERISTICS OF SBUs
It is a Single Business
It can be placed independently of other Businesses.
It has a distinct mission
It has its own Competition
It has a Responsible Manager
It controls certain Resources
It can be benefitted from Strategic Planning
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HULs SBUs Personal wash
Lux. Lifebuoy, Liril , Hamam, Breeze, Dove, Pears and Rexona
Laundry
Surf Excel, Rin and Wheel
Foods
Kissan, Annapurna, Knorr
Ice-cream
Kwality Wall's
Tea
Brooke bond, Lipton
Coffee
Brooke bond, Bru
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BCG GROWTH SHARE MATRIX
HIGH
LOW
HIGH LOW
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GE Mc KINSEY MATRIX In consulting engagements with General Electric in the 1970s,
McKinsey & Company developed a nine-cell portfolio matrix as atool for screening GE's large portfolio of strategic business units(SBU).
This business screen became known as the GE-McKinsey Matrix.
The GE McKinsey matrix is similar to the BCG matrix in that itmaps strategic business units on a grid of the industry and theSBU's position in the industry.
The GE matrix however, attempts to improve upon the BCGmatrix in the following two ways:
The GE matrix generalizes the axes as IndustryAttractiveness" and Business Unit Strength" whereas the BCGmatrix uses the market growth rate as a proxy for industryattractiveness and relative market share as a prow for thestrength of the business unit.
The GE matrix has nine cells vs. four cells in the BCG matrix
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I. Companys Competitive Advantage
Market shareProduct quality
Product life cycle
Customer loyalty
Capacity utilization
Technological know how
Vertical integration
New product introduction
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II. Companys Financial Strength
Return on investment ROILeverage
Liquidity
Capital requirements
Cash flows
Exit from markets
Economies of scale
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III. Industry Strength
Growth potentialProfit potential
Capacity intensity
Ease of entry into the market
Financial stability
Resource utilization
Technological know how
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IV. Environmental Stabilty
InflationEconomic condition
Demand variability
Price range of competing products
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Application of SAPCE
It involves following stepsI. Numerically assign values to firms
factor which having a bearing on thefour dimensions.
The scale for factors relating toCompanys financial strength andIndustry strength may be from 0 to 7.
With 0 reflecting the most unfavorable assessmentand 7 most favorable assessment.
The scale for factors relating toCompanys Competitive advantage andEnvironmental stability may be from -7to 0.
With -7 reflecting the most unfavorable assessmentand 0 most favorable assessment.
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Application of SAPCE
II. Average the values assigned to thefactors to get numerical value for eachdimension.
III. Plot the scores for the FourDimensions on the Axes of theSPACE chart.
IV. Connect the scores so plotted to get a
Four-Sided Polygon, reflecting thesize and the direction of assessment.
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FS
ES
CA IS
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FS
ES
CA IS
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FS
ES
CA IS
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FS
ES
CA IS
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SPACE & GenericStrategies
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FS
ES
CA ISAGGRESIVE
COMPETITIVEDEFENSIVE
CONSERVATIVE
COST
LEADERSHIP
Concentric Diversification
Concentration
Vertical
Integration
Concentric
Merger
Conglomerate
Merger
Turnaround
Status Quo
Conglomerate
Diversification
Diversification
FOCUS
Divestment
Liquidation
Retrenchment
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MARKET GROWTH RATE
Market growth axis, correlates with the product life
cycle pattern, and predicts the cash requirement a
business needs relative to the growth of that market.
A fast growing market is generally considered
attractive and pulls a lot of organizations resources in
an effort to increase gains.
Industry ales this ear - Industry ales last ear
Industry ales last ear
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RELATIVE MARKET SHARE Here we analyze the business unit by comparing it against its
competitors.
This is linked with the experience curve phenomenon that
when a business conducts its operations overtime, it developsnew ways in performing those task better which results in
lowering the operation cost.
Thus the company have a cost advantage over its competitorsand enjoys a high relative market share.
S Sales this ear
Leading ompetitors Sales this ear