Chapt 11

Portfolio Analysis MBM6
and Strategic Market Planning Chapter 11
Yum Brands
Store-Brand Portfolio Chapter 11 Objectives
 Portfolio Analysis
Models
 Portfolio Position and

Strategic Market Plan
 Portfolio Planning and

Portfolio Performance
Note: Sales in proportion to circle size
Copyright Roger J. Best, 2012

PORTFOLIO
Portfolio means the strategic units that make
up the company, while portfolio analysis
attempts to evaluate the effectiveness and
weaknesses of current portfolio
The purpose of portfolio analysis is to take a
strategic view of where a business is and where
it wants to go with its portfolio of existing and
future products
It is a strategic snapshot of the current
situation
Portfolio management enables the strategists
to select the optimal strategies for the
individual products while achieving the overall
corporate objectives
Unilever’s portfolio
(2012)
Unilever’s portfolio
(2016)
An American fast food corporation
listed on the Fortune 1000.
Yum! was created on May 30, 1997, as
Tricon Global Restaurants, Inc. from
PepsiCo's fast food division as the
parent corporation of KFC, Pizza Hut
YUM and Taco Bell restaurant companies.
In March 2002, Tricon announced the
BRAND acquisition of Lexington, Kentucky-
based Yorkshire Global Restaurants,
owner of the Long John Silver's and
A&W Restaurants[16] chains and
changed the company's name to Yum!
Brands, Inc. to match its NYSE ticker
symbol.
MBM6
Yum Brands Portfolio Strategy Chapter 11
 Invest to Grow – Kentucky Fried Chicken,

Taco Bell and Pizza Hut.
 Divest – A&W and Long John Silver’s

were sold in 2011.
 New Market Investment: - The cash freed

up from divesting was used to invest growing
their 3 core brands internationally.
2011
$12.6
$1.82
$14.4%

Tricon Global
Restaurants (1997–
Formerly 2002)
US$5.597 billion (FY December

Revenue 31, 2019)
yum! Brands
US$1.930 billion (FY December
Operating income 31, 2019)
Net income US$1.294 billion (FY December

31, 2019)
Total assets US$5.231 billion (FY December

31, 2019)
and Strategic Market Planning Chapter 11
Objective # 1:
Portfolio Planning
Models
In this section we will review different

approaches to Portfolio Analysis.

1.
Portfolio Price-quality model
analysis
can be
done
along two Product life-cycle
models model
MBM6
Portfolio analysis model 1:
Chapter 11
a. Price-Quality Model
1964 Toyota Corolla
How has the Toyota Product Portfolio evolved

and contributed to sales and profitable growth?
Portfolio Analysis Model 1 Marketing
Performance
b. Product Lifecycle Portfolio Tool 11.1
Let’s assume these are two separate companies. Which would be

a better long term investment with respect to a stock purchase?

Portfolio A is an unbalanced
product portfolio
• It has not invested in new
products
• Sales and profits will decline
Summary shortly
of Figure 2
Portfolio B is a balanced
portfolio
• It has healthy products in the late
growth and maturity stages
• The future is also promising
Strategi
c market
planning
It is a process that involves assessing business
performance with respect to market attractiveness
and competitive position.
To specify a strategic direction and to allocate

resources efficiently
What is
strategic
market The resources are limited, so it has to allocate
them most efficiently
planning?
• It may want to increase, decrease, or totally cut-off
investment in its products, depending upon their respective
market positions and their performance levels.
The important part of this process is investing for

future and maintaining portfolio diversification to
reduce large swings in overall performance
MBM6
Apple Mac vs. iPad Chapter 11
How does market

attractiveness and
competitive position
differ for these two
Apple products?
62%
Market Share (%)

Market Demand
Mac
iPad
6%
Time Mac iPad
Analysis of Strategic mkt
planning
Market • It is affected by product life-cycle

attractiveness position and market growth rate
• It helps a company discern a strong position from a

weak one
• Determined by relative market share, which is the
Competitive share of a company with respect to the market
shares of 3 largest competitors
position • Another determinant of competitive position is share
development index, relating share growth to sales
and profit
Market attractiveness
and market growth
The following illustration integrates

product life-cycle stage and the
market growth
◦ It shows how the sales and profits

vary over time, along the PLC
Market Growth as a Measure MBM6
of Market Attractiveness Chapter 11
Market Growth is often used as a measure

of Market Attractiveness. Why?
Assume that the market demand for
product D, which is in the early growth
stage of the PLC, is 1 million units
annually.
Sales The price is $100
analysis The market share is 10%
over PLC So the current sales are:

= Market demand x market share x price
= 1,000,000 units x 10% x $100
= $ 10 million
Sales analysis over PLC
Assuming that the market
grows 20% annually, while
the business maintains its = 1,200,000 units x 10% x $100
10% market share, the = $12 million
annual sales for the next
year become:
Although this example gives us sales estimates, it

oversimplifies by not decreasing the price as the
product moves along the PLC.
• Then, what about the profits?
• We include unit cost and MSE
For profits we have to include the unit cost and the
M&S expenses.
Assume that the business is determined to hold its

market share of 10%, the NMC for the base year
becomes:
NMC = market demand x market share x (unit price-

Profit unit cost) – M&S expenses
analysis
over PLC NMC = 1,000,000 x 10% x ($100-$60) - $1.5million
NMC = $4 million - $1.5 million
NMC = $2.5 million (marketing profit)

Profit analysis over PLC
If the market demand in the next year
increases by 20%, the profits become
NMC = 1,200,000 units x 10% x ($100-$60) -

$1.8 million
NMC = $3 million
Now we turn our attention towards
the other component of portfolio
analysis – the competitive position.
Sales and Market share is a reliable tool to

measure one’s competitive position,
Profit which also reflects one’s sales and
analysis profits.
with ◦ Market Share Index tells about the
actual market share
respect to ◦ Share Potential Index tells about
competitiv the share that can be achieved if
e position the business reaches all its targets
◦ Share Development Index is the
ratio of market share index to
share potential index.
Market Share Development Index MBM6
Chapter 11
As a Measure of Competitive Position
The Market Share Development index is a good measure of

competitive position for strategic management. Why?
Portfolio Model II: Product mkt portfolio plan Marketing
Performance
Market Growth vs. Share Development Tool 11.2
Product Portfolio
Product A: Slow growth

near full share development
Product B: No growth 65%

of share potential.
Product C: 10% growth rate

and 50% of share potential.
Product D: 20% growth rate

and 33% of share potential,
Product E: 23% growth rate

and 90% of share potential
What would be the right investment strategy for each product?

Product A - Mature stage of PLC. Market demand
5% and SDI is 84 (competitive) – worth to protect.
Key source of profit. Manage profit well
Product B – Mature stage of PLC. Mkt demand no
longer growing. Some room for MS to grow but
cutting price may result in lower profit. B’s future is
limited – harvest strategy
Summary Product C – Late growth stage of PLC. Need to
of PLC – invest in MSE to grow mkt share before going to
maturity. Potential to be major contributor of sales
Mkt share & profit.
Portfolio Product D – Early stage of growth. Low share index
(32). Will be in rapid growth soon. Need to invest
in MSE. Potential for profit growth.
Product E – Move from emerging to early growth
stage of PLC. Strong competitive position with SDI
of 90. Continue to invest to hold E’s excellent share
position in a market that is growing 25% annually.
Consider the same example shown
earlier as of year 1, following a
market share growth strategy, the
sales in year 1 would be:
Impact of Sales = market demand x market

share x price
share
growth
strategy
on sales Sales = 1,200,000 units x 11% x $100
By following a share
Sales = $13.2 growth strategy, the
million sales increased from $12
to $13.2 million
In order to increase its market share, the business
had to invest more in M&S. The NMC in year 1
becomes:
NMC = market demand x market share x (unit price

– unit cost) – M&S expenses
Impact of
share NMC = 1,200,000 units x 11% x ($100-$60) - $2
growth million
strategy
on profits NMC = $5.3 million - $2 million
NMC = $3.3 million
• Hence, a company following a growth strategy produced 10%

higher profits compared to a hold-share strategy
But will increase
in market share
always lead to
increase in sales
and profits?
Pursuing a hold-share
strategy
The current sales of product A, with 20% market share
and price of $50 are:
Sales (current) = market demand x market share x price
Sales (current) = 10,000,000 units x 20% x $50 per unit
Sales (current) = $100 million
If the market grows by 5%, the sales become:

Sales (year 1) = 10,500,000 units x 20% x $50 per unit
Sales (year 1) = $105 million
Sales increases by $5 million
NMC (current) = market demand x
market share x (unit price – unit cost)
– marketing & sales expenses
Pursuing a
hold-share NMC (current) = 10,000,000 units x
20% x ($50-$40) - $10million
strategy
NMC (current) = $10 million

(mktg profit)
But if the company decides to pursue a share-
growth strategy, it would have to reduce price
by 5%, resulting in increase in market share by
2%, so the sales for year 1 become:
Sales (year 1) = 10,500,000 units x 22% x $47.5
Pursuing Sales (year 1) = $109.7 million
a share-
growth While the NMC becomes:
strategy NMC (year 1) = 10,500,000 units x 22% x ($47.5-

$40) - $10million
NMC (year 1) = $7.3 million
While the company increased its sales from
$105 to $109.7 million, the NMC actually
dropped from $10 to $7.3 million!
MBM6
Product Portfolio Share Strategy Chapter 11
Product Portfolio
Product A: Hold Share
Product B: Harvest Share.
Product C: Growth Share.
Product D: Growth Share,
Product E: Hold Share
What is the logic

underlying these
share strategies?

Portfolio Model III: GE-McKinsey MBM6
Multi-Factor Portfolio Model Chapter 11
GE-McKinsey Model
Market Attractiveness
 Attractiveness based on several
factors such as Market Size,
Market Growth, Competitive
Intensity.
 Each is weighted according to

importance and then rated based
on Market Attractiveness.
Competitive Position
 Position based on several factors
such as Market Share, Product
Performance, Brand Reputation.
 Each should be weighted

according to importance and then
rated based on Competitive
Position.
Intel uses this portfolio approach to prioritize new product investment projects.
GE-McKinsey Model MBM6
Chapter 11
1. Market Attractiveness
One approach is to create three major dimensions of

Market Attractiveness and then specify a subset of
performance metrics for that dimension.

Marketing
Assessing Market Attractiveness Performance
Tool 11.3
Usage Process
1. Select three dimensions of market
attractiveness and weight each
such the total adds to 100%.
2. For each dimension identify three

areas of measureable market
attractiveness.
3. For each dimension weight the

performance metrics such that the
total adds to 100%.
4. Rate each performance metric on

a scale fro 0 (very unattractive
condition) to 100 (extremely
attractive condition).
5. An overall score (61) is produced

along with three dimension scores.

Marketing
Tool 11.3
Usage Process

attractiveness.

total adds to 100%.



Marketing
Tool 11.3
Usage Process

attractiveness.

total adds to 100%.



Marketing
Tool 11.3
Usage Process

attractiveness.

total adds to 100%.



GE-McKinsey Model MBM6
Chapter 11
2. COMPETITIVE POSITION
Create three major dimensions of Competitive

Position and then specify a subset of performance
metrics for that dimension.

Marketing
Assessing Competitive Position Performance
Tool 11.3
Usage Process
1. Select three dimensions of
Competitive Position and weight
each such the total adds to 100%.

areas of measureable competitive
position..

total adds to 100%.

a scale fro 0 (very weak
competitive position) to 100
(extremely strong competitive
position).


MBM6
GM Portfolio Strategy Chapter 11
GM Portfolio Strategy
Before 2010
Hold – Brands with average
market attractiveness and
average to good competitive
position were retained.
Divest – The 4 brands with

weak market attractiveness
and poor competitive
positions were divested.
2010.
Hold – The new portfolio
retained 8 GM brands with
average to good strategic
positions.
Invest – Volt was added to the
portfolio.
How did the GM Portfolio

Strategy impact sales and
profits?
Chapter 11
and Strategic Market Planning
Objective # 2:
Portfolio Position and
Strategic Market Plan
In this section we will focus on

different portfolio strategies.

MBM6
Offensive vs. Defensive Strategies Chapter 11
A business may pursue an Offensive Strategy or Defensive Strategy

based on portfolio analysis and business performance objectives.
MBM6
Offensive vs. Defensive Plans Chapter 11

Product Portfolio Position MBM6
Chapter 11
and Portfolio Strategies
How did GM apply the various portfolio

strategies to it’s 2010 portfolio?
Offensive strategic market plans
are geared to deliver above-
average performance in the
areas of sales growth, share-
OFFENSIVE position, and long-run profit
performance
VS
DEFENSIV
E Defensive strategies are
intended to protect important
share positions and produce
short-run profit performance,
while also contributing to long-
run profits.
Offensive portfolio strategy
Attractive product-markets usually

warrant an offensive strategic market
plan.
◦ Such offensive strategies take advantage of
favorable market conditions.
◦ These strategies might help to improve

one’s competitive position by increasing its
market share; grow the market itself; or
guide into entering another existing or
entirely new market
MBM6
Selecting A Portfolio Strategy Chapter 11
A business may have to look at a defensive strategy when it would prefer

an offensive strategy when faced with limited resources.
As the product manager for this consumer electronics product,
which portfolio strategy would you prefer to pursue?
They are most commonly implemented in
attractive markets by businesses with a
lowharvesting,
Divesting, competitive
and position index
Only ‘hold’ (protect)
even monetizing is not going
defensive strategy brings
to generate significant sales
significant cash flows
revenue growth
Defensive
portfolio
strategy
All strategies are meant to improve the

short-run cash flow and product
performance
MBM6
Selecting A Portfolio Strategy Chapter 11
A business may have to look at a defensive strategy when it would prefer

an offensive strategy when faced with limited resources.
As the product manager for this consumer electronics product,
which portfolio strategy would you prefer to pursue?
Chapter 11
and Strategic Market Planning
Portfolio Diversification
Diversification across product-markets adds two advantages

to the overall performance of the business:
1. It reduces dependence on a single product
2. It increases the likelihood of consistent
performance despite turbulence

Portfolio Diversification MBM6
Chapter 11
& Performance Variance
Diversified Portfolios
These are portfolios in which

individual Product-Markets
operate independent from
one another.
Performance Variance
The overall performance

variance in sales (6%) is
much smaller than the
individual performance
variance of the individual
product-markets (17% to
57%)…..Why?

Implication
from Figure 16
Every product market

experiences performance
swings but it is unlikely that all
product-mkt of a diversified
business will experience the
same conditions at the same
time - each contributes to
performance stability.
Product mkts that perform
well offset those that do not
(which contribute by various
factors)
A mktg mix strategy is
essential to make
strategic mktg plan
successful.
NOTE
Tactical mktg strategy
(mktg mix) must tally
with your mktg
strategy.
5 Giant
supermarkets to
close shop
HTTPS://WWW.THEMAL AYSIANINSIGHT.COM
/S/20548/
Giant outlets closing
because leases
lapsed, says minister
HTTPS://WWW.THESTAR.COM.MY/NEWS/NAT
ION/2017/11/01/GIANT- OUTLETS-CLOSIN
G-BECAUSE-LEASES-L APSED-S AYS-MINIST
ER/
Mr. D.I.Y. rolls
out its 300 th
store
HTTPS://WWW.THESTAR.COM.MY/METRO/CO
MMUNITY/2017/08/30/DIY-CHAIN- OPENS-
300TH-STORE-COMPANY-AIMS-TO -EXPAND-
TO -360-STORES-BY-END- OF-THIS-YEAR/

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Portfolio Analysis MBM6

and Strategic Market Planning Chapter 11

 Portfolio Position and

 Portfolio Planning and

Note: Sales in proportion to circle size

Copyright Roger J. Best, 2012

 Invest to Grow – Kentucky Fried Chicken,

 Divest – A&W and Long John Silver’s

 New Market Investment: - The cash freed

Copyright Roger J. Best, 2012

US$5.597 billion (FY December

Net income US$1.294 billion (FY December

Total assets US$5.231 billion (FY December

In this section we will review different

Copyright Roger J. Best, 2012

1964 Toyota Corolla

How has the Toyota Product Portfolio evolved

Let’s assume these are two separate companies. Which would be

Copyright Roger J. Best, 2012

To specify a strategic direction and to allocate

The important part of this process is investing for

How does market

Market Share (%)

Market • It is affected by product life-cycle

• It helps a company discern a strong position from a

The following illustration integrates

◦ It shows how the sales and profits

Market Growth is often used as a measure

analysis The market share is 10%

over PLC So the current sales are:

Although this example gives us sales estimates, it

Assume that the business is determined to hold its

NMC = market demand x market share x (unit price-

NMC = $4 million - $1.5 million

NMC = $2.5 million (marketing profit)

NMC = 1,200,000 units x 10% x ($100-$60) -

Sales and Market share is a reliable tool to

The Market Share Development index is a good measure of

Product A: Slow growth

Product B: No growth 65%

Product C: 10% growth rate

Product D: 20% growth rate

Product E: 23% growth rate

What would be the right investment strategy for each product?

Impact of Sales = market demand x market

NMC = market demand x market share x (unit price

NMC = $3.3 million

• Hence, a company following a growth strategy produced 10%

If the market grows by 5%, the sales become:

NMC (current) = $10 million

strategy NMC (year 1) = 10,500,000 units x 22% x ($47.5-

Product A: Hold Share

Product B: Harvest Share.

Product C: Growth Share.

Product D: Growth Share,

Product E: Hold Share

What is the logic

Copyright Roger J. Best, 2012

 Each is weighted according to

 Each should be weighted

One approach is to create three major dimensions of

Copyright Roger J. Best, 2012

2. For each dimension identify three