Financial & Strategic Objectives

When a business consistently is losing money, top leadership may vent a frustration and an urgency that department heads are not doing the kinds of things necessary to prevent the operational demise that is unfolding and to deal with it effectively. To right the organization's operating ship, senior executives may formulate fresh financial and strategic goals that functional heads must follow to the letter.

Financial Goals

Financial goals touch on everything money-related that a company wants to achieve within a given period — say, one month, quarter or fiscal year. These objectives may span a shorter stretch if top leadership must cope with an immediate operational crisis, the kind that may happen if a major customer owing substantial amounts suddenly files for bankruptcy. For a company, economic objectives may be making a specified amount of money at year-end, increasing sales by 15 percent, cutting costs by 20 percent in segments that are bleeding cash and raising long-term debts on credit markets by targeting interest rates between 4 and 5 percent and avoiding lender restrictions that are too stringent.

Strategic Objectives

Formulating strategies is what company executives do to cope with competitive tedium, understand the tactical moves that rivals surreptitiously are making, deal with the hybrid problem of customer loyalty and brand positioning, hire competent professionals and nurture the company's mid-level brass. Strategic objectives may cover things like expanding market share overseas and domestically by 8 percent and 10 percent, respectively; reducing the corporate employee turnover ratio by 2 percent; cultivating more amicable ties with lenders, business partners and shareholders; and communicating with regulators more effectively. Employee turnover deals with how many employees leave a company compared to its total work force.

Strategic management

Definition

Strategic management is the identification, selection and implementation of an organisation’s long- term goals and objectives.

General

There are many models for strategic management that generally have three components in common:strategic analysis, strategic choice and strategic implementation.

Strategic analysis starts with the definition of a mission for the organisation. This explains why the organisation exists and provides the context against which strategies will be formulated.

Mission statements usually contain high-level criteria that can be used to evaluate strategies as they are designed and implemented.

All strategic analysis must take account of the organisation’s changing external environment (often described using the acronym PESTLE) and its capacity and capability to implement the strategy. Tools commonly used for different aspects of this analysis include the Boston Grid and Ansoff’s Matrix.

Strategic choice involves the generation, evaluation and selection of strategic options. Inputs to this process include:

• stakeholders’ expectations and aspirations;
• the organisation’s strengths;
• the opportunities created by the external environment;
• demands imposed by external influences.

The third stage of strategic management is implementation through projects, programmes and portfolios. The relationship between strategic management and P3 management should be close and symbiotic.

In simple terms, strategic management will set out long-, medium- and short-term goals that are implemented by portfolios, programmes and projects respectively. Successful implementation of strategy depends upon successful P3 management. Together they lead to growth and development of the organisation and the creation of further opportunities and challenges that preface each strategic planning cycle.

In order to judge success, a strategy must have measurable consequences. Tools such as the balanced scorecard help translate strategy into four categories of performance measures: financial, customer, learning and growth, and internal business processes. These provide the basis for defining objectives for projects, programmes and portfolios.

P3 management is therefore of vital importance to strategic management. An organisation should ensure that it establishes governance structures that embed and continuously improve P3 management.

Importance of Cultural Products in Our Culture

Culture plays a very important role to survive in present civilization. In every race and caste this culture is really very important.

Every generation has its own culture and this culture varies from time to time. Through culture we can recognize a person. Artists are mainly the savior of our cultural products. These products are mainly classified in four basic components. These are mainly artistic product itself; spin off products, related services and consumer’s experience of the product. The very first component is the central product. It is the work by itself which is mainly created by an individual creator or by a team of work creators. An organization or a market is the one where the work is mainly done by inviting customers to come in contact with creative artists’ labor. In this respect, there are mainly three aspects which are involved around the central component. These aspects are mainly spinning off products, related services and consumer’s experience including attached to the product. There are some organizations which consider these components which are integral to the work and make decision by concerning them. These components are generally left in the discretion of marketing director.

Cultural products are important for representing culture of a particular community or race. Each and every country must have its own culture that can represent their race and tradition to the people of the world. Culture is really very important to survive in this world. In today’s civilized world, having culture is quite important. In this world, we find various races of people and their different culture. Each culture is having its products. For maintaining culture these types of products are really very important. These products are really very important for establishing one’s own culture. People may come to know different things from this culture.

We people should try hard to maintain our culture whole heartedly. Culture is not static. It is dynamic. Cultural people are called as civilized people. Culture is having certain basic characteristics. The very first characteristic is that culture is learned. Second characteristic is that culture is shaped by group of people. The third characteristic is that culture is cumulative. We can earn some knowledge from this culture and can pass it on from one generation to next. All these are the main characteristics of culture.

Thus cultural products are really very important in defining culture. To get more information about these products of culture, you can take the help of internet. There are many online sites through we can gather information about it and we will also learn how we can maintain our culture.

Cultural Products

Cultural Products

Cultural Products

In this entry you will see some info according to the cultural products of a culture.

Remember that Cultural Products are tangible (Paintings, Food, Clothing) or intangible (Language, Dances, Education) creations of a particular culture.

Cultural products are very important for a culture because they represent their particular community and race. It is not new, we all know that every culture has its own products. For maintaining culture these types of products are essential. By having these products, every country or society is establishing its own culture.

Cultural products are designs that you can see, feel, touch or hear.

The book show us four categories about the cultural products of any culture.

1.       Artifacts: This is the authentic material of any culture such as, coins, bills, newspapers, etc...

2.       Places: Structure of places in a culture; what integrates and manipulates the environment. For example, villages, agriculture, etc…

3.       Institutions: Formal and organized institutions like Town Halls, directions, etc…

4.       Art Forms: Language, creative manifestations, music, dances, architecture, clothing, etc… 

Strategic Management

There are four essential phases of strategic management process. In different companies these phases may have different, nomenclatures and the phases may have different sequences, however, the basic content remains same. The four phases can be listed as below.
1. Defining the vision, business mission, purpose, and broad objectives.
2.. Formulation of strategies.
3. Implementation of strategies.
4. Evaluation of strategies.
These phases are linked to each other in a sequence. It may not be possible to draw a clear line of difference between each phase, and the change over from one phase to another is gradual. The next phase in the sequence may gradually evolve and merge into the following phase. An important linkage between the phases is established through a feedback mechanism or corrective action. The feedback mechanism results in a course of action for revising, reformulating, and redefining the past phase. The process is highly dynamic and compartmentalization of the process is difficult. The change over is not clear and boundaries of phases overlap. My purpose of depicting this diagram is to assist you in remembering and recalling it with ease Exhibit Phases of Strategic Management Process
A strategic management process that could be followed in a typical organisation is presented in Fig.The process takes place in the following stages:
1. The Strategic Planner has to define what is intended to be accomplished (not just desired). This will help in defining the objectives, strategies and policies.
2. In the light of stage I, the result of the current performance of the organisation are documented.
3. The Board of Directors and the top management will have to review the current performance of the documented.
4. In view of the review, the organisation will have to scan the internal environment for strengths and weaknesses and the external environment for opportunities and threats.
5. The internal and external scan helps in selecting the strategic factors.
6. These have to be reviewed and redefined in relation to the Mission and Objectives.
7. At this stage a set of strategic alternatives and generated.
8. The best strategic alternative is selected and implemented through programme budgets and procedures.
9.Monitoring, evaluation and review of the strategic alternative chosen is undertaken in this mode. This can provide a feedback on the changes in the implementation if required. As can be seen, this provides a rational approach to strategic decision making and it can be successfully practised by Indian organisations, which now have to operate in a competitive environment.

Benefits of Strategic Management

There are many benefits of strategic management and they include identification, prioritization, and exploration of opportunities. For instance, newer products, newer markets, and newer forays into business lines are only possible if firms indulge in strategic planning. Next, strategic management allows firms to take an objective view of the activities being done by it and do a cost benefit analysis as to whether the firm is profitable.

Just to differentiate, by this, we do not mean the financial benefits alone (which would be discussed below) but also the assessment of profitability that has to do with evaluating whether the business is strategically aligned to its goals and priorities.

The key point to be noted here is that strategic management allows a firm to orient itself to its market and consumers and ensure that it is actualizing the right strategy.

Financial Benefits

It has been shown in many studies that firms that engage in strategic management are more profitable and successful than those that do not have the benefit of strategic planning and strategic management.

When firms engage in forward looking planning and careful evaluation of their priorities, they have control over the future, which is necessary in the fast changing business landscape of the 21st century.

It has been estimated that more than 100,000 businesses fail in the US every year and most of these failures are to do with a lack of strategic focus and strategic direction. Further, high performing firms tend to make more informed decisions because they have considered both the short term and long-term consequences and hence, have oriented their strategies accordingly. In contrast, firms that do not engage themselves in meaningful strategic planning are often bogged down by internal problems and lack of focus that leads to failure.

Non-Financial Benefits

The section above discussed some of the tangible benefits of strategic management. Apart from these benefits, firms that engage in strategic management are more aware of the external threats, an improved understanding of competitor strengths and weaknesses and increased employee productivity. They also have lesser resistance to change and a clear understanding of the link between performance and rewards.

The key aspect of strategic management is that the problem solving and problem preventing capabilities of the firms are enhanced through strategic management. Strategic management is essential as it helps firms to rationalize change and actualize change and communicate the need to change better to its employees. Finally, strategic management helps in bringing order and discipline to the activities of the firm in its both internal processes and external activities.

Strategy Evaluation Process

The process of Strategy Evaluation consists of following steps-

1. Fixing benchmark of performance - While fixing the benchmark, strategists encounter questions such as - what benchmarks to set, how to set them and how to express them. In order to determine the benchmark performance to be set, it is essential to discover the special requirements for performing the main task. The performance indicator that best identify and express the special requirements might then be determined to be used for evaluation. The organization can use both quantitative and qualitative criteria for comprehensive assessment of performance. Quantitative criteria includes determination of net profit, ROI, earning per share, cost of production, rate of employee turnover etc. Among the Qualitative factors are subjective evaluation of factors such as - skills and competencies, risk taking potential, flexibility etc.
2. Measurement of performance - The standard performance is a bench mark with which the actual performance is to be compared. The reporting and communication system help in measuring the performance. If appropriate means are available for measuring the performance and if the standards are set in the right manner, strategy evaluation becomes easier. But various factors such as managers contribution are difficult to measure. Similarly divisional performance is sometimes difficult to measure as compared to individual performance. Thus, variable objectives must be created against which measurement of performance can be done. The measurement must be done at right time else evaluation will not meet its purpose. For measuring the performance, financial statements like - balance sheet, profit and loss account must be prepared on an annual basis.
3. Analyzing Variance - While measuring the actual performance and comparing it with standard performance there may be variances which must be analyzed. The strategists must mention the degree of tolerance limits between which the variance between actual and standard performance may be accepted. The positive deviation indicates a better performance but it is quite unusual exceeding the target always. The negative deviation is an issue of concern because it indicates a shortfall in performance. Thus in this case the strategists must discover the causes of deviation and must take corrective action to overcome it.
4. Taking Corrective Action - Once the deviation in performance is identified, it is essential to plan for a corrective action. If the performance is consistently less than the desired performance, the strategists must carry a detailed analysis of the factors responsible for such performance. If the strategists discover that the organizational potential does not match with the performance requirements, then the standards must be lowered. Another rare and drastic corrective action is reformulating the strategy which requires going back to the process of strategic management, reframing of plans according to new resource allocation trend and consequent means going to the beginning point of strategic management process.

Steps in Implementing a Strategy

Strategy implementation is the translation of chosen strategy into organizational action so as to achieve strategic goals and objectives. Strategy implementation is also defined as the manner in which an organization should develop, utilize, and amalgamate organizational structure, control systems, and culture to follow strategies that lead to competitive advantage and a better performance. Organizational structure allocates special value developing tasks and roles to the employees and states how these tasks and roles can be correlated so as maximize efficiency, quality, and customer satisfaction-the pillars of competitive advantage. But, organizational structure is not sufficient in itself to motivate the employees.

An organizational control system is also required. This control system equips managers with motivational incentives for employees as well as feedback on employees and organizational performance. Organizational culture refers to the specialized collection of values, attitudes, norms and beliefs shared by organizational members and groups.

Following are the main steps in implementing a strategy:

	Developing an organization having potential of carrying out strategy successfully.
	Disbursement of abundant resources to strategy-essential activities.
	Creating strategy-encouraging policies.
	Employing best policies and programs for constant improvement.
	Linking reward structure to accomplishment of results.
	Making use of strategic leadership.

Excellently formulated strategies will fail if they are not properly implemented. Also, it is essential to note that strategy implementation is not possible unless there is stability between strategy and each organizational dimension such as organizational structure, reward structure, resource-allocation process, etc.

Strategy implementation poses a threat to many managers and employees in an organization. New power relationships are predicted and achieved. New groups (formal as well as informal) are formed whose values, attitudes, beliefs and concerns may not be known. With the change in power and status roles, the managers and employees may employ confrontation behaviour.

Steps in Strategy Formulation Process

Strategy formulation refers to the process of choosing the most appropriate course of action for the realization of organizational goals and objectives and thereby achieving the organizational vision. The process of strategy formulation basically involves six main steps. Though these steps do not follow a rigid chronological order, however they are very rational and can be easily followed in this order.

1. Setting Organizations’ objectives - The key component of any strategy statement is to set the long-term objectives of the organization. It is known that strategy is generally a medium for realization of organizational objectives. Objectives stress the state of being there whereas Strategy stresses upon the process of reaching there. Strategy includes both the fixation of objectives as well the medium to be used to realize those objectives. Thus, strategy is a wider term which believes in the manner of deployment of resources so as to achieve the objectives.
   While fixing the organizational objectives, it is essential that the factors which influence the selection of objectives must be analyzed before the selection of objectives. Once the objectives and the factors influencing strategic decisions have been determined, it is easy to take strategic decisions.
2. Evaluating the Organizational Environment - The next step is to evaluate the general economic and industrial environment in which the organization operates. This includes a review of the organizations competitive position. It is essential to conduct a qualitative and quantitative review of an organizations existing product line. The purpose of such a review is to make sure that the factors important for competitive success in the market can be discovered so that the management can identify their own strengths and weaknesses as well as their competitors’ strengths and weaknesses.
   After identifying its strengths and weaknesses, an organization must keep a track of competitors’ moves and actions so as to discover probable opportunities of threats to its market or supply sources.
3. Setting Quantitative Targets - In this step, an organization must practically fix the quantitative target values for some of the organizational objectives. The idea behind this is to compare with long term customers, so as to evaluate the contribution that might be made by various product zones or operating departments.
4. Aiming in context with the divisional plans - In this step, the contributions made by each department or division or product category within the organization is identified and accordingly strategic planning is done for each sub-unit. This requires a careful analysis of macroeconomic trends.
5. Performance Analysis - Performance analysis includes discovering and analyzing the gap between the planned or desired performance. A critical evaluation of the organizations past performance, present condition and the desired future conditions must be done by the organization. This critical evaluation identifies the degree of gap that persists between the actual reality and the long-term aspirations of the organization. An attempt is made by the organization to estimate its probable future condition if the current trends persist.
6. Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course of action is actually chosen after considering organizational goals, organizational strengths, potential and limitations as well as the external opportunities.

Business Ethics

Definition of Business Ethics

Business Ethics refers to carrying business as per self-acknowledged moral standards. It is actually a structure of moral principles and code of conduct applicable to a business. Business ethics are applicable not only to the manner the business relates to a customer but also to the society at large. It is the worth of right and wrong things from business point of view.

Business ethics not only talk about the code of conduct at workplace but also with the clients and associates. Companies which present factual information, respect everyone and thoroughly adhere to the rules and regulations are renowned for high ethical standards. Business ethics implies conducting business in a manner beneficial to the societal as well as business interests.

Every strategic decision has a moral consequence. The main aim of business ethics is to provide people with the means for dealing with the moral complications. Ethical decisions in a business have implications such as satisfied work force, high sales, low regulation cost, more customers and high goodwill.

Some of ethical issues for business are relation of employees and employers, interaction between organization and customers, interaction between organization and shareholders, work environment, environmental issues, bribes, employees rights protection, product safety etc.

Below is a list of some significant ethical principles to be followed for a successful business-

1. Protect the basic rights of the employees/workers.
2. Follow health, safety and environmental standards.
3. Continuously improvise the products, operations and production facilities to optimize the resource consumption
4. Do not replicate the packaging style so as to mislead the consumers.
5. Indulge in truthful and reliable advertising.
6. Strictly adhere to the product safety standards.
7. Accept new ideas. Encourage feedback from both employees as well as customers.
8. Present factual information. Maintain accurate and true business records.
9. Treat everyone (employees, partners and customers) with respect and integrity.
10. The mission and vision of the company should be very clear to it.
11. Do not get engaged in business relationships that lead to conflicts of interest. Discourage black marketing, corruption and hoarding.
12. Meet all the commitments and obligations timely.
13. Encourage free and open competition. Do not ruin competitors’ image by fraudulent practices.
14. The policies and procedures of the Company should be updated regularly.
15. Maintain confidentiality of personal data and proprietary records held by the company.
16. Do not accept child labour, forced labour or any other human right abuses.

Different Types of Business Strategies

New companies often face unique challenges. Specific strategies, such as identifying product strengths, adjusting pricing, or acquiring another business, have historically been used to get a small enterprise off the ground. Understanding these strategies, and skillfully implementing them, can help entrepreneurs achieve success.

Growth Strategy

A growth strategy entails introducing new products or adding new features to existing products. Sometimes, a small company may be forced to modify or increase its product line to keep up with competitors. Otherwise, customers may start using the new technology of a competitive company. For example, cell phone companies are constantly adding new features or discovering new technology. Cell phone companies that do not keep up with consumer demand will not stay in business very long.

A small company may also adopt a growth strategy by finding a new market for its products. Sometimes, companies find new markets for their products by accident. For example, a small consumer soap manufacturer may discover through marketing research that industrial workers like its products. Hence, in addition to selling soap in retail stores, the company could package the soap in larger containers for factory and plant workers.

Product Differentiation Strategy

Small companies will often use a product differentiation strategy when they have a competitive advantage, such as superior quality or service. For example, a small manufacturer or air purifiers may set themselves apart from competitors with their superior engineering design. Obviously, companies use a product differentiation strategy to set themselves apart from key competitors. However, a product differentiation strategy can also help a company build brand loyalty.

Price-Skimming Strategy

A price-skimming strategy involves charging high prices for a product, particularly during the introductory phase. A small company will use a price-skimming strategy to quickly recover its production and advertising costs. However, there must be something special about the product for consumers to pay the exorbitant price. An example would be the introduction of a new technology. A small company may be the first to introduce a new type of solar panel. Because the company is the only one selling the product, customers that really want the solar panels may pay the higher price. One disadvantage of a price-skimming is that it tends to attract competition relatively quickly. Enterprising individuals may see the profits the company is reaping and produce their own products, provided they have the technological know-how.

Acquisition Strategy

A small company with extra capital may use an acquisition strategy to gain a competitive advantage. An acquisition strategy entails purchasing another company, or one or more of its product lines. For example, a small grocery retailer on the east coast may purchase a comparable grocery chain in the Midwest to expand its operations.

Strategy Formulation vs Strategy Implementation

Strategy Formulation	Strategy Implementation
Strategy Formulation includes planning and decision-making involved in developing organization’s strategic goals and plans.	Strategy Implementation involves all those means related to executing the strategic plans.
In short, Strategy Formulation is placing the Forces before the action.	In short, Strategy Implementation is managing forces during the action.
Strategy Formulation is an Entrepreneurial Activity based on strategic decision-making.	Strategic Implementation is mainly an Administrative Taskbased on strategic and operational decisions.
Strategy Formulation emphasizes on effectiveness.	Strategy Implementation emphasizes on efficiency.
Strategy Formulation is a rational process.	Strategy Implementation is basically an operational process.
Strategy Formulation requires co-ordination among few individuals.	Strategy Implementation requires co-ordination among many individuals.
Strategy Formulation requires a great deal of initiative and logical skills.	Strategy Implementation requires specific motivational and leadership traits.
Strategic Formulation precedes Strategy Implementation.	STrategy Implementation follows Strategy Formulation.

SWOT Analysis of Microsoft

Strengths

• The biggest strength of Microsoft is that it has top of the mind brand recall among all the PC (personal computer) users in the world. Indeed, Microsoft and its legendary founder, Bill Gates, are known to anyone who is remotely acquainted with computing. This has enabled the company to forge ahead of its rivals even though as we shall discuss later, in recent years, some of the sheen of the Microsoft brand has been lost.
• The other strength and a key driver of its business and readymade acceptance by the users of its products is that Microsoft’s software is easy to use which has won it an increasing base of customers around the world. It can also be said that Microsoft and Bill Gates have spawned what can be called a “Second Industrial Revolution” by making computing available to the masses.
• The company has a worldwide network of distributors and also it indulges in co-branding with hardware makers of computers, which enables it to have strategic depth and a breadth of user base that is unparalleled.
• Microsoft has consistently beat analyst expectations in terms of profitability and revenues though it is appearing to be vulnerable to shifting trends like mobile computing in recent years.

Weaknesses

• The biggest weakness of Microsoft is that its fabled team did not anticipate the emergence of the internet as a phenomenon that would take over the world in addition to reading the market signals about mobile computing. In case of the former (internet), Microsoft was slow to respond and even when it did, it was in a manner that attracted monopolistic charges which in earlier years were the mainstay of the company.
• As for mobile computing, Microsoft completely missed this wave and indeed, the success of the other computing revolutionary, Late Steve Jobs and his Apple Company appeared to blindside Microsoft and Bill Gates so much that it has even now failed to come up with a compelling Smartphone device or operating system.
• The third weakness relates to the ubiquitous security flaws in its software, which is apparent to any windows user, and chances are that you would have probably encountered the familiar crashes of Windows no matter which version you use.

Opportunities

• Though Microsoft failed to read the emergence of the internet and was completely taken aback by the mobile wave, a ray of hope that is still visible to the company is in the cloud-computing paradigm, which the company is betting big to take on the competition and regain its leadership position.
• Indeed, the recent appointment of the Indian born Satya Nadella as the CEO is in line with its aggressive push towards cloud computing as the game changer for the company and since Nadella is thought to be a cloud-computing wizard, it is understood that Microsoft is banking on him for it to ride the next wave.
• The company has a huge cash hoard which means that if it cannot grow organically (through normal growth) it can still grow inorganically (through acquisitions) of smaller companies that have good business prospects.
• This is the manner in which Bill Gates made amends for misreading the internet and bought out Hotmail created by another Indian, Sameer Bhatia that did give Microsoft some edge for a few years before Google revolutionized personal email products.

Threats

• As can be inferred from the analysis so far, Microsoft’s biggest threat is that it’s very size which is an asset otherwise is preventing it from being quick and nimble and seize market opportunities by proactively reading market signals.
• Further, Microsoft faces a key challenge from Open Source software, which was a force to reckon with initially seemed to have lost some of its fizz though it is making a comeback again.
• On the commercial front, Microsoft has been exasperated with software piracy especially in Asia where the pirated copies are more than the original products in China and India.
• Finally, Microsoft has to be both weary and wary of potential lawsuits especially in Europe where the regulators are not taking kindly to its monopolistic business practices.

Conclusion

The preceding analysis has made it clear that Microsoft cannot afford to misread emerging trends and changing customer preferences anymore. Instead, it must be in a position where it senses and intuits market moves and prepares to act accordingly. A possible strategic move would be to focus more on the enterprise segment since most other technology companies seem to be focusing exclusively on the personal customer segment. In conclusion, it remains to be seen as to how the recent leadership changes play themselves out with regards to the future strategic moves by the company.

.....BCG MATRIX ....

How to use the BCG Matrix     ?

Now that we have plotted the different products, divisions or SBUs on the BCG matrix, we need to know what to do next. So how does the BCG matrix work and help to derive strategic decisions?

To arrive at these decisions, we need to understand the four types of SBU that are distinguished by the Boston growth-share matrix.

Question Marks

Question marks are low-share business units in high-growth markets. They require cash to hold their share, let alone increase it. The company needs to think hard about question marks – which ones should be built into stars, and which ones should be phased out? Question marks have the following characteristics:

• Low relative market share in a relatively young but promising market (growing)
• Potential of becoming stars if the market share can be increased
• If necessary market share is not reached, question marks are likely to turn into dogs as soon as the market gets more mature
• Careful analysis is needed to determine whether to invest or not.

Stars

Stars are high-growth, high-share businesses or products. They often need heavy investment to finance their rapid growth. Eventually, their growth will slow down, and they will turn into cash cows. Stars have the following characteristics:

• High market share in a promising market
• To turn a star into a future cash cow, heavy investment is needed to fight competition and expand market share.

Cash Cows

Cash cows are low-growth, high-share businesses or products. These established and successful SBUs need less investment to maintain their market share. As a result, they produce cash that the company uses to pay its bills and to support other SBUs that need investment. As we have learned, question marks and stars require heavy investment, which usually comes from the profitable cash cows. Cash cows have the following characteristics:

• High market share in a slowly growing or mature market
• Create the highest cash flow
• No further investment should be undertaken due to limited or non-existent growth potential
• The company should try to “milk” the cash cows as long as possible.

(Poor) Dogs

Dogs are low-growth, low-share businesses and products. They may generate enough cash to maintain themselves, but do not promise to be large sources of cash flow. Dogs have the following characteristics:

• Low relative market share in a slowly growing or declining market
• Products do mostly not generate large profit and may usually just break even
• The company should divest dogs, as these products have a negative effect on the overall profitability of the company. Instead of carrying dogs along, the company should better focus on products or SBUs with greater potential.

The ideal circle of the BCG matrix

The ideal situation as suggested by the BCG matrix is the following: The company invests in promising Question marks to turn them into Stars. By further investing, Stars are turned into Cash cows. The company harvests all the cash until the Cash cows eventually turn into dogs. At that point, the company divests the product or SBU and focuses on more profitable opportunities.

The table below summarizes the characteristics of the four types of SBUs in the BCG matrix and shows the strategic implications for the company’s long-term planning.

SWOT Analysis

S.W.O.T. is an acronym that stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis is an organized list of your business’s greatest strengths, weaknesses, opportunities, and threats.

Strengths and weaknesses are internal to the company (think: reputation, patents, location). You can change them over time but not without some work. Opportunities and threats are external (think: suppliers, competitors, prices)—they are out there in the market, happening whether you like it or not. You can’t change them.

Existing businesses can use a SWOT analysis, at any time, to assess a changing environment and respond proactively. In fact, I recommend conducting a strategy review meeting at least once a year that begins with a SWOT analysis.

New businesses should use a SWOT analysis as a part of their planning process. There is no “one size fits all” plan for your business, and thinking about your new business in terms of its unique “SWOTs” will put you on the right track right away, and save you from a lot of headaches later on.