Page 195 - (DK) The Business Book

WORKING WITH A VISION 193

See also: Study the competition 24–27 ■ Protect the core business 170–71 ■ Good and bad strategy 184–85 ■ Porter’s five
forces 212–15 ■ The value chain 216–17 ■ Product portfolio 250–55 ■ Ansoff’s matrix 256–57

company McKinsey & Company The MABA matrix
for conglomerate General Electric, provides a means
GROW— GROW— HOLD— of identifying which
which had 150 business units. invest and invest and invest
The MABA matrix is a High grow grow selectively if business units should
be grown, held at their
systematic, consistent method for cash allows current level, or sold.
a decentralized corporation to decide Those at the top left of
how to share its capital among the GROW— HOLD— HARVEST the matrix have a high
various business units by assessing Medium invest and invest for cash, business and market
each unit’s profitability and market MARKET ATTRACTIVENESS grow selectively if then sell attractiveness, and
cash allows
position. Past methods of budget should be grown. Those
in the center have
allocation relied on each business medium ratings for both
unit’s forecasts for growth and HOLD— HARVEST HARVEST factors, and may warrant
invest
profitability, which were subject to Low selectively if for cash, for cash, selective investment.
then sell
then sell
error. Although designed for large cash allows Those at the bottom
companies, the matrix can also be right have low scores for
used by smaller companies to assess High Medium Low both factors, and should
the strength of a product line or be harvested for cash,
and sold or liquidated.
brands, rather than business units.
BUSINESS ATTRACTIVENESS
Using the matrix
The matrix allows a company to matrix according to their market determining where to invest to
judge each business unit on two and business attractiveness. This yield the highest growth. Over
factors to determine its future sorts units into three categories: the years, the criteria for assessing
success: the attractiveness of its those that should be “grown” industry attractiveness and
industry or market, and the business through investment, “held” (invested competitive strength have grown
unit’s competitive strength within in selectively), and “harvested” for more sophisticated. But even today,
that industry. Market attractiveness cash and either sold or liquidated. most large organizations with a
is rated according to the market Sorting units into these three formal approach to modeling their
size, growth rate, profitability, categories provides a starting point businesses use the MABA matrix
and level of competition. Business for strategic analysis, and for or one of its derivatives. ■
attractiveness is rated according
to the unit or product’s current Why Kraft gobbled up Cadbury
and growth level of market share,
its brand strength, and its profit When Illinois-based Kraft potential for growth elsewhere
margins relative to rivals. Foods bought British chocolate in the world. In the first half of
By plotting the attractiveness manufacturer Cadbury for more 2009 alone, 69 percent of
of an industry on one axis and the than $19 billion in 2010, it was Cadbury’s sales growth came
competitive position of a business because it saw Cadbury’s from emerging markets. The
unit in that industry along the competitive strength in an British company offered Kraft
other, large corporations can attractive industry. Cadbury greater access to these markets,
compare the strengths of diverse would be positioned at the top including the BRIC economies—
left of the MABA matrix. Kraft Brazil, Russia, India, and China.
business units. The matrix
was already the world’s second- Cadbury also had some of the
condenses the value-creation
biggest food business with world’s leading chocolate,
potential of multiple business
strong brands of its own, but candy, and chewing gum
units into a single, digestible chart.
it was generating 80 percent of brands. Cadbury’s Chocolate,
Each business unit or product
its sales from the US and it was for example, was already a
must be evaluated, using data eager to capitalize on the leading brand in India.
analysis, and placed within the