The significance of the SWOT analysis undertaken above is to use the existing business strengths to exploit opportunities, to create new opportunities, to counteract threats and repair any weaknesses as suggested by (Robson 1997) Further strategic analysis will be undertaken by utilising product portfolio analysis; this will be achieved by using the BCG matrix. The concept of product portfolio is used here to describe the financial health of a collection of business products and is equivalent to an investment portfolio.
This matrix produced by the Boston Consultancy Group (BCG) is used as a planning tool to divide the various business units of a firm into categories associated with particular characteristics and actions. Figure 3 overleaf displays this model. To understand this model, the vertical axis is the overall growth rate of the industry; the horizontal axis is the market share of the product or business relative to that of the largest competitor. The matrix is divided into four (not necessarily equal) quadrants each of which is labelled according to the type of business or product located within it.
Each quadrant will not be explained to contribute to the understanding of this complex model as suggested by (Robson 1997)Products or business divisions in this segment are the ones that provide significant revenue now and are expected to continue to do so in the future. In this quadrant, the organisation will wish to seek opportunities to increase profits and extend the life of the product or division. However, as these products services require on-going investment they do not generate as much margin as cash cows. Products or divisions in this segment are those that are the current high income earners for the organisation.
They are expected to provide the major part of current profits and form the major source of funding for future developments. However, cash cows are relatively short-term so they are not expected to provide significant future revenues. For business areas in this segment, the organisation should look to adopt measures to increase the profit, extend the life time, or shift the division of the product into the star quadrant. Products or divisions in this segment provide little or no contribution to profits today and it is not expected that this situation will change.
This segment should be removed or by taking steps to reduce associated costs, it should be moved into the cash cows. These products/ divisions are seen to have lost market share to competitors or are in a declining market. Divisions or products in this quadrant are those that the organisation is currently prepared to “carry” since, although they make little or no contribution to revenue now, they are expected to in the future. These are usually young areas or products and are probably still being developed.
It is suggested that investments should be made cautiously in this segment since the risks associated with this segment are higher than with others. Theses products or divisions if successful will become stars. The importance and advantages present in the utilisation of this portfolio analysis is that it focuses attention the abilities of businesses to generate cash and allows management to decide how best to allocate cash and other resources to different divisions in the business. This is also a useful tool in aiding development of strategies to sustain the long-term growth of business portfolios.
In addition, it provides a means of assessing both products and business units and therefore, is applicable at different levels within the firm. The above-completed BCG Matrix highlights all the different divisions within Lloyds TSB. For ease of understanding the matrix has been discussed further explaining the different divisions, which exist, and the quadrants in which they are aligned to. For further interpretation of the matrix above, the radius of the circle depends on what division is doing most of the business for the organisation.
The strategy plan established for Lloyds TSB has been created after undertaking a through environmental and portfolio analysis. It is clear from undertaking the environmental analysis that competition within the financial services industry is intense and the UK market is influenced by the impact of ever-increasing regulation and Government-driven price controls. There is no clear indication in the environmental analysis undertaken that indicates that in the future the competition will be any less fierce or regulation any less intrusive.
The strategy plan developed exists to understand Lloyds TSB current position in the financial services industry. The plan considers how the organisation can move forward with a sense of direction, purpose and urgency. In addition, it has been developed in order to have a significant impact on the industry and more importantly the plan exists to highlight how to achieve some degree of sustainable competitive advantage. Strategic planning as suggested by (Robson 1997) highlights that strategic planning turns a organisations vision into concrete achievable.
It describes the initiatives that will achieve the vision in ways deemed consistent with the organisation, its assumed market and the competitive environment. The strategies that have been highlighted are likely to create the future of the organisation. However, in developing a strategy plan it is vitally important to involve the creation of new and lasting competitive advantages and the development of new products and services. It is important whilst strategy making that innovation and dynamism is concurrently endeavoured for as suggested by (Porter 1987)
The strategy plan developed consists of a vision for Lloyds TSB followed by a mission and goals. The goals highlight how the company will continue to strive for market leadership. The objectives which follow have been selected as they include innovation and dynamic approaches to follow in order to achieve the vision of the organisation. Overall, the process of developing a strategy plan is a complex task; however, once this has been developed and strategies have been underpinned the outcome is a clear direction for the organisation to follow to remain competitive and in preparation for the uncertain future ahead.
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