UGC NET COMMERCE January 2017(Paper-II) Q29
0. Match the items of List-I with List-II and denote the code of correct matching.
| List–I | List–II |
| (a) Invest Strategy | 1. No receiving of new resources. |
| (b) Protect Strategy | 2. Well financed marketing efforts. |
| (c) Harvest Strategy | 3. Selective resource allocation |
| (d) Divest Strategy | 4. Not warranting substantial new resources. |
CODES
| (a) | (b) | (c) | (d) | |
| 1 | 2 | 3 | 4 | 1 |
| 2 | 1 | 3 | 2 | 4 |
| 3 | 2 | 1 | 4 | 3 |
| 4 | 4 | 3 | 2 | 1 |
- Option : A
- Explanation : Management can use the GE business screen to classify SBUs or major products on the basis of two factors: market attractiveness and business position. Each factor is rated according to several criteria. Market attractiveness should be judged with respect to market growth rate (similar to the BCG matrix), market size, degree of difficulty in entering the market, number and types of competitors, technological requirements, and profit margins, among other criteria. Business position encompasses market share (as in the BCG matrix), SBU size, strength of differential advantage, research and development capabilities, production capacity, cost controls, and strength of management, among others. The criteria used to rate market attractiveness and business position are assigned different weights because some criteria are more important than others. Then each SBU or, if desired, major product is rated with respect to all criteria. Finally, overall ratings for both factors, usually numerical scores, are calculated for each SBU. On the basis of these ratings, each SBU is labelled as high, medium or low with respect to (1) market attractiveness and (2) business position. For example, an SBU may be judged as having high market attractiveness but medium business position. Following the ratings, an organization’s SBUs are plotted on a 3 × 3 grid, as depicted in Figure. The best location for an SBU is the upper left cell because it points to (1) the most attractive market opportunity and (2) the best business position to seize that opportunity. The worst location is the lower right cell, for the opposite reasons. The nine cells have implications with respect to how resources are allocated and, in turn, what marketing strategies are suitable.
Every organization has to make decisions aimed at using its limited resources most effectively. That’s where planning models can help—determining which SBUs or major products should be stimulated for growth, which ones maintained in their present market positions, and which ones eliminated. An SBU’s evaluation, as indicated by its location on the GE business screen, suggests how it should be treated:
Invest strategy : SBUs in the three cells in the upper left of the grid should receive ample resources. To strengthen or at least sustain such SBUs, bold, well-financed marketing efforts are needed. Several years ago, Silicon Graphics, Inc. announced that it would concentrate on producing powerful server computers that can handle challenging technical and Internet applications. The firm’s decision seemed to be based on an assessment indicating high market attractiveness and a midrange business position. Xerox Corp is following this strategy with respect to highend digital copiers, as are several competitors.
Protect strategy : Resources should be allocated selectively to SBUs along the diagonal running from the lower left to the upper right of the grid. This somewhat defensive approach helps an SBU maintain its present market position while it generates cash needed by other SBUs. For example, the firm that makes Precious Moments, small porcelain figurines of children, suffered when demand for collectibles declined. The Enesco Group took several actions, including (a) selling inexpensive Precious Moments trinkets at discount stores in order to promote the brand and (b) distributing the figurines through different channels, including in-home parties.
Harvest strategy : Because they lack an attractive market and a strong business position, SBUs in the two cells just below the three-cell diagonal do not warrant substantial new resources. Instead, expenditures should be curtailed to maximize any remaining profits. An alternative is to sell these SBUs. A case can be made that the Hewlett-Packard Co. is following this strategy with regards to lowerprice printers. With growth slowing and profit margins shrinking in this category, H-P is shifting resources from basic printers to higher-growth areas, including digital publishing and multipurpose printer-based machines.
Divest strategy : SBUs in the lower right cell do not have much going for them. Hence, an SBU in this location should not receive any resources. The best approach probably is to eliminate it from the organization’s portfolio by selling it or, failing that, shutting it down. When the McDonald’s Corp. assessed its portfolio several years ago, the firm decided to divest its Fazoli’s and Donatos Pizzeria divisions and keep two “promising concepts,” Chipotle Mexican Grill and Boston Markets, in addition to its famous namesake division. Firms typically employ more than one of these four strategies and adjust them over time.
