Response 1(150 words):
1) Walt Disney Corporation owns the following companies: ESPN, ABC News, and Pixar.
Based on the materials in chapter 7, what is the management tool that Walt Disney can use to assess and determine the financial performance of each firm including market growth to assist with its funding decision for these firms?
One of the most popular tools in developing a corporate strategy for multiple business corporations is a portfolio analysis. A portfolio analysis requires top management to view its product lines and business management as a type of investment because of it expects a profitable return.
The information gathered from the product line and business makes it possible to create a portfolio of investments that top management must constantly handle to confirm the best return on the corporation’s invested money. According to Wheelen, the advantages of portfolio analysis include:
(1) encouraging top management to evaluate each of the corporation’s business individually, (2) stimulating the use of externally oriented data to supplement management’s judgement, (3) raising the issue of cash flow availability for use in expansion and growth, and finally, (4) a graphic description which facilitates communication.
2) Which section in the table of contents for the capstone report would require the use of the information in chapter 7 of the class text, based on the stated instructions?
The recommended directional corporate strategy section would require the use of the information in chapter 7 as we need to state and discuss in detail, the strategy for the firm. A firm’s directional strategy is composed of three general orientations which include:
(1) growth strategies, (2) stability strategies, and (3) retrenchment strategies. These strategies are useful both to corporations operating in only one industry with one product line and to those operating in many industries with many product lines.
3) Name and discuss the concept that describes the action of company management when an industry is unattractive and the company too weak to be sold as a going concern giving management the choice to convert as many saleable assets as possible to cash, which is then distributed to the shareholders after all obligations are paid.
Liquidation is typically used in the termination of a firm. Liquidation occurs when the industry is unattractive and the company is too weak to be sold as a going concern, management may choose to convert as many saleable assets as possible to cash, which is then distributed to the shareholders after all obligations are paid.
Liquidation is an advisable strategy for struggling firms with a small number of possible outcomes, all of which are problematic. Although, liquidation may be the best strategy for a firm, the manager(s) may be unwilling to ‘liquidate’ their company in order to avoid being personally blamed for the company’s faults.
To avoid the negative stigma that comes with a failing business, many top managers are reluctant to admit that their company has serious weaknesses. After these top managers are unable to avoid the company’s struggles, they are likely to attribute the struggle to temporary environmental disturbances instead of finding a solution to the problem.
They then tend to continue to follow their profit strategies. Even when things are going terribly wrong, top management is greatly tempted to avoid liquidation in hope of a miracle.
4) Is stability really a strategy or just a term for no strategy?
Strategy is the direction the corporation is taking in order to reach its objective. The text states that stability is a strategy itself. Stability strategies can be very useful in the short term but can be dangerous if followed for too long. Some of the more common stability strategies include: the pause/proceed with caution, no change, and profit strategies.
Wheelen, T. L. and Hunger, David J. Strategic Management and Business Policy: Globalisation, Innovation, and Sustainability. 14th ed. Upper Saddle River: NJ: Pearson, 2015.
Response 2 (150 words):
The BCG Growth-Share Matrix is the simplest way to represent a corporation, like Disney’s, portfolio of investments based on its growth rate and its relative market share. Its growth rate is its market growth.
There are four types of its purpose, which are:
(1) Question marks/problem children, which are the new products that are most likely expensive to develop but have the potential for success. (2) Stars, which are the market leaders that are usually at the top of their product life cycle with enough cash to maintain a high market share and profits. (3) Cash Cows, which usually bring a lot of money to maintain their market share. (4) Dogs, which have low market share and is not likely to have any potential to bring any money or profit.
Section 9: Recommended Directional Corporate Strategy
According to the textbook, liquidation is when the “industry is unattractive and the company too weak to be sold as a going concern, management may choose to convert as many saleable assets as possible to cash, which is then distributed to the shareholders after all obligations are paid.”
This means closing down all business activities of the company in case of total failure of the its operation. This could be caused by a few things, such as: insolvency of a company, continuous losses, getting involved in illegal businesses. The businesses will then dispose their assets and earn some cash from the sale of assets, and use it to pay creditors first before distributing the rest to pay the members of the company.
If the business owners don’t have the time to do it, then they could file for bankruptcy, in which an agent will sell the assets for you and pay off your creditors.
Strategy itself means a plan chosen to achieve a certain goal and objectives in the future. Usually, only after a business analyse and consider everything that needs to be considered, it would be able to come up with the best strategy for its business going forward.
Stability, in this case, means being able to tackle and respond to any kind of problem that a business might occur for a period of time. When a business is stable, it is able to maintain its current position in its market.
And I think to be able to do this, a business would need to have a good strategy. So stability is more a strategy than no strategy. Stability can be considered a good strategy for a company, because if a business is unstable things can change at any moment.
Wheelen, Thomas L., et al. Concepts in Strategic Management and Business Policy: Globalization, Innovation, and Sustainability. Pearson, 2018.