Strategic Market Management, 10th Edition

CHAPTER FIFTEEN

Setting Priorities for Businesses and Brands—The Exit, Milk, and Consolidate Options

There is nothing so useless as doing efficiently that which should not be done at all.

—Peter Drucker

If you want to succeed, double your failure rate.

—Thomas Watson, founder, IBM

Anyone can hold the helm when the sea is calm.

—Publilius Syrus

All firms, from Mercedes to GE to Nestlé to Marriott to Intel, should view their business units as a portfolio. Some should receive investment because they are cash-generating stars in the present and will be into the future. The investment is needed to keep them healthy and to exploit growth opportunities. Others need investment because they are the future stars of the company even though they now have more potential than sales and profits. Identifying the priority business units, the ones that merit financial and managerial resources, is a key to a successful strategy.

Equally important, perhaps more important, is to identify those business units that are not priorities. Some of them should assume the role of generating cash through a milking or harvesting strategy. These units, termed cash cows, should no longer absorb investments aimed at growing the business. Still other units should be divested or closed or merged because they lack the potential to become either stars or cash cows—their profit prospects may be unsatisfactory, or they may lack a fit with the strategic thrust going forward. These decisions, which are strategically and ...