Diversification "out of the box" - Roland Berger

1.1 EXAMPLESThe correct portfolio segmentation can lead to insights, whilstincorrect segmentation can result in serious consequencesINSIGHTS FROMCORRECT PORTFOLIO SEGMENTATIONSTRATEGIC> Should we buy or sell the attractive business?> Should we expand into new geographies?> Are we vulnerable to low cost countries?> Should we vertically integrate into growingdownstream/upstream?> Can we exit a business without weakening the corebusiness?> Do we have to grow through M&A to be successful inthe future?OPERATIONAL> Should we drop this product line?> Should we merge our salesforce?> How should we plan our manufacturing footprint?> Should we centralize our activities to achieve higherscale? (e.g. distribution centers; salesforce)STRATEGIC CONSEQUENCES OFINCORRECT PORTFOLIO SEGMENTATIONCUSTOMERS> Neglect profitable customer segments or over-investin unprofitable customers> Give away opportunities to capture synergies> Misjudge relevant trends> Overlook relevant geographiesCOSTS> Induce unnecessary costs> Give away opportunities to capture synergies> Do not transfer experience> Under invest in important R&D initiativesCOMPETITORS> Overlook threats from competition> Miscalculate "real market share" (as proxy for scale andachievable profits)> Set inappropriate targets> Overlook relevant capacity changes in the industry> Misjudge true cost position10