Structure of the Tissex Company

1.Structure of the Tissex Company’s product portfolio One way to proceed is to use the three-dimensional macro-segmentation methods, to identify the six major business units (MBUs) in which Tissex operates. The segmentation chart is presented in Figure TN8.1 and the main economic data for each business unit in Table TN8.1. Functions Printing Protection Finishing Leisure Clothing Linings Technical fabrics Printing ribbons Sportswear fabrics Polyester fabrics Spinning Weaving Printing Dyeing Groups of buyers Garment industry – Menswear – Womenswear –… Dangerous jobs – Army – Chemical – Police –… Office equipment – Typewriters – Computers – Printers –… Technologies Figure TN8.1 Macro-segmentation analysis of the Tissex reference market This teaching note has been prepared by J.-J. Lambin on the base of a note written by G. Marion (ESC, Lyon). All rights reserved. © Jean-Jacques Lambin, 2000. Market-driven Management, published by Macmillan Press 27 Figures TN8.2 and TN8.3 give graphic illustrations of the sales revenue and the gross profit margin, to be used to compare the relative importance of each business unit. In Table TN8.2, the key success factors are identified for each MBU and the strengths and weaknesses of the Tissex Company. The growth-share matrix The growth-share matrix is graphically presented in Figure TN8.4. Similar charts can be developed using alternatively sales revenue or gross profit margins. Analysis of the matrix leads to the following observations: A very large MBU (polyester) is located in the lame ducks quadrant (34.7%); The MBU linings is a cash cow and represents 29.9% of the total sales revenue; Sportswear fabrics (12.5%) and ribbons (16.8%) are problem children; Technical fabrics are a star but represent a relatively small proportion (12.5%) of total sales. © Jean-Jacques Lambin, 2000. Market-driven Management, published by Macmillan Press 1 For example. Propose a marketing strategy for each MBU In Table TN8. . 487). The same type of comparison can be made with competitiveness indicators. while polyester represents 14. p. ribbons and technical fabrics.The recommendation suggested by this analysis would be to adopt a low profile (or to divest) on polyester. the scores should be given by reference to the priority competitor within each MBU.3 and TN8.5 and TN8. using the cash generated by linings. The students should be reminded that the growth-share matrix will yield valid conclusions only if the two underlying hypotheses. Attractiveness indicators should be factors beyond the control of the firm (opportunities and threats).5 and TN8. Students sometimes have difficulty in understanding the differences between market attractiveness indicators and company competitiveness indicators. Significant differences can be observed between the multi-factor matrix and the growth-share matrix. A list of possible indicators is provided in Chapter 11 (see main text. In terms of relative market share. The resulting multi-factor matrix is presented in Figure TN8. Examples of evaluation scores are presented in Tables TN8. the overall picture is very different. The students could then be subdivided in groups to evaluate the five MBUs using the empty grids presented in Tables TN8. 381–3). distinctive qualities. are verified in this particular industry (see main text. ribbons and sportswear are rated as very unattractive by reference to strength of competition.6 per cent of the total gross profit margin. to invest heavily on sportswear fabrics. The analysis of the scores of Tables TN8. but this activity scored very poorly on four other indicators of competitiveness: unit cost. The student should refer to Chapter 9 in the main text (see in particular Exhibit 9. But in the multi-factor matrix these two MBUs are rated as very attractive in terms of market accessibility and duration of the PLC. which are relevant for this market.8. Chapter 9. polyester and linings were rated as unattractive in terms of growth rate.8 is useful to reconciliate the results.5.3 per cent. One observes however that linings generated only 17. while competitiveness indicators are measures of the company distinctive qualities (strengths and weaknesses). pp.4 and TN8. Thus. The multi-factor matrix The students should be asked to identify six to seven attractiveness and competitiveness indicators. sales organisation and image. the competitiveness of the linings MBU was very high. 412) to identify feasible strategies. 389 and p. Similarly. life cycle and experience effects. a non-negligible amount. in the growth-share matrix analysis.11. Examples of indicators are presented in Tables TN8. p. The students should also define the scale by proposing semantic supports for each position on the 5-point scales. Chapter 9.9 strategic options are suggested for each MBU.6.7. For the competitive indicators. Market-driven Management.Tissex Table TN8.4% 24 Polyester 34. 2000.3% 13 Technical fabrics 12.7% 186 Ribbons 29.7% 27 Table TN8.9% 160 Technical fabrics 6.5% 67 Linings 17.1% 11 Linings 29.6% 16 Polyester 14.2% 33 Sportswear fabrics 26.8% 90 Sportswear fabrics 12.2 Main diagnosis factors per business unit Technical Fabrics Printing Ribbons Quality Price Good production equipment Quality Delivery Good commercial network Supply diversity No brand Price Price Sportwear Polyester Linings Key success factors TISSEX strengths Service Technical know-how Good customisation TISSEX weaknesses Production equipment Unit cost Customers selection Sales revenue (million FF) Gross profit margin (million FF) Sales Revenue (SR)(SR) Gross Profit Margin (GM)(GM) Figure TN8.5% 12% 55% 2000 1st DECKERMAN 7% Sportswear Polyester Linings [Japan/Germany] SPORTING 7/8% 20% Ribbons 16.2 Sales revenue and gross profit margin © Jean-Jacques Lambin. published by Macmillan Press 3 .1 Key economic and competitive data Technical Fabrics Sales turnover Gross margin: rate Gross margin: value Reference market Market growth Market share Export share in the sales turnover Number of customers TISSEX rank Direct competitor Share of the direct competitor 33 MF (6%) 34% 11 MF (12%) France 9% 30% 5% 100 1st GUILLIEZ 18% Printing Ribbons 90 MF (17%) 30% 27 MF (30%) Europe/USA 6% 5% 60% 90 3rd 67 MF (12%) 36% 24 MF (26%) France 8% 15% 5% 30 2nd 186 MF(35%) 7% 13 MF (14%) Europe 0% 1% 40% 1400 very low [Japan] 5% 160 MF(30%) 10% 16 MF (18%) Europe –2. GM = Gross profit margin Figure TN8.4 Strategic marketing diagnosis: BCG matrix © Jean-Jacques Lambin.0 Polyester ( SR: 186 – GM : 13) 0.25 0.0 2.0 1. published by Macmillan Press Table TN8.3 Attractiveness – evaluation indicators Evaluation scale Indicators Market accessibility Weight (100) – Weak 1 2 Moderate 3 Europe & USA 4 Europe Strong 5 Outside Europe © Jean-Jacques Lambin. Market-driven Management.3 Sales revenue and gross profit margin Market growth rate + 15% Technical fabrics ( SR: 33 – GM : 11) Sportswear fabrics ( SR: 67 – GM : 24) Ribbons ( SR: 90 – GM : 27) + 5% Linings ( SR: 160 – GM : 16) – 5% 8. Market-driven Management.5 0. published by Macmillan Press 4 . 2000.Million FF 200 186 150 160 Tissex 100 90 67 50 33 11 27 24 13 16 0 Technical fabrics Ribbons fabrics Sportswear Polyester Lining Strategic Business Units Figure TN8.125 Relative market share SR = Sales revenue. 2000.0 4. Market-driven Management. published by Macmillan Press 5 .00 4 1 3 1 1 1 1 1.55 © Jean-Jacques Lambin.20 5 3 4 5 1 4 5 3.5 Attractiveness – Indicators W eight activities e valuation Major business units (MBUs) Technical fabrics Printing ribbons 3 3 3 5 1 3 5 3.Tissex – – – – – – – – – & USA < 5% < 2 years < 15% Structured oligopoly Commoditised product > 2000 Market growth rate Length of the life cycle Gross profit potential Strength of competition Potential for differentiation Concentration of customers 5% – 10% 2 – 5 years 15% – 25% Unstructured competition Weak differentiation 2000 – 200 > 10% > 5 years > 25% Atomised competition Strong differentiation < 200 Table TN8.80 4 1 4 1 1 1 2 2.75 Sportswear Polyester Linings Market accessibility Market growth rate Length of the life cycle Gross profit potential Strength of competition Potential for differentiation Concentration of customers Weighted mean 15 15 15 15 15 15 10 100 5 4 5 5 3 5 5 4. 2000.4 Attracti Indicators Weight veness – acti vities evaluation Major business units (MBUs) Technical fabrics Printing ribbons – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Sportswear Polyester Linings Market accessibility – Market growth rate – Length of the life cycle Gross profit potential – Strength of competition Potential for differentiation Concentration of customers Weighted mean 100 – – – – – – – – – – – – Table TN8. 2000.8 Comp Indicators etitiveness – activitie s evaluation Weight Technical fabrics Major business units (MBUs) Printing ribbons 3 3 2 5 5 4 3. Market-driven Management.00 1 1 1 5 4 1 2.05 5 1 1 5 1 1 2.60 © Jean-Jacques Lambin.7 Compe Indicators titiveness – a ctivities evaluation Weight Technical fabrics Major business units (MBUs) Printing ribbons – – – – – – – – – – – – – – – – – – – – – – – – – – – – Sportswear Polyester Linings Relative market share Unit cost Distinctive qualities Technological know-how Sales organisation Image Weighted mean – – – – – – 100 – – – – – – – Table TN8.60 4 4 4 5 4 3 4. published by Macmillan Press 6 .40 Sportswear Polyester Linings Relative market share Unit cost Distinctive qualities Technological know-how Sales organisation Image Weighted mean 20 20 15 15 15 15 100 5 3 5 5 5 5 4.Tissex Table TN8.6 Competitiveness – evaluation indicators Evaluation scale Indicators Relative market share Unit cost Distinctive qualities Technological know-how Sales organisation Image Weight (100) – – – – – – – Weak 1 2 < 1/3 leader > direct competitors ‘Me too’ product Weak control Independent distributors Very weak Moderate 3 > 1/3 leader = direct competitors Moderately differentiated Moderate control Selective distribution Fuzzy 4 Leader < direct competitors ‘Unique selling proposition’ Strong control Direct sales Strong Strong 5 Table TN8. GM = Gross profit margin Figure TN8.Tissex Attractiveness rate 5 Technical fabrics ( SR: 33 – GM : 11) Sportswear fabrics ( SR: 67 – GM : 24) 4 Polyester ( SR: 186 – GM : 13) 3 Ribbons ( SR: 90 – GM : 27) 2 1 Linings ( SR: 160 – GM : 16) 1 2 3 4 5 Competitiveness rate SR = Sales revenue. 2000. Market-driven Management.9 Activities Technical fabrics Strategic choices Possible strategic choice Market share conquest Market share defence Hold Market share conquest Hold then divest Leave Conquest Market share conquest Hold Market share defence Hold the activity Cash maximisation Maximisation Divest Market share defence Hold the activity Cash maximisation Hold Recommendations Conquest Printing ribbons Sportswear Polyester Linings © Jean-Jacques Lambin.5 Strategic marketing diagnosis: attractiveness – competitiveness matrix Table TN8. published by Macmillan Press 7 .