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 units (MBUs) in which which Tissex operates. operates. The segmentation segmentation chart is presented presented in Figure Figure TN8.1 and the main economic data for each business unit in Table TN8.1.

Functions

Printing ribbons

Printing Technical fabrics

Protection Finishing

Leisure

Clothing

Linings

Sportswear fabrics

Polyester fabrics

Groups of buyers Spinning Weaving Printing Dyeing

Garment industry

Dangerous obs  – Army  – Chemical  – Police  – …

 – Menswear  – Womenswear  – …

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 2000. Market-driven Management  Management , published by Macmillan Press

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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 2000. Market-driven Management  Management , published by Macmillan Press

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The recommendation suggested by this analysis would be to adopt a low profile (or to divest) on polyester, to invest heavily on sportswear fabrics, ribbons and technical fabrics, using the cash generated by linings. One observes however that linings generated only 17.6 per cent of the total gross profit margin, while polyester represents 14.3 per cent, a non-negligible amount. The students should be reminded that the growth-share matrix will yield valid conclusions only if the two underlying hypotheses, life cycle and experience effects, are verified in this particular industry (see main text, Chapter 9, pp. 381 – 3).

The multi-factor matrix The students should be asked to identify six to seven attractiveness and competitiveness indicators, which are relevant for this market. Examples of indicators are presented in Tables TN8.3 and TN8.6. Students sometimes have difficulty in understanding the differences between market attractiveness indicators and company competitiveness indicators. Attractiveness indicators should be factors beyond the control of the firm (opportunities and threats), while competitiveness indicators are measures of the company distinctive qualities (strengths and weaknesses). A list of possible indicators is provided in Chapter 11 (see main text, Chapter 9, p. 389 and p. 487). The students should also define the scale by proposing semantic supports for each position on the 5-point scales. The students could then be subdivided in groups to evaluate the five MBUs using the empty grids presented in Tables TN8.4 and TN8.7. For the competitive indicators, the scores should be given by reference to the priority competitor within each MBU. Examples of evaluation scores are presented in Tables TN8.5 and TN8.8. The resulting multi-factor matrix is presented in Figure TN8.5. Significant differences can be observed between the multi-factor matrix and the growth-share matrix. The analysis of the scores of Tables TN8.5 and TN8.8 is useful to reconciliate the results. For example, in the growth-share matrix analysis, polyester and linings were rated as unattractive in terms of growth rate. But in the multi-factor matrix these two MBUs are rated as very attractive in terms of market accessibility and duration of the PLC. Similarly, ribbons and sportswear are rated as very unattractive by reference to strength of competition. Thus, the overall picture is very different. The same type of comparison can be made with competitiveness indicators. In terms of relative market share, the competitiveness of the linings MBU was very high; but this activity scored very poorly on four other indicators of competitiveness: unit cost, distinctive qualities, sales organisation and image.

Propose a marketing strategy for each MBU In Table TN8.9 strategic options are suggested for each MBU. The student should refer to Chapter 9 in the main text (see in particular Exhibit 9.11, p. 412) to identify feasible strategies.

Tissex Key economic and competitive data

Table TN8.1

Technical

Printing

Fabrics

Ribbons

Sportswear

Polyester

Linings

Sales turnover

33 MF (6%)

90 MF (17%)

67 MF (12%)

186 MF(35%)

160 MF(30%)

Gross margin: rate

34%

30%

36%

7%

10%

Gross margin: value

11 MF (12%)

27 MF (30%)

24 MF (26%)

13 MF (14%)

16 MF (18%)

Reference market

France

Europe/USA

France

Europe

Europe

Market growth

9%

6%

8%

0%

 –2.5%

Market share

30%

5%

15%

1%

12%

turnover

5%

60%

5%

40%

55%

Number of customers

100

90

30

1400

2000

TISSEX rank

1st

3rd

2nd

very low

1st

Direct competitor

GUILLIEZ

[Japan/Germany] SPORTING

[Japan]

DECKERMAN

18%

7/8%

5%

7%

Export share in the sales

Share of the direct competitor

20%

Ribbons 16.8% 90

Polyester 14.3% 13 Linings 17.6% 16

Sportswear fabrics 12.5% 67

Linings 29.9% 160

Technical fabrics 12.1% 11

Technical fabrics 6.2% 33 Sportswear fabrics 26.4% 24 Ribbons 29.7% 27

Polyester 34.7% 186

Table TN8.2

Key success factors TISSEX strengths

Main diagnosis factors per business unit Technical

Printing

Fabrics

Ribbons

Service

Sportwear

Quality

Quality

Price

Delivery

Technical

Good

Good

know-how

production

commercial

equipment

network

Good

Polyester

Linings

Price

Price

Production

Unit cost

equipment

Customers

Supply

customisation

diversity TISSEX weaknesses

No brand

selection

Figure TN8.2

Sales revenue

Gross profit margin

(million FF)

(million FF)

Sales revenue and gross profit margin Sales Revenue (SR)(SR)

© Jean-Jacques Lambin, 2000. Market-driven Management , published by Macmillan Press

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Gross Profit Margin (GM)(GM)

Million FF 200 186

160

Tissex

150

100

90 67

50

33

27

24

16

13

11 0 Technical fabrics

Sportswear

Ribbons

Polyester

Lining

fabrics

Strategic Business Units

Sales revenue and gross profit margin

Figure TN8.3

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)

Polyester ( SR: 186 – GM : 13)

 – 5%

8.0

4.0

2.0

0.5

1.0

0.25

0.125

Relative market share SR = Sales revenue; GM = Gross profit margin

Figure TN8.4

Strategic marketing diagnosis: BCG matrix

© Jean-Jacques Lambin, 2000. Market-driven Management , published by Macmillan Press

Table TN8.3 Attractiveness – evaluation indicators Evaluation scale Indicators

Weak

Weight (100)

Market accessibility

1

Moderate 2

Outside Europe

 –

© Jean-Jacques Lambin, 2000. Market-driven Management , published by Macmillan Press

4

3

Europe & USA

Strong 4

5

Europe

Tissex  –

& USA

Market growth rate

 –

< 5%

5% – 10%

> 10%

Length of the life cycle

 –

< 2 years

2 – 5 years

> 5 years

Gross profit potential

 –

< 15%

15% – 25%

> 25%

Strength of competition

 –

Structured

Unstructured

Atomised

 –

oligopoly

competition

competition

 –

Commoditised

Weak

Strong

 –

product

differentiation

differentiation

 –

> 2000

2000 – 200

< 200

Potential for differentiation Concentration of customers

Table TN8.4 Attracti

veness – acti vities evaluation

Indicators Weight

Major business units (MBUs) Technical

Printing

Sportswear

Polyester

Linings

abrics

ribbons

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 TN8.5 Attractiveness – Indicators W

activities e valuation

eight

Major business units (MBUs) Technical abrics

Printing

Sportswear

Polyester

Linings

ribbons

Market accessibility

15

5

3

5

4

4

Market growth rate

15

4

3

3

1

1

Length of the life cycle

15

5

3

4

4

3

Gross profit potential

15

5

5

5

1

1

Strength of competition

15

3

1

1

1

1

Potential for differentiation

15

5

3

4

1

1

Concentration of customers

10

5

5

5

2

1

100

4.55

3.20

3.80

2.00

1.75

Weighted mean

© Jean-Jacques Lambin, 2000. Market-driven Management , published by Macmillan Press

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Tissex

Table TN8.6 Competitiveness – evaluation indicators Evaluation scale Indicators

Weak

Weight (100)

Moderate

1

2

Strong

3

4

5

Relative market share

 –

< 1/3 leader

> 1/3 leader

Leader

Unit cost

 –

> direct

= direct

< direct

competitors

competitors

competitors

‘Me too’

Moderately

‘Unique selling

product

differentiated

proposition’

Distinctive qualities

 –

Technological know-how

 –

Weak control

Moderate

Strong

control

control

Sales organisation

 –

Independent

Selective

Direct sales

 –

distributors

distribution

 –

Very weak

Fuzzy

Image

Table TN8.7 Compe Indicators

Strong

titiveness – a ctivities evaluation Weight

Major business units (MBUs) Technical

Printing

abrics

ribbons

Sportswear

Polyester

Linings

Relative market share

 –

 –

 –

 –

 –

 –

Unit cost

 –

 –

 –

 –

 –

 –

Distinctive qualities

 –

 –

 –

 –

 –

 –

Technological know-how

 –

 –

 –

 –

 –

 –

Sales organisation

 –

 –

 –

 –

 –

 –

Image

 –

 –

 –

 –

 –

 –

100

 –

 –

 –

 –

 –

Weighted mean

Table TN8.8 Comp

etitiveness  – activitie s evaluation

Indicators

Weight

Major business units (MBUs) Technical abrics

Printing

Sportswear

Polyester

Linings

ribbons

Relative market share

20

5

3

4

1

5

Unit cost

20

3

3

4

1

1

Distinctive qualities

15

5

2

4

1

1

Technological know-how

15

5

5

5

5

5

Sales organisation

15

5

5

4

4

1

Image

15

5

4

3

1

1

100

4.60

3.60

4.00

2.05

2.40

Weighted mean

© Jean-Jacques Lambin, 2000.  Market-driven Man agement , published by Macmillan Press

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Tissex

Attractiveness rate

Technical fabrics ( SR: 33 – GM : 11) 5

Sportswear fabrics ( SR: 67 – GM : 24)

4

Polyester ( SR: 186 – GM : 13)

Ribbons ( SR: 90 – GM : 27)

3

2

Linings ( SR: 160 – GM : 16) 1

1

2

3

4

5

Competitiveness rate SR = Sales revenue; GM = Gross profit margin

Figure TN8.5 Strategic marketing diagnosis: attractiveness – competitiveness matrix

Table TN8.9

Strategic choices

Activities

Possible strategic choice

Recommendations

Technical fabrics

Market share conquest Market

Conquest

share defence Hold Printing ribbons

Sportswear

Market share conquest Hold then divest

Leave

Market share conquest

Conquest

Hold Polyester

Market share defence Hold the activity Cash maximisation

Maximisation

Divest Linings

Market share defence Hold the activity

Hold

Cash maximisation

© Jean-Jacques Lambin, 2000.  Market-driven Man agement , published by Macmillan Press

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