Impact of Misdefined Business Strategies on Profitability PPT

This PPT slide, part of the 60-slide Business Definition Analysis PowerPoint presentation, presents a critical analysis of how improper business definitions can lead to significant missed opportunities and losses for established companies. It highlights 3 case studies: American Express, Allegis, and Saatchi & Saatchi, each illustrating the pitfalls of narrow or incorrect business definitions.

For American Express, the management viewed charge cards and credit cards as separate entities. A more comprehensive definition would recognize them as part of a unified category—plastic money. This misalignment resulted in financial losses for the charge card division, attributed to poor cost management and ineffective marketing strategies.

Allegis is another example where management combined airlines, hotels, and rental cars under a single umbrella focused on serving travelers. The better approach would have been to treat these as distinct businesses. The consequence of this oversight was a lack of value for customers, ultimately leading to the company's split.

Saatchi & Saatchi faced similar challenges by merging advertising and consulting into one business model. The recommended separation of these functions would have allowed for clearer focus and better service delivery. The company suffered severe financial setbacks due to its inability to leverage its experience effectively.

The overarching theme is that a precise understanding of business boundaries is essential for strategic success. Companies must define their operations accurately to avoid costly mistakes and ensure they can capitalize on market opportunities. This slide serves as a cautionary reminder for executives to reassess their business definitions regularly.

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Strategic Analysis Cost Management