A Portfolio Approach to Actively Managing Alliances: The SGO Matrix

Francesco Baldi ()
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Francesco Baldi: LUISS Guido Carli University

Chapter Chapter 5 in Options in Alliances, 2013, pp 51-59 from Springer

Abstract: Abstract We propose the Synergistic Growth Options (SGO) matrix as a tool that combines and extends the best features of the Boston Consulting Group (BCG) matrix and the option features of alliances in addressing the classic trade-off between short-term-oriented synergistic value creation and long-term growth potential. The aim of such an extension is to embed a dynamic, real options-based valuation (current value plus synergistic growth option value) within traditional alliance portfolio management analysis. The economic environment that global firms face is no longer static but it is affected by an increasing uncertainty and associated high instability. Hence, the BCG matrix fails to capture the most relevant upside growth opportunities embedded in a dynamic market while mitigating the severe performance and relational risks arising from too volatile and vulnerable alliances. In this sense, a real options analysis can add significant insights to this traditional strategy framework allowing for re-arranging partnerships into different strategic groups (learning, strategic, relationship, business alliances), which makes it possible to better determine the value of their hidden managerial flexibility. Cases are briefly discussed as illustrations for all types of alliances classified based on the SGO matrix and associated real options are summarized.

Keywords: Boston Consulting Group (BCG) matrix; Synergistic Growth Options (SGO) matrix; Alliance portfolio management analysis; Expanded net present value (NPV); Business alliances; Learning alliances; Strategic alliances; Relationship alliances (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:spr:spbrcp:978-88-470-2850-0_5

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DOI: 10.1007/978-88-470-2850-0_5

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