The Boston Consulting Group approach and other formal methods revolutionized strategic planning. However such approaches have limitations. They can be difficult, time consuming and costly to implement. Management may find it difficult to define strategic business units and measure market share and growth. In addition, these approaches focus on classifying current businesses but provide little advice for future planning. Management must still rely on its own judgment to set the business objectives for the strategic business unit, to determine what resources each will be given and to figure out which new businesses should be added.
Formal planning approaches can also lead the company to place too much emphasis on market share growth or growth through entry into attractive new markets. Using these approaches many companies plunged into unrelated and new high growth businesses that they did not know how to manage with every bad results. At the same time, these companies were often too quick to abandon, sell, or milk to death their healthy mature businesses. As a result many companies that diversified too broadly in the past now are narrowing their focus and getting back to the basics of serving one or a few industries that they know best.
Formal planning approaches can also lead the company to place too much emphasis on market share growth or growth through entry into attractive new markets. Using these approaches many companies plunged into unrelated and new high growth businesses that they did not know how to manage with every bad results. At the same time, these companies were often too quick to abandon, sell, or milk to death their healthy mature businesses. As a result many companies that diversified too broadly in the past now are narrowing their focus and getting back to the basics of serving one or a few industries that they know best.
