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BCG Category Segments Ashridge general
policy/strategy
Heartland business PGMs (platinum), diamonds, copper Core of parent’s future

strategy
Value trap businesses Nickel, coal, iron ore and manganese, Learn more about the
nobium and phosphates businesses or Disinvest

Ballast businesses None Manage with very light
touch/Hands-off
Alien businesses Residential property portfolio Exit from this segment.

Just like in the Question Mark quadrant, there is an overconcentration in the Value Trap quadrant
with Nickel, Nophium and Phosphates, Iron Ore and Manganese, and Coal. The policy for Value

Trap Businesses is to learn more about it or to divest. We discuss each Value Trap business in turn:

Nickel: Our BCG has already confirmed the need to divest Nickel and this is reinforced here so no

further analysis is required.

Nobium and Phosphates: This has the most superior ROCE (Appendix 4.3) but we have a US$1.5

billion offer for the Brazilian subsidiary of this segment. We can either learn more about this
businesses in order to add value to it and extract even better ROCE going forward or disinvest.
Phosphates however appears to be the most different of all our metals as it is used more in fertilizer
production for the agriculture market as opposed to infrastructure or consumer durables, so it

appears to have the least scope for learning in a way that will assist us add more value to it as a
corporate parent. Furthermore, despite its highest ROCE, it by far the smallest contributor to
revenue so it can be disposed easily with the least impact on the business.

Coal: Our BCG classified coal as a Dog. Clearly its ROCE (11% in 2016 and 8% in 2015) is amongst
the best and the second highest contributor (23% i.e. 4,888/23,003) to revenues (after Platimum) so

it will be suicidal to sell/divest.

Iron Ore and Manganese: Our BCG termed this a Question Mark. It has very strong ROCE (10% in

2016 and 19% in 2015). We may need to rather hold or Build this in terms of BCG or Learn more
about it in terms of Ashridge; in order to extract even better ROCE going forward.

4.2.3 Recommendation
Divest from Nickel as well as Nobium and Phosphates but revise downwards the US$5.8 billion cost

reduction target as these segments hold far too few employees to support such a saving. Hold
PGMs, coal, iron ore and manganese as well as Copper and build diamonds.

Developed by The CharterQuest Institute for 'The CFO Business Case Study Competition 2017'
www.charterquest.co.za | Email: thecfo@charterquest.co.za