This summary covers the topics: BCG Matrix, Confrontation Matrix with strategies per quadrant, Product and Pricing strategies with the product life cycle, market penetration and market skimming, Place and communication strategies including distribution channels, push and pull strategy. Further, the...
Marketing Summary Quarter 1 Year 2
PowerPoint week 1 BCG Matrix
Marketing plays an important role in strategic planning. It provides:
- A guiding philosophy.
- Inputs to strategic planners by helping to identify attractive market opportunities and
by assessing the firm’s potential to take advantage of them.
Marketing designs strategies for reaching unit objectives.
BCG growth-share matrix = an analysis of a company’s portfolio of different products SBU’s
(Strategic Business Units).
Business portfolio = the group of different products or brands owned by an organization and
having different income-generating and growth capabilities.
To be effective, objectives must be specific in terms of:
- the performance dimension being measured
- the measures most appropriate for the performance dimension
- the target value for each measure
- the time by which the target should be achieved.
Strategic Business Unit:
1. Strategic audit:
External audit = a detailed examination of the markets, competition, business and economic
environment in which the organisation operates.
Internal audit = an evaluation of the firm’s entire value chain.
1
, 2. Financial statements of a strategic audit:
A balance sheet shows the assets, liabilities, and net worth of a company at a given time
The operating statement shows company sales, cost of goods sold, and expenses during a
given period of time
3. A SWOT analysis draws the critical strengths, weaknesses, opportunities, and threats
from the strategic audit.
4. A strategic business unit is a unit of the company that has a separate mission and
objectives, and which can be planned independently from other company business.
BCG a tool for Portfolio analysis
Evaluate the businesses making up a company:
1. Identify the key businesses (SBU’s)
2. Assess the attractiveness of each SBU
3. Decide which SBU’s should receive more or less of the firm’s resources
The BCG growth-share matrix enables a firm to evaluate SBU’s on two important dimensions:
1. The attractiveness of the SBU’s market or industry
2. The strength of the SBU’s position in that market or industry
BCG growth-share matrix
Market growth rate
- Measured in percentages
- What is “low” and what is “high” depends on the type of market in which you are
active.
e.g. food market, building construction market, steel market (traditional markets): high
growth could be 5%.
e.g. telecommunications, internet market: high growth rate could be 20%.
2
,Relative market share
- Ratio of a SBU’s own market share to the market share held by the largest competitor.
- Relative market share = Market share company / market share of biggest
competitor
- The midpoint on the x-axis is usually set at 0.50 (half of the market share of the leader).
Size of the circles
- The size of the circle corresponds to the proportion of total revenue generated by the
SBU. model does not say anything about profit. You might have a certain position but
it does not say anything about your competitive position it has its limitations.
Example:
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, BCG Growth-share matrix Strategies
- Invest more in a SBU to build its share
- Invest just enough to hold a SBU’s share at the current level
- Harvest a SBU, milking it’s short-term cash-flows regardless of the long-term effect
- Divest a SBU by selling it or phasing it out and using the resources elsewhere.
There might be competitive reasons to keep the dog it could be a block for another company
Reflections on model
- Is the market share leader also the profit leader? (Model doesn’t show profit)
- Future is unpredictable
- How about competitiveness?
- How about synergies?
- There may be reasons to keep a dog alive..
Challenges the BCG Matrix needs to be adapted to
1. The world is changing and markets are quite turbulent. Technology is developing
rapidly, and hence, business models get outdated quite quickly. therefore, it is more
difficult to hold market share and there are fewer cash cows.
2. Market share is not an exclusive predictor of sustained performance.
Remember for exam:
- How to calculate the market share
- How to calculate the relative market share (1 to 0 vs Market Leader)
- Naming the axis, the name of each quadrant
- Strategies associated with each quadrant
- Choosing the mid-points of each axis
- And that the circle size corresponds to revenues.
- Choose 1 strategy; for example divest, or you choose build, not divest or build.
- Study the cases, know how to apply the theory.
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