Marketing BCG

Marketing
BCG Matrix
BCG Matrix
• For manufacturing businesses it is very functional to have a prior

understanding of the market position of their products. Besides knowing
which products need to be promoted more, they will know which
products will be successful. For this purpose, the American
Boston Consulting Group (BCG) developed the BCG Matrix in which
products or (functional) business units are assessed on two features:
• The relative market share that a certain product or its business unit has
with respect to the competition.
• The market growth potential for that product or its business unit.
• The BCG Matrix is also known as the Boston Matrix, the Growth Share
Matrix or Boston Consulting Group Matrix.
Continued
• BCG Matrix categories
• The absolute values of the axes are dependent on the line of business
or industry. This is why the axes are often indicated with high and low.
Based on the BCG Matrix a product or business unit can be in one of
the four following categories:
Continued
Continued
• 1. Question mark
• It is still a big question (problem child / wild cat) what the product is going to do on the market.
Often it is concerns a product that is to be introduced and is unknown with a very small market
share. It is still uncertain whether it can become a Star or a Cash Cow.
• 2. Star
• The market share of the product grows like a ‘rising star’ in the growth market. With targeted
investments such as innovations and adjustments to the product, this lead in the market is
maintained. The product will become more and more familiar.
• 3. Cash Cow
• The product is a ‘milch cow’ and big money is made from this. The revenue from the Cash Cow is
invested in other products.
• 4. Dog
• When a product is in the underdog position, it has a small market share in a mature market. If this
product is no longer of strategic importance to the company, this product will be divested.
Continued
• Sequence
• The most ideal development path of a product is that from Question
mark to Starand Cash Cow. The route to Dog should be postponed for as long as
possible. Some products remain stuck as a Question mark and become Dogs at an
early stage. This is a costly affair for a business as investments have been made in the
product and in the promotion around the product. The route of a product via the
ideal development path will eventually bring in money with which investments can be
made in other and/or new products that will be deployed in the market as a Question
mark. However, for the sake of the continuity of the Cash Cows and/or Stars, Dogs are
also necessary.
• Example: Fast food restaurants in America almost always offer soft drinks (Dog) for
free in combination with a hamburger (Cash Cow).
• As a consequence, the sale of the Cash Cows is guaranteed.
Continued
• Strategic choices
• Operational management can be determined from the BCG matrix. For a company it entails a lot of risk to
fully aim at one of the four categories and from a strategic point of view it is better to distribute the
assortment over all four categories. Some strategic choices that are in conformity with the BCG matrix could
be:
• 1. Build strategy
• Create a new brand and a new target audience by means of a Question Mark.
• 2. Hold strategy
• Maintain this success and benefit from market growth by means of a Star.
• 3. Harvest strategy
• Make as much money as possible with the product by means of the Cash Cow. This can be achieved by
improving or renewing the product or by manufacturing by-products.
• 4. Divest strategy
• Abandon the investment in the product by means of a Dog; the market is saturated or there is no or little
interest in the product.
Continued
• Criticism on the BCG matrix
• Notwithstanding the fact that the BCG matrix is applied by many businesses, it has also been
criticized:
• The market share of the matrix does not guarantee profitability.
• The BCG matrix does not consider decreasing markets enough; Cash Cows could disappear
without reason.
• Market growth is treated as a given, whereas a business could give the market an incentive.
• Both axes have been assigned the same value. In practice, this value can depend on the
strategy.
• The coherence as regards content between products and product groups is not incorporated.
• The BCG matrix does not show what the competition is doing.
• The BCG matrix may oversimplify the assessments of the facts
The McKinsey 7-S Framework: Developed in 1980s by
Tom Peters and Robert Waterman
• The 7-S model can be used in a wide variety of situations where an

alignment perspective is useful, for example, to help you:
• Improve the performance of a company.
• Examine the likely effects of future changes within a company.
• Align departments and processes during a merger or acquisition.
• Determine how best to implement a proposed strategy.
• The McKinsey 7-S model can be applied to elements of a team or a
project as well. The alignment issues apply, regardless of how you
decide to define the scope of the areas you study.
The Seven Elements
• The McKinsey 7-S model involves seven interdependent factors which

are categorized as either "hard" or "soft" elements:
Hard Elements Soft Elements
Shared Values
Strategy
Skills
Structure
Style
Systems
Staff
Continued
• "Hard" elements are easier to define or identify and management can
directly influence them: these are strategy statements; organization
charts and reporting lines; and formal processes and IT systems.
• "Soft" elements, on the other hand, can be more difficult to describe,
and are less tangible and more influenced by culture. However, these
soft elements are as important as the hard elements if the
organization is going to be successful.
• The way the model is presented in figure 1 below depicts the
interdependency of the elements and indicates how a change in one
affects all the others.
Continued
Let's look at each of the elements specifically:
• Strategy: the plan devised to maintain and build competitive advantage over the
competition.
• Structure: the way the organization is structured and who reports to whom.
• Systems: the daily activities and procedures that staff members engage in to get the
job done.
• Shared Values: called "superordinate goals" when the model was first developed,
these are the core values of the company that are evidenced in the corporate culture
and the general work ethic.
• Style: the style of leadership adopted.
• Staff: the employees and their general capabilities.
• Skills: the actual skills and competencies of the employees working for the company.
• Placing Shared Values in the middle of the model emphasizes that these values are
Shell Directional Policy Matrix
• The Shell Directional Policy Matrix is another refinement upon the Boston Matrix.
Along the horizontal axis are prospects for sector profitability, and along the
vertical axis is a company’s competitive capability. As with the GE Business Screen
the location of a Strategic Business Unit (SBU) in any cell of the matrix implies
different strategic decisions.
• Double or quit – gamble on potential major SBU’s for the future.
• Growth – grow the market by focusing just enough resources here.
• Custodial – just like a cash cow, milk it and do not commit any more resources.
• Cash Generator – Even more like a cash cow, milk here for expansion elsewhere.
• Phased withdrawal – move cash to SBU’s with greater potential.
• Divest – liquidate or move these assets on a fast as you can.
continued
The Arthur D Little strategic condition matrix
Product lifecycle portfolio mix: This model combines the life
stage of the product/service with the portfolio approach, also considering the investment
implications.

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Marketing

• For manufacturing businesses it is very functional to have a prior

• The 7-S model can be used in a wide variety of situations where an

• The McKinsey 7-S model involves seven interdependent factors which

Hard Elements Soft Elements

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