MARKETING MANAGEMENT

Presented to: Ms Astha Gupta

Presented by Harshita Baranwal

BCG Matrix, Ansoff Matrix & GE Matrix

BCG MATRIX

Boston Consulting Group (BCG) Matrix is developed by BRUCEHENDERSON of the BOSTON CONSULTING GROUP in the early 1970’s.

According to this technique, businesses or products are classified as lowor high performers depending upon their market growth rate and

relative market share

STARS

Stars are leaders in business.

May not necessarily produce highest cash flow.

They also require heavy investment, to maintain its large market share.

It leads to large amount of cash consumption and cash generation.

Attempts should be made to hold the market share otherwise the star

will become a CASH COW.

They are foundation of the company

and often the stars of yesterday.

They generate more cash than

required.

They extract the profits by investing

as little cash as possible.

Enjoys economy of scale and high

profit margins being the market

leader.

They are located in an industry that

is mature, not growing or declining.

CASH COWS

DOGS Dogs are the cash traps.

Dogs do not have potential to bring in much cash.

Number of dogs in the company should be minimized.

Business is situated at a declining stage

QUESTION MARK Most businesses start of as question

marks.

They will absorb great amounts of cash

if the market share remains unchanged,

(low).

Question marks have potential to

become star and eventually cash cow

but can also become a dog.

Investments should be high for

question marks

BCG OF PEPSICO

STARSPEPSICO BRANDS

????TROPICANAGATORADE

CASH COWSQUAKERS

DOGSFRITO –LAY

RELATIVE MARKET SHARE

MARKET

GROWTH

RATE

ANSOFFFirst course of action should be to review whether any

opportunities exist for improving it’s existing businesses’

performance. Ansoff’s model called product-market

expansion grid.

• Market penetration

Market penetration is the name given to a growth strategy where the

business focuses on selling existing products into existing markets.

• Market development

Market development is the name given to a growth strategy where

the business seeks to sell its existing products into new markets.

• Product development

Product development is the name given to a

growth strategy where a business aims to

introduce new products into existing

markets. This strategy may require the

development of new competencies and

requires the business to develop modified

products which can appeal to existing

markets.

• Diversification

Diversification is the name given to the growth

strategy where a business markets new

products in new markets

GE Matrix / McKinsey matrix portfolio analysis Model

In the late sixties and early seventies, while the Boston Consulting Group were devising the BCG

or Growth Share matrix, General Electric, a leading corporation in the United States, were also

looking at concepts and techniques for strategic planning.

The firm was disappointed in the profits that they had made from their investments in the

various businesses, which suggested flaws in GE’s approach to investment decision-making.

GE asked McKinsey and Company, a consulting company in the USA, to develop a portfolio

approach with a wider dimension than the BCG matrix.

In 1971 McKinsey and Co developed the business screen for General Electric to differentiate the

potential for future profit in each of the 43 strategic business units.

Starting point of GE Matrix

Firstly, MARKET ATTRACTIVENESS replaces MARKET GROWTH

as the dimension of

industry attractiveness, and includes a broader range of factors other than just the market

growth rate.

Secondly, COMPETITIVE STRENGTH replaces MARKET SHARE

as the

dimension by which the competitive position of each business unit is assessed.

GE OVER BCG

BCG

In the original GE McKinsey matrix,

business strength is plotted on the

vertical axis; the industry

attractiveness on the horizontal axis

and the size of the circle represents

the size of the industry with a shaded

wedge representing the firm’s

current share of the industry. The

matrix is divided into nine boxes.

The matrix allows a company to

assess the fit between the

organizational competencies and

the business/product offerings.

It also introduces the forecasted

positioning of

businesses/products on the

matrix facilitating the strategic

planning process.

- Market Size

- Market growth

- Market profitability

- Pricing trends

- Competitive intensity / rivalry

- Overall risk of returns in the industry

- Opportunity to differentiate products and services

- Segmentation

- Distribution structure (e.g. retail, direct, wholesale

Factors that Affect Market

Attractiveness

- Strength of assets and competencies

- Relative brand strength

- Market share

- Customer loyalty

- Relative cost position (cost structure

compared with competitors)

- Distribution strength

- Record of technological or other innovation

- Access to financial and other investment

resources

Factors that Affect Competitive Strength

The factors are usually identified by

a representative, experienced

group of managers from the firm

including corporate, business and

functional managers.

Who Defines the Factors?

1. The three cells at the top left hand

side of the matrix are the most

attractive in which to operate and

require a policy of investment for

growth – these are usually colored

green.

2. The three cells running diagonally from

left to right have a medium

attractiveness, are colored yellow and

the management of businesses within

this category should be more cautious

and with a greater emphasis being

placed on selective investment and

earning retention.

3. The three cells at the bottom right hand

side are the least attractive, therefore

colored red and management should

follow a policy of harvesting and / or

divesting unless the relative strengths can

be improved.

• If an organization is made up of many

business units or if a business unit is

made up of a number of different

product lines.

• Important for assigning priorities for

investment in the various businesses of

the firm and is guidance for resource

allocation.

• This matrix can be used at all levels

within the organization.

• It allows an organization to focus on

the strengths and weaknesses of the

business units or products.

Best Use

GE of UK Retailing

Source: http://www.oppapers.com/subjects/ge-matrix-marketing-page25.html

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