datta meghe institute of management studies product and brand management unit 1 lecture 4 bcg matrix...
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![Page 1: Datta Meghe Institute of Management Studies Product and Brand Management Unit 1 Lecture 4 BCG matrix and its applications](https://reader030.vdocuments.us/reader030/viewer/2022032802/56649e115503460f94afc5ed/html5/thumbnails/1.jpg)
Datta Meghe Institute of
Management Studies
Product and Brand Management
Unit 1
Lecture 4
BCG matrix and its applications.
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2
Datta Meghe Institute of
Management Studies
Syllabus
• Unit 1
BCG matrix and its applications.
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Datta Meghe Institute of
Management Studies
Learning Objectives• What is Growth Share Matrix (Boston Consulting
Group)• What are SBUs
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Datta Meghe Institute of
Management Studies
Growth Share Matrix (Boston Consulting Group)
• Classification of SBUs/products into four cell matrix based on– Market Attractiveness
• Indicator – Industry’s annual growth rate
• 10% traditional cutoff– Business Strength
• Indicator – Company’s Market Share Relative to Largest Competitor
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The Boston Consulting Group’s Growth-Share Matrix
20%-18%-16%-14%-12%-10%- 8%- 6%- 4%- 2%- 0
Mar
ket G
row
th R
ate
10x 4x 2x 1.5x 1x Relative Market Share
.5x .4x .3x .2x .1x
Dogs 87
3 ?Question marks
? ?2
1
Cash cows
6
Stars
5
4
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Star Strategies
• Leader expanding industry
• Generates large profits• Requires substantial
investments to sustain growth
• Farthest down on experience curve relative to competition
• Increase sales – e.g. new markets, new channels of distribution
• Increase market share
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Problem Child or ?
• Low market share in expanding industry
• Needs substantial cash to improve its position
• Slow progress on experience curve
• Increase sales (limit to niche or increase market share (limit to niche)
• Leave market
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Cash Cow
• Leader in mature or declining industry
• Can generate funds for other SBUs
• Maintain market share e.g. ensure quality, build customer loyalty, develop substitute brands
• Maximize Cash Flow e.g. increase usage rate, rate of replacement, modify expense structure, raise prices
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Dogs
• Low market share in a mature or declining industry
• Slow progress on experience curve
• Cost disadvantages and few growth opportunities
• Harvest or Divest• Concentrate on niches
requiring limited effort
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The Boston Consulting Group’s Growth-Share Matrix
20%-18%-16%-14%-12%-10%- 8%- 6%- 4%- 2%- 0
Mar
ket G
row
th R
ate
10x 4x 2x 1.5x 1x Relative Market Share
.5x .4x .3x .2x .1x
![Page 11: Datta Meghe Institute of Management Studies Product and Brand Management Unit 1 Lecture 4 BCG matrix and its applications](https://reader030.vdocuments.us/reader030/viewer/2022032802/56649e115503460f94afc5ed/html5/thumbnails/11.jpg)
Datta Meghe Institute of
Management Studies
Strategy Implications BCG
• Star – Leader in Expanding Industry– BUILD - Continue to increase market share – if
necessary at expense of short-term earnings
• Problem Child – Low market share in Expanding Industry– HARVEST if weak, BUILD if strong.– Assess chances of dominating segment. If good, go
after share. If bad, redefine business or withdraw.
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Datta Meghe Institute of
Management Studies
Strategy Implications BCG
• Cash Cow – Leader in mature or declining industry– HOLD - Maintain share and cost leadership until
further investment becomes marginal– Maximize cash flow
• Dogs – Low market share in a mature or declining industry– DIVEST Plan an orderly withdrawal so as to maximize
cash flow or concentrate on niches that require limited effort
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Datta Meghe Institute of
Management Studies
Assumptions of Growth /Share Matrix
• High market share generates cash revenues ?• High Market growth uses more cash resources ?
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Datta Meghe Institute of
Management Studies
Issues with Growth/Share Matrix
• Market growth is not the only factor related to cash usage.
• Market growth is not necessarily related to cash usage.
• Market share is not necessarily related cash generation.
• Multiple factors lead to profitability.• Cash is not the only factor in evaluating a
portfolio.
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Datta Meghe Institute of
Management Studies
Issues With Growth/Share Matrix
• Limited to industries where experience curve is relevant
• Appropriate for volume industries• Overlooks perils of growth• Measurement problems• Product-market definition problems• Difficult to implement strategies
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Datta Meghe Institute of
Management Studies
Summary
Star – Leader in Expanding Industry
Problem Child – Low market share in Expanding Industry
Cash Cow – Leader in mature or declining industry
Dogs – Low market share in a mature or declining industry
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Datta Meghe Institute of
Management Studies
Assignment
• Prepare a BCG matrix for companies in TATA group?
• LAQS and SAQS• Explain BCG matrix?• What are • Dogs• Cash cows• Stars• Question marks in BCG
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Datta Meghe Institute of
Management Studies
Reference
• Marketing Management – Kotler, Keller, Koshy, Jha
• Principles of Marketing – Kotler, Armstrong, Agnihotri, Haque