strategic marketing(2)

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Strategy Formulation Strategy Implementation Strategy Evaluation

Ch 1 -2

ExternalAudit

2

InternalAudit

3

Long-TermObjectives

4

Generate,Evaluate,

SelectStrategies

5

ImplementStrategies:

Mgmt Issues

6

Measure &Evaluate

Performance

7

Vision &

Mission

1

Comprehensive Marketing-Plan Model

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Ch 1 -3

Vision & Mission

Strategy Formulation

External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection

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Ch 1 -4

Issues in Strategy Formulation

New business opportunitiesBusinesses to abandonAllocation of resourcesExpansion or diversificationInternational marketsMergers or joint venturesAvoidance of hostile takeover

New business opportunitiesBusinesses to abandonAllocation of resourcesExpansion or diversificationInternational marketsMergers or joint venturesAvoidance of hostile takeover

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Ch 1 -5

Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation

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Ch 1 -6


Action Stage of Strategic Management

Most difficult stageMobilization of employees & managersInterpersonal skills criticalConsensus on goal pursuit

Action Stage of Strategic Management

Most difficult stageMobilization of employees & managersInterpersonal skills criticalConsensus on goal pursuit

STRATEGIC MARKETING

Ch 1 -7

Strategy Evaluation

Internal Review

External Review

Performance Metrics

Corrective Actions

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Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -8

Strategy

Evaluation Final Stage of Strategic Management

Subject to future modificationToday’s success no guarantee of future successNew & different problemsComplacency leads to demise

Final Stage of Strategic Management

Subject to future modificationToday’s success no guarantee of future successNew & different problemsComplacency leads to demise

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Ch 1 -9

“Anything that a firm does especially well compared to rival firms”

Strategic Marketing Plan is Gaining and Maintaining Competitive Advantage

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Ch 1 -10

1. Identify Existing

Strategic Marketing-Plan Model

• Vision

• Mission

• Objectives

• Strategies

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Ch 1 -11

2. Audit external environment3. Audit internal environment4. Establish long-term objectives5. Generate, evaluate, and select strategies6. Implement selected strategies7. Measure & evaluate performance

Strategic Marketing-Plan Model

STRATEGIC MARKETING

STRATEGIC MARKETINGChapter 1

MISSION & VISION STATEMENTS

STRATEGIC MARKETING

What Do We Want to Become? VISION

What Is Our Business? MISSION

Importance of Vision and Mission Statements

Components of a Mission Statement

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“The last thing IBM needs right now is a vision.” (July 1993)

Vision

“What IBM needs most right now is a vision.” (March 1996)

– Louis V. Gerstner, Jr., CEO, IBM Corporation

STRATEGIC MARKETING

“What do we want to become?”

Vision

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ComprehensiveMission Statement

Vision

Clear Business Vision

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Vision Statement Examples

Tyson Foods’ vision is to be the world’s first choice for protein solutions while maximizing shareholder value.

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General Motors’ vision is to be the world leader in transportation products and related services.


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PepsiCo’s responsibility is to continually improve all aspects of the world in which we operate – environment, social, economic – creating a better tomorrow than today.


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Dell’s vision is to create a company culture where environmental excellence is second nature.


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“What is our business?”

Mission Statements

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Mission Statements

•Enduring statement of purpose

•Distinguishes one firm from another

•Declares the firm’s reason for being

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Mission Statements

•Creed statement

•Statement of purpose

•Statement of philosophy

•Statement of business principles

Also referred to as:

STRATEGIC MARKETING

Reveal what an organization wants to be and whom it wants to serve.

Mission Statements

Essential for effectively establishing objectives and formulating strategies

STRATEGIC MARKETING

Developing Vision & Mission

Clear mission is needed before alternative strategies can be formulated and implemented

STRATEGIC MARKETING

Mission Components

1.Customers3.Markets

9.Employees

8.PublicImage

7.Self-Concept 6.Philosophy

5.Survival,Growth,Profits

2.Products orServices

4.Technology

STRATEGIC MARKETING STRATEGIC MARKETING

We aspire to make PepsiCo the world’s(3) premier consumer products company, focused on convenient foods and beverages(2). We seek to produce healthy financial rewards for investors(5) as we provide opportunities for growth and enrichment to our employees(9), our business partners and the communities(8) in which we operate. And in everything we do, we strive to act with honesty, openness, fairness and integrity(6).

Mission Statement Examples


Dell’s mission is to be the most successful computer company(2) in the world(3) at delivering the best customer experience in markets we serve(1). In doing so, Dell will meet consumer expectations of highest quality; leading technology(4); competitive pricing; individual and company accountability(6); best-in-class service and support(7); flexible customization capability(7); superior corporate citizenship(8); financial stability(5).



Proctor & Gamble will provide branded products and services of superior quality and value(7) that improve the lives of the world’s(3) consumers. As a result, consumers(1) will reward us with industry leadership in sales, profit(5), and value creation, allowing our people(9), our shareholders, and the communities(8) in which we live and work to prosper.


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EXTERNAL ANALYSIS

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“It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.” – Charles Darwin

External Assessment

Purpose of External Audit– Identify

• Opportunities• Threats

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Purpose of External Audit– Identify

• Opportunities• Threats

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External Audit – Sources of Information•Internet

•Libraries

•Suppliers

•Distributors

•Salespersons

•Customers

•Competition

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Performing External Audit – Variables

•Market share

•Breadth of competing products

•World economies

•Foreign affiliates

•Proprietary account advantages

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Performing External Audit – Variables

•Price competitiveness

•Technological advancements

•Interest rates

•Pollution abatement

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Performing External Audit

External Factors

Measurable

Long-term Orientation

Applicable to Competing Firms

Hierarchical

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Industrial Organization (I/O) View

– Industry factors more important than internal factors

Performance determined by industry forces

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Economies of Scale

Industry Properties

Barriers to Market Entry

Product Differentiation

Level of Competitiveness

I/O Perspective Firm Performance

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Social, Cultural, Demographic, and Environmental Forces

Major Impact –

• Products

• Services

• Markets

• Customers

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Facts

• World population approaching 7 billion

• World population = 8 billion by 2028

• World population = 9 billion by 2054

• U.S. population < 300 million

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• Trends– More American households with people living

alone– Aging Americans – affects all organizations– Population shift to the south and west– Decimation and degradation of the natural

environment


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Global trends

• China’s labor rates less than Mexico

• China provides more site location incentives than Mexico


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•More educated consumers

•Aging population

•Minorities more influential

•Local rather than federal solutions

21st Century Trends

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Key Social, Cultural, Demographic, and Environmental Variables

Number of marriages & divorces

Number of special interest groups

Number of births & deaths

Immigration & emigration rates

Childbearing rates

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Actuarial Rates

Monitor KeyVariables

Per Capita Income

Attitudes Toward Business

Avg. Disposable Income


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Consumer Behavior


Ethical Concerns

Attitudes Toward Saving

Racial Equality


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Avg. Educational Level


Governmental Regulation

Attitudes Toward Customer Service

Attitudes Toward Quality


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Waste Management


Air & Water Pollution

Ozone Depletion

Endangered Species


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Political, Governmental, and Legal Forces

Key opportunities & threats Antitrust legislation Tax rates Lobbying efforts Patent laws

Government Regulation

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Key Political, Governmental, and Legal Variables

Special tariffs

Tax law changes

Voter participation rates

Regulation/deregulation

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Key Political, Governmental, and Legal Variables (cont’d)

Environmental protection laws

Changes in patent laws

Equal employment legislation

Government subsidies

Number of patents

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Key Political, Governmental, and Legal Variables (cont’d)

Import/export regulations

Global relationships

Political conditions

Location and severity of terrorist activity

Anti-trust enforcement

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Technological Forces

Major Impact –

• Internet

• Communication

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Competitive Forces

Collection & evaluation of data on competitors is essential for successful strategy formulation

STRATEGIC MARKETING

Competitive Forces

•Strengths

•Weaknesses

•Capabilities

•Opportunities

•Threats

•Objectives

•Strategies

Identifying Rival Firms

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Key Questions Concerning Competitors

Their objectives and strategies

Their weaknesses

Their responses to external variables

Their vulnerability to our alternative strategies

Their strengths

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Key Questions Concerning Competitors (cont’d)

Entry and exit of firms in the industry

Our product/service positioning

Key factors for our current position in industry

Sales/profit rankings of competitors over time

Our vulnerability to strategic counterattack

STRATEGIC MARKETING

Ch 3 -61Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Key Questions Concerning Competitors (cont’d)

The threat of substitute products/services

Nature of supplier & distributor relationships

Should we keep our strategies secret fromemployees and stakeholders?

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Competitive Forces

1. Market share matters

2. Understand what business you are in

3. Broke or not, fix it

4. Innovate or evaporate

7 Characteristics of Most Competitive U.S. Firms:

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Competitive Forces

5. Acquisition is essential to growth

6. People make a difference

7. No substitute for quality

7 Characteristics of Most Competitive U.S. Firms:

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The Five-Forces Model of Competition

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The Five-Forces Model

Most powerful of the five forces Focus on competitive advantage of

strategies

Rivalry Among Competing Firms

STRATEGIC MARKETING


Barriers to entry are important Quality, pricing, and marketing can

overcome barriers

Potential Entry of New Competitors

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Pressures increase when consumers’ switching costs decrease

Firm’s plans for increased capacity & market penetration

Potential Development of Substitute Products

STRATEGIC MARKETING


Large number of suppliers & few substitutes affects intensity of competition

Backward integration can gain control or ownership of suppliers

Bargaining Power of Suppliers

STRATEGIC MARKETING


Customers concentrated or buying in volume affects intensity of competition

Consumer power is higher where products are standard or undifferentiated

Bargaining Power of Consumers

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Conditions Where Consumers GainBargaining Power

• If they can inexpensively switch• If they are particularly important• If sellers are struggling in the face of falling

consumer demand• If they are informed about sellers’ products,

prices, and costs• If they have discretion in whether and when

they purchase the product

STRATEGIC MARKETING

Industry Analysis: The External Factor Evaluation (EFE) Matrix

CompetitivePoliticalCultural

Technological

EnvironmentalSocial

Governmental

DemographicEconomic

Summarize & Evaluate

STRATEGIC MARKETING

HOW TO DEVELOP AN EFE MATRIX

1. Identify a list of KEY external factors (critical success factors).

2. Assign a weight to each factor, ranging from 0 (not important) to 1.0 (very important).

3. Assign a 1-4 rating to each critical success factor to indicate how effectively the firm’s current strategies respond to the factor. (1 = response is poor, 4 = response is extremely good)

4. Multiply each factor’s weight by its rating to determine a weighted score.

5. Sum the weighted scores.

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Total weighted score of 4.0• Organization response is outstanding to threats and

weaknesses

Industry Analysis EFE

Total weighted score of 1.0 Firm’s strategies not capitalizing on opportunities or

avoiding threats

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Industry Analysis EFE

Understanding the factors used in the EFE Matrix is more important than the actual weights and ratings assigned.

Important –

STRATEGIC MARKETING

Industry Analysis: Competitive Profile Matrix (CPM)

Identifies firm’s major competitors and their strengths & weaknesses in relation to a sample firm’s strategic positions

STRATEGIC MARKETING

CPM

• Competitive profile matrix is an essential strategic management tool to compare the firm with the major players of the industry. • Competitive profile matrix show the clear picture to the firm about their strong points and weak points relative to their competitors.

• The CPM score is measured on basis of critical success factors, each factor is measured in same scale mean the weight remain same for every firm only rating varies. The best thing about CPM that it include your firm and also facilitate to add other competitors make easier the comparative analysis

STRATEGIC MARKETING

CPM (Conti…)

Critical Success FactorsCritical success factors are extracted after deep analysis of external and internal environment of the firm. Obviously there are some good and some bad for the company in the external environment and internal environment.The higher rating show that firm strategy is doing well to support this critical success factors and lower rating means firm strategy is lacking to support the factor.

RatingRating in CPM represent the response of firm toward the critical success factors. Highest the rating better the response of the firm towards the critical success factor ,rating range from 1.0 to 4.0 and can be applied to any factor. There are some important point related to rating in CPM.Rating is applied to each factor.•The response is poor represented by 1.0•The response is average is represented by 2.0•The response is above average represented by 3.0•The response is superior represented by 4.0

STRATEGIC MARKETING

CPM (Conti…)WeightWeight attribute in CPM indicates the relative importance of factor to being successful in the firm’s industry. The weight range from 0.0 means not important and 1.0 means important, sum of all assigned weight to factors must be equal to 1.0 otherwise the calculation would not be consider correct.

Weighted ScoreWeighted score value is the result achieved after multiplying each factor rating with the weight.

Total Weighted ScoreThe sum of all weighted score is equal to the total weighted score, final value of total weighted score should be between range 1.0 (low) to 4.0(high). The average weighted score for CPM matrix is 2.5 any company total weighted score fall below 2.5 consider as weak. The company total weighted score higher then 2.5 is consider as strong in position.The other dimension of CPM is the firm with higher total weighted score considered as the winner among the competitors

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Industry Analysis CPM

Just because one firm receives a 3.2 rating and another receives a 2.8 rating, it does not follow that the first firm is 20 percent better than the second.

Important –

STRATEGIC MARKETING


INTERNAL ANALYSIS

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Chapter Outline

The Nature of an Internal Audit

The Resource-Based View (RBV)

Integrating Strategy & Culture

STRATEGIC MARKETING

Chapter Outline (cont’d)

Management

Marketing

Opportunity Analysis

STRATEGIC MARKETING


Finance/Accounting

Production/Operations

Research & Development

STRATEGIC MARKETING


Management Information Systems

The Internal Factor Evaluation (IFE) Matrix

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Key Internal Forces

Distinctive Competencies:

Firm’s strengths that cannot be easily matched or imitated by competitors

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Key Internal Forces

Distinctive Competencies:

Strategies designed to improve on a firm’s weaknesses and turn to strengths

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Internal Audit

•Information from:• Management

• Marketing

• Finance/accounting

• Production/operations

• Research & development

• Management information systems

Parallels process of external audit

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Internal Audit

Coordination & understanding among managers from all functional areas

Key to Organizational Success

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Resource Based View (RBV)

Three All-Encompassing Categories

1. Physical resources

2. Human resources

3. Organizational resources

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U.S. Versus Foreign Cultures

To successfully compete in world markets, U.S. managers must obtain a better knowledge of historical, cultural, and religious forces that motivate and drive people in other countries.

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Management

Functions of Management

1. Planning

2. Organizing

3. Motivating

4. Staffing

5. Controlling

STRATEGIC MARKETING

Management

Planning

Stage When Most ImportantFunction

Strategy Formulation

Organizing Strategy Implementation

Motivating Strategy Implementation

Staffing

Controlling


Strategy Evaluation

STRATEGIC MARKETING

Management

Planning

Beginning of management process

Bridge between present & future

Improves likelihood of attaining desired results

STRATEGIC MARKETING

Planning

Forecasting

Establishing objectives

Devising strategies

Developing policies

Setting goals

Management

STRATEGIC MARKETING

Management

Organizing

Achieves coordinated effort

Defines task & authority relationships

Departmentalization

Delegation of authority

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Organizing

Organizational designJob specializationJob descriptions

Job specificationsSpan of control

Unity of commandCoordination

Job designJob analysis

Management

STRATEGIC MARKETING

Management

Motivating

Influencing to accomplish specific objectives

Communication – major component

STRATEGIC MARKETING

Motivating

LeadershipCommunication

Work groupsJob enrichmentJob satisfaction

Needs fulfillmentOrganizational change

Morale

Management

STRATEGIC MARKETING

Management

Staffing

Personnel management

Human resource management

STRATEGIC MARKETING

Staffing

Wage & salary admin.Employee benefits

InterviewingHiring

DischargingTraining

Management developmentAffirmative action

Labor relations

Management

STRATEGIC MARKETING

Management

Controlling

Establishing performance standards

Ensure actual operations conform to planned operations

Taking corrective actions

STRATEGIC MARKETING

Controlling

QualityFinancial

SalesInventoryExpenseRewardsSanctions

Management

STRATEGIC MARKETING

Marketing

Customer Needs/Wants for Products/Services

1. Defining

2. Anticipating

3. Creating

4. Fulfilling

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Marketing

Marketing Functions

1. Customer analysis

2. Selling products/services

3. Product & service planning

4. Pricing

5. Distribution

6. Marketing research

7. Opportunity analysis

STRATEGIC MARKETING

Customer Analysis

Customer surveys

Consumer information

Market positioning strategies

Customer profiles

Market segmentation strategies

Marketing

STRATEGIC MARKETING

AdvertisingSales

PromotionPublicity

Sales force managementCustomer relations

Dealer relations

Marketing

Selling Products/Services

STRATEGIC MARKETING

Test marketingBrand positioning

Devising warranteesPackaging

Product features/optionsProduct style

Quality

Marketing

Planning Product/Service

STRATEGIC MARKETING

Forward integrationDiscounts

Credit termsCosts

Marketing

Pricing

STRATEGIC MARKETING

WarehousingChannelsCoverage

Retail site locationsSales territoriesInventory levelsTransportation

Marketing

Distribution

STRATEGIC MARKETING

Data collectionData input

Data analysis

Marketing

Marketing Research

STRATEGIC MARKETING

Assessing costs

Assessing benefits

Assessing risks

Cost/benefit/risk analysis

Marketing


STRATEGIC MARKETING

Marketing


1. Are markets segmented effectively?

2. Is the organization positioned well among competitors?

3. Has the firm’s market share been increasing?

4. Are the distribution channels reliable & cost effective?

5. Is the sales force effective?

STRATEGIC MARKETING

Marketing


6. Does the firm conduct market research?

7. Are product quality & customer service good?

8. Are the firm’s products/services priced appropriately?

9. Does the firm have effective promotion, advertising, and publicity strategies?

STRATEGIC MARKETING

Marketing


10. Are the marketing, planning, and budgeting effective?

11. Do the firm’s marketing managers have adequate experience and training?

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Finance/Accounting

Determining financial strengths & weaknesses key to strategy formation

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Finance/Accounting

Finance/Accounting Functions

1. Investment decision (Capital budgeting)

2. Financing decision

3. Dividend decision

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Production/Operations

Production/Operations Functions

Process

Capacity

Inventory

Workforce

Quality

STRATEGIC MARKETING

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Research & Development

Research & Development Functions

Development of new products before competitors

Improving product quality

Improving manufacturing processes to reduce costs

STRATEGIC MARKETING

Management Information Systems

Purpose

Improve performance of an enterprise by improving the quality of managerial decisions

STRATEGIC MARKETING

Internal Factor Evaluation (IFE) matrix

It is a strategic management tool for auditing or evaluating major strengths and weaknesses in functional areas of a business. IFE is use for internal audit of functional area of business such as finance, marketing, IT, operations, accounts and others depend upon the nature of business and its size.

Internal Factors

Internal factors are extracted after deep internal analysis of the company. Internal factors are divided into two categories namely strengths and weaknesses.

Strengths: Strengths are the strong areas or attribute of the company, which are used to overcome weakness and capitalize to take advantage of the external opportunities available in the industry.

Weakness: These are the weak factors which needs to be improved in future otherwise if they exposed to the competitors they can take the advantage of it.

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Rating

The range of rating starts from minimum 1.0 which is worst and maximum 4.0 which is the best factor of the company.Rating is applied to each factor.Major weakness is represented by 1.0Minor weakness is represented by 2.0Minor strength represented by 3.0Major Strength represented by 4.0

Weight

Weight attribute in IFE matrix indicates the relative importance of factor to being successful in the firm’s industry. The weight range from 0.0 means not important and 1.0 means important, sum of all assigned weight to factors must be equal to 1.0 otherwise the calculation would not be consider correct.

Weighted Score

Weighted score value is the result achieved after multiplying each factor rating with the weight.

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Total Weighted Score

The sum of all weighted score is equal to the total weighted score, final value of total weighted score should be between range 1.0 (low) to 4.0(high). The average weighted score for IFE matrix is 2.5, any company total weighted score fall below 2.5 consider as weak. The company total weighted score higher then 2.5 is consider as strong in position.

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Steps to develop IFE Matrix

1. List key internal factors as identified in the internal audit process. Use a total of from ten to twenty internal factors, including both strengths and weaknesses. List strengths first and then weaknesses. Be as specific as possible, using percentages, ratios, and comparative numbers.

2. Assign a weight that ranges from 0.0 (not important) to 1.0 (all important) to each factor. The weight assigned to a given factor indicates the relative importance of the factor to being

successful in the firm’s industry. The sum of all weights must equal 1.0.

3. Assign a 1 to 4 rating to each factor to indicate whether that factor represents a major weakness (rating = 1), a minor weakness (rating = 2), a minor strength (rating = 3), or a

major strength (rating = 4). Note that strengths must receive a 4 or 3 rating and weaknesses must receive a 1 or 2 rating. Ratings are thus company based, whereas the weights in Step 2 are industry based.

4. Multiply each factor’s weight by its rating to determine a weighted score for each variable.

5. Sum the weighted scores for each variable to determine the total weighted score for the organization.

STRATEGIC MARKETING

There are few examples of internal factors of the company.

Strengths

Strong marketing and promotionBest product quality

Strong Financial conditionHigh Market ShareHigh value assets

WeaknessHigh cost operations

Manufacturing cost is highHigh employee turnover rate

Expensive productsLoss in joint venture

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STRATEGIES IN ACTION

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Types of Strategies

Vertical IntegrationStrategies

Forward Integration

BackwardIntegration

HorizontalIntegration

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ForwardIntegration

Southwest Airlines selling tickets through Galileo

BackwardIntegration

Hilton Hotels could acquire a large furniture manufacturer

HorizontalIntegration

Huntington Bancshares and Sky Financial Group merged

STRATEGIC MARKETING

Types of Strategies

IntensiveStrategies

MarketPenetration

MarketDevelopment

ProductDevelopment

STRATEGIC MARKETING

MarketPenetration

McDonald’s selling millions of “Shrek the Third” items to a healthier image

Market Development

Burger King opened its first restaurant in Japan

ProductDevelopment

Google introduced “Google Presents” to compete with PowerPoint

STRATEGIC MARKETING

Types of Strategies

DiversificationStrategies

Related Diversification

Unrelated Diversification

STRATEGIC MARKETING

Related Diversification

MGM Mirage is opening its first non-casino luxury hotel

Unrelated Diversification Ford Motor Company entered the

industrial bank business

Retrenchment Discovery Channel closed 103 mall-based and stand-alone stores

STRATEGIC MARKETING

Types of Strategies

DefensiveStrategies

Retrenchment

Divestiture

Liquidation

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Divestiture Whirlpool sold its struggling Hoover floor-care business to Techtronic Industries

Liquidation Follow Me Charters sold all of its assets and ceased doing business

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More Strategies.

There are five significant strategies to consider when planning your marketing approach. Position yourself as a;1. Market Leader,2. Challenger, 3. Follower,4. Niche marketer5. Form an alliance to attack the market with increased power.

1. Market Leader: Maintain your position as market leader in one of three ways. First; expand the total market by increasing the total number of users.

Second; defend your current share of the market. You can enhance your product offerings, as in as a supermarket adding banking services or video rental. Another option is to reduce weak products or services and build up the strongest ones.

Third; expand your market share by aggressively attacking your competitor through a variety of strategies. Offer coupons, promote sales and advertise benefits your competitor doesn't have, such as longer shop hours or more personalized service.

STRATEGIC MARKETING

2. Market Challenger: If you are the challenger in the market, look for a small, unmet need that your business can fill. (Daihatsu Cuore)

3. Market Follower: As a market follower, capitalize on a market already identified and researched by your competitors. Watch your competitors for weaknesses, and then provide better solutions such as longer store hours or free training. Good examples include full-service restaurants offering take-out or delivery, interior design service included with furniture purchase.

4. Market Niche: Becoming a niche marketer enables you to research and respond better to a smaller, fine-tuned segment. This works especially well for small companies who are nimble and able to make quick decisions in reaction to market trends. Serve the demographic of women ages 55 to 70. As a consultant, choose the niche of selling only to engineering consulting firms in the $3 to $5 million revenue range.

5. Alliance Marketing: Strengthen your marketing by partnering with a product, service or company that is compatible with, but not a competitor of, your business. Your child care center may partner with any number of after-school activities to offer an enriched experience. Talk with karate studios, dance studios and gyms.

STRATEGIC MARKETING

Emphasis on New Product-Market Growth

Prospector

Units primarily concerned with attaining growth

through aggressive pursuit of new product-market opportunities

Analyzer

Units with strong core business,

actively seeking to expand into related

product-markets with differentiated

offerings

Defender

Units primarily concerned with maintaining a differentiated

position in mature markets

Reactor

Units with no clearly defined product-

market development or competitive

strategy

Units with strong core business,

actively seeking to expand into related

product-markets with low-cost

offerings

Units primarily concerned with

maintaining a low-cost position in mature markets

Heavy Emphasis No Emphasis

Com

petiti

ve S

trat

egy

Cost

Lea

ders

hip

D

iffer

entia

tion

STRATEGIC MARKETING

BCG Growth - Share Matrix1.Star: Leader [i.e. high market share] of high growth market is called star.These SBUs are net user of cash, because they always require heavy investment to finance rapid growth and to sustain market share. When the product comes to mature stage, then the growth slow down and they turn to cash cow.

2. Cash Cow: Cash cows are low growth but high market share (Market leader) businesses or products.Their high earnings, coupled with their depreciation, represent high cash inflows and they need very little in the way of reinvestment. And thus, they are the net provider of cash. Surplus cash are used for Research and Development and to support other SBUs that need investment.

C. Question mark: Products in a growth market with low market share are categorized as Question Mark.Because of growth, these SBUs require a lot of cash to hold their market share and let alone to increase it. If nothing is done to increase the market share, a Question mark will simply absorb large amount of cash in the short run and later, as growth slow down, become a dog. Thus, unless something is done to change its perspective, it becomes a cash trap.

Management has to decide which question marks should try to build into stars and which should be phased out.

D. Dog: Dog are low growths, low market share SBUs. They may generate enough cash to maintain themselves, but do not promise to be large source of cash.Most often case, it should be liquidate and try with Question mark SBUs for investment.

STRATEGIC MARKETING

BCG Growth Share Matrix

STRATEGIC MARKETING

strategic marketing(2)

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