<
>
swopdoc logo
Download
a) trade for free
b) buy for 2.08 $
Document category

Term paper
Management / Administration

University, School

Hong Kong Polytechnic University - PolyU

Grade, Teacher, Year

Management & Organizations

Author / Copyright
Text by Hedy D. ©
Format: PDF
Size: 0.26 Mb
Without copy protection
Rating [details]

Rating 5.0 of 5.0 (1)
Live Chat
Chat Room
Networking:
0/0|0[-2.0]|3/1







More documents
5. Marketing objectives and –strategy Different strategy/tactic­: strategy: long-term/tacti­c: short-term a) Bring examples for objectives and strategies Marketing objectives are the goals that a business is trying to achieve through its marketing. A business might have a number of marketing objectives. à Growth: A business might want to increase sales, revenue, profit and market share. They can increase its revenue by selling more products or charging a higher price. Both should lead to higher profits. They might launch new products. Business aiming to grow often attempt to create a competitive advantage (USP) over their rivals. Strategies: Diversification (New Products/New Market) Market Development (Existing Products/New Market) Product Development (New Products/Existi­ng Market) Market Penetration (Existing Products/Existi­ng Markets): * Increasing brand loyalty * Make consumers use product more regularly * Make consumers use more of product à Marketing sales and market share: A business may attempt to prevent losses and declining sales, and maintain market share, through its marketing. There are reasons why a business might do this: - when a new product is launched: new products often require marketing and promotion to break into the market and for sales to take off - to develop over the long term: some products have very long life cycles, extension strategies are often used in the
Being first to market Old idea, new idea. - Idea 3G Smartphone TVC · Idea announced two affordable 3G Android phones at press conference and at a minimum cost of Rs 5,850 and it also offered free bundled services along with the purchase of the handset. · The idea behind new campaign was not only to make its 3G handsets accessible to people, but to get more people onto 3G because of the fantastic experience that it can offer to subscribers. Idea id-280 on left and Idea Blade on right Diversification­: Diversification is the process of entering into different industries either to exploit untapped potential or to minimize risk of changing business trends. Aditya Birla Group is the majority shareholder of Idea Cellular,  was started as a joint venture with the group, AT&T and the Tata Group (both of which later sold their stake)  After an Initial Public Offering on the Indian Stock Markets, Idea Cellular now accounts for a third of the groups market capitalization The two major types of diversification are concentric diversification and conglomerate diversification adopted by adityabirla group. Concentric diversification­: If a firm acquires firms with operations in related industries, it is called concentric diversification­. Conglomerate Diversification­:  if a firm tries to enter into a totally non related area it is called  conglomerate diversification­. Horizontal integration- If a firm grows through

Why BCG Growth-Share Matrix Fails Sometimes: Discussion on the Reasons Behind BCG Matrix Malfunction


Introduction


Due to the growing trend of diversification with respect to corporate business nature, most major companies have acquired a combination of distinct product-market businesses, and they are still expanding their subsidiaries in various industries.

One of the key determinants of these multi-business firms’ success is whether the resource could be allocated efficiently across different business units (Slater, 1992). This is when Corporate Portfolio Analysis/Management (CPA/CPM) displays its critical value— it could help the management of a diversified company make strategic decisions to identify latent opportunities, allocate resources to business units with growth potential, and formulate future development plan.


Amongst the available CPA instruments, BCG Growth-Share Matrix is the most widely adopted tool in the industry, and it was implemented by a number of large companies due to its user-friendly graphical representation and simple classification of business units.

However, it has confronted with doubts regarding whether it is logical to apply and transfer CPA concepts from BCG Matrix’s theoretical framework to the real business industry (Sharpe, 1963). The objective of this paper is to identify the reasons why BCG Growth-Share Matrix is incapable of recognizing a strategic business unit’s (SBU) true growth potentials under certain circumstances, and provides suggestions for the management of multi-business firms when BCG Matrix malfunctions.

By congregating the research from past academic literature, this paper will demonstrate the reasons behind different BCG Matrix malfunctions and discuss the relevant limitations.


Reasons behind BCG Growth-Share Matrix malfunctions


To begin with, it is essential to introduce the basic concepts underlying BCG Matrix.

This CPA tool categorizes an organization’s SBU into 4 kinds of matrices, which are Cash Cows, Stars, Question Marks and Dogs, with respect to their relative market share on a horizontal axis, and their market growth rate on a vertical axis (Bettis & Hall, 1981), as shown in Figure 1 below. Cash cows are units that have high market share but in a slow-growing industry, and usually generate an excess amount of cash to maintain the business while being invested in as little as possible; Stars refer to the units with high market share in an industry with high market growth rate, which have the potentials to become the Cash cows if funded heavily; Question Marks refer to units that have low market share but located in a low-growing industry, but they have potential to become the Stars or Cash Cows in the future; Dogs are the units with low market share in a slow-growing industry and should be discard.....[read full text]


Download Why BCG Growth-Share Matrix Fails Sometimes- Discussion on the Reasons Behind BCG Matrix Malfunction
Click on download to get complete and readable text
• This is a free of charge document sharing network
Upload a document and get this one for free
• No registration necessary, gratis
This page(s) are not visible in the preview.
Please click on download.
Download Why BCG Growth-Share Matrix Fails Sometimes- Discussion on the Reasons Behind BCG Matrix Malfunction
Click on download to get complete and readable text
• This is a free of charge document sharing network
Upload a document and get this one for free
• No registration necessary, gratis

Nevertheless, the case is entirely different when it comes to the units operating in fast growing industries. The measure of relative market share becomes far less effective in the high-growth markets, in which the environment is more competitive and therefore the changes in market share is much more dynamic as well.


The above findings suggest that the management should be more careful when implementing BCG Matrix to assess SBU that operate in fast-growing industries, since the results have a greater degree of deviation with the SBU’S true growth potential and competences.

In order to minimize this deviation, the management is recommended to adopt other corporate portfolio analysis instruments that take more dimensions and variables into account, and should not solely rely on what BCG Matrix renders.


b.

BCG Matrix oversimplifies the categories to which SBU belong.


Technically speaking, this defect stems from the oversimplification of determinants in BCG Matrix. Ansoff, Kirsch and Roventa stated that “single point positioning” of SBU into a 4-grid system may fail to identify some SBU that fall between two categories.

For instance, a dilemma may arise if a business unit in a fast-growing industry has a relative market share of median value among that of other business units. It would be a hare choice to decide whether this business unit belongs to Stars or Question Marks.

Even if the management simply categorized the business unit as either Star or Question Mark, the respective strategy suitable for either of the two categories could not be applied to this “median” business unit, and it may further lead to an infer.....

Download Why BCG Growth-Share Matrix Fails Sometimes- Discussion on the Reasons Behind BCG Matrix Malfunction
Click on download to get complete and readable text
• This is a free of charge document sharing network
Upload a document and get this one for free
• No registration necessary, gratis
This page(s) are not visible in the preview.
Please click on download.
Download Why BCG Growth-Share Matrix Fails Sometimes- Discussion on the Reasons Behind BCG Matrix Malfunction
Click on download to get complete and readable text
• This is a free of charge document sharing network
Upload a document and get this one for free
• No registration necessary, gratis

An empirical research of a Fortune 500 company with 15 SBUs was conducted by Wind et al. (1983), which substantiates the variability of such classification method.

The group analyzed the classification of these 15 SBUs within BCG Matrix based on four different definition of market growth and market share, only to find that only 4 out of the 15 SBUs were concordantly positioned as in the BCG Matrix. This study illustrated the repercussion of vague and weak definitions of the matrix dimensions, and warned the users of the potential danger arising from subjectively interpreted definitions.


To further illustrate that, the case of Apple provided an interesting question with respect to the ambiguous definition of “relative market share”.

The question is whether Apple should define its phone market as all mobile phones or smart phones only. It is generally acknowledged that Apple produces the most innovative and high-quality smart phones in the world, so if the relative market share refers to the share in smart phone market, then iPhone should be positioned as a Star product, since the smart phone market is growing rapidly and Apple yields a large proportion of shares.

However, when the reference of market shifts to the entire mobile phone market, iPhone may suddenly fall to the matrix for Dogs, since the entire mobile phone market is already mature and saturated, and Apple is not a major competitor in this market. This simple scenario proves that the variance in definition of “market” will result in the classification of a SBU in two different matrices.


d.

The criterion determining the performance of SBU .....

Download Why BCG Growth-Share Matrix Fails Sometimes- Discussion on the Reasons Behind BCG Matrix Malfunction
Click on download to get complete and readable text
• This is a free of charge document sharing network
Upload a document and get this one for free
• No registration necessary, gratis
This page(s) are not visible in the preview.
Please click on download.
Download Why BCG Growth-Share Matrix Fails Sometimes- Discussion on the Reasons Behind BCG Matrix Malfunction
Click on download to get complete and readable text
• This is a free of charge document sharing network
Upload a document and get this one for free
• No registration necessary, gratis

Conclusion


To conclude, the malfunction of BCG Growth-Share Matrix probably arises from the following reasons: firstly, the determinants regarding the performance of SBU are oversimplified; secondly, the 4-grid system is insufficient and oversimplified to position various types of business units; Thirdly, the underlying assumptions and basic components are ambiguous and subjective in definition; and lastly, the criterion determining the performance of SBU may lack reasonable ground.

As has been noted above, complete reliance on BCG Growth-Share Matrix may lead to inferior strategic decisions and may further jeopardize the strategic planning of the entire organization. Given that BCG Matrix have the limitations above, we should not de-recognize the value of this system due to its virtue of simplicity and straightforwardness. Management of multi-business firms is advised to embed the BCG Matrix into other CPA process, and pay heed to the situations when one of the limitations above is present. (1615 words)


References


Ansoff, H., Kirsch, W., & Roventa, P. (1982).

Dispersed positioning in portfolio analysis. Industrial Marketing Management, 11(4), 237-252.


Bettis, R. & Hall, W. (1981). Strategic Portfolio Management in the Multibusiness Firm. California Management Review, 24(1).....

Download Why BCG Growth-Share Matrix Fails Sometimes- Discussion on the Reasons Behind BCG Matrix Malfunction
Click on download to get complete and readable text
• This is a free of charge document sharing network
Upload a document and get this one for free
• No registration necessary, gratis
This page(s) are not visible in the preview.
Please click on download.

Sharpe, W. (1963).

A Simplified Model for Portfolio Analysis. Management Science, 9(2), 277-293.


Slater, S. (1992). Shareholder Value and Investment Strategy Using the General Portfolio Model. Journal Of Management, 18(4), 717-732.


Wind, Y., Mahajan, V., & Swire, D. (1983).

An Empirical Comparison of Standardized Portfolio Models. Journal Of Marketing, 47(2), 89.


Appendix


Figure 1


F.....


Download Why BCG Growth-Share Matrix Fails Sometimes- Discussion on the Reasons Behind BCG Matrix Malfunction
Click on download to get complete and readable text
• This is a free of charge document sharing network
Upload a document and get this one for free
• No registration necessary, gratis

Legal info - Data privacy - Contact - Terms-Authors - Terms-Customers -
Swap+your+documents



Parse error: syntax error, unexpected '{' in /var/www/bodo/dokumente-online.com/caching_ende.inc on line 23