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e most re"o#"ed corporate portfolio a"alysis tool. t provides a $rap!ic represe"tatio" for a" or$a"i%atio" to exami"e differe"t busi"esses i" it&s portfolio o" t!e basis of t!eir related mar'et s!are a"d i"dustry $ro#t! rates. t is a t#o dime"sio"al a"alysis o" ma"a$eme"t of SBU&s (Strate$ic Busi"ess U"its). " ot!er #ords, it is a comparative a"alysis of busi"ess pote"tial a"d t!e evaluatio" of e"viro"me"t. Accordi"$ to t!is matrix, busi"ess could be classified as !i$! or lo# accordi"$ to t!eir i"dustry $ro#t! rate a"d relative mar'et s!are. Relative Market Share ( SBU Sales t!is year leadi"$ competitors sales t!is year. Market Growth Rate ( "dustry sales t!is year ) "dustry Sales last year. *!e a"alysis re+uires t!at bot! measures be calculated for eac! SBU. *!e dime"sio" of busi"ess stre"$t!, relative mar'et s!are, #ill measure comparative adva"ta$e i"dicated by mar'et domi"a"ce. *!e 'ey t!eory u"derlyi"$ t!is is existe"ce of a" experie"ce curve a"d t!at mar'et s!are is ac!ieved due to overall cost leaders!ip. BCG matrix !as four cells, #it! t!e !ori%o"tal axis represe"ti"$ relative mar'et s!are a"d t!e vertical axis de"oti"$ mar'et $ro#t! rate. *!e mid)poi"t of relative mar'et s!are is set at ,.-. if all t!e SBU&s are i" same i"dustry, t!e avera$e $ro#t! rate of t!e i"dustry is used. .!ile, if all t!e SBU&s are located i" differe"t i"dustries, t!e" t!e mid)poi"t is set at t!e $ro#t! rate for t!e eco"omy. /esources are allocated to t!e busi"ess u"its accordi"$ to t!eir situatio" o" t!e $rid. *!e four cells of t!is matrix !ave bee" called as stars, cas! co#s, +uestio" mar's a"d do$s. 0ac! of t!ese cells represe"ts a particular type of busi"ess.
10 x x
1x
0.1
Figure: BCG Matrix ,. Stars Stars represe"t busi"ess u"its !avi"$ lar$e mar'et s!are i" a fast $ro#i"$ i"dustry. *!ey may $e"erate cas! but because of fast $ro#i"$ mar'et, stars re+uire !u$e i"vestme"ts to mai"tai" t!eir lead. 1et cas! flo# is usually modest. SBU&s located i" t!is cell are attractive as t!ey are located i" a robust i"dustry a"d t!ese
busi"ess u"its are !i$!ly competitive i" t!e i"dustry. f successful, a star #ill become a cas! co# #!e" t!e i"dustry matures. 2. Cash Cows Cas! Co#s represe"ts busi"ess u"its !avi"$ a lar$e mar'et s!are i" a mature, slo# $ro#i"$ i"dustry. Cas! co#s re+uire little i"vestme"t a"d $e"erate cas! t!at ca" be utili%ed for i"vestme"t i" ot!er busi"ess u"its. *!ese SBU&s are t!e corporatio"&s 'ey source of cas!, a"d are specifically t!e core busi"ess. *!ey are t!e base of a" or$a"i%atio". *!ese busi"esses usually follo# stability strate$ies. .!e" cas! co#s loose t!eir appeal a"d move to#ards deterioratio", t!e" a retre"c!me"t policy may be pursued. 2. !uestion Marks 3uestio" mar's represe"t busi"ess u"its !avi"$ lo# relative mar'et s!are a"d located i" a !i$! $ro#t! i"dustry. *!ey re+uire !u$e amou"t of cas! to mai"tai" or $ai" mar'et s!are. *!ey re+uire atte"tio" to determi"e if t!e ve"ture ca" be viable. 3uestio" mar's are $e"erally "e# $oods a"d services #!ic! !ave a $ood commercial prospective. *!ere is "o specific strate$y #!ic! ca" be adopted. f t!e firm t!i"'s it !as domi"a"t mar'et s!are, t!e" it ca" adopt expa"sio" strate$y, else retre"c!me"t strate$y ca" be adopted. 4ost busi"esses start as +uestio" mar's as t!e compa"y tries to e"ter a !i$! $ro#t! mar'et i" #!ic! t!ere is already a mar'et)s!are. f i$"ored, t!e" +uestio" mar's may become do$s, #!ile if !u$e i"vestme"t is made, t!e" t!ey !ave pote"tial of becomi"$ stars. 5. "ogs 6o$s represe"t busi"esses !avi"$ #ea' mar'et s!ares i" lo#)$ro#t! mar'ets. *!ey "eit!er $e"erate cas! "or re+uire !u$e amou"t of cas!. 6ue to lo# mar'et s!are, t!ese busi"ess u"its face cost disadva"ta$es. Ge"erally retre"c!me"t strate$ies are adopted because t!ese firms ca" $ai" mar'et s!are o"ly at t!e expe"se of competitor&s7rival firms. *!ese busi"ess firms !ave #ea' mar'et s!are because of !i$! costs, poor +uality, i"effective mar'eti"$, etc. U"less a do$ !as some ot!er strate$ic aim, it s!ould be li+uidated if t!ere is fe#er prospects for it to $ai" mar'et s!are. 1umber of do$s s!ould be avoided a"d mi"imi%ed i" a" or$a"i%atio".
#i$itations o% BCG Matrix
*!e BCG 4atrix produces a frame#or' for allocati"$ resources amo"$ differe"t busi"ess u"its a"d ma'es it possible to compare ma"y busi"ess u"its at a $la"ce. But BCG 4atrix is "ot free from limitatio"s, suc! as) ,. BCG matrix classifies busi"esses as lo# a"d !i$!, but $e"erally busi"esses ca" be medium also. *!us, t!e true "ature of busi"ess may "ot be reflected. 2. 4ar'et is "ot clearly defi"ed i" t!is model. 2. 8i$! mar'et s!are does "ot al#ays leads to !i$! profits. *!ere are !i$! costs also i"volved #it! !i$! mar'et s!are. 5. Gro#t! rate a"d relative mar'et s!are are "ot t!e o"ly i"dicators of profitability. *!is model i$"ores a"d overloo's ot!er i"dicators of profitability. 9. At times, do$s may !elp ot!er busi"esses i" $ai"i"$ competitive adva"ta$e. *!ey ca" ear" eve" more t!a" cas! co#s sometimes. :. *!is four)celled approac! is co"sidered as to be too simplistic.
McKinsey 7S Framework
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*!e M&'inse( )S Fra$ework is a ma"a$eme"t model developed by #ell)'"o#" busi"ess co"sulta"ts /obert 8. .aterma", ;r. a"d *om <eters (#!o also developed t!e 4B.A)) =4a"a$eme"t By .al'i"$ Arou"d= motif, a"d aut!ored In Search of Excellence) i" t!e ,>?-s. *!is #as a strate$ic visio" for $roups, to i"clude busi"esses, busi"ess u"its, a"d teams. *!e @S are structure, strate$y, systems, s'ills, style, staff a"d s!ared values. *!e model is most ofte" used as a tool to assess a"d mo"itor c!a"$es i" t!e i"ter"al situatio" of a" or$a"i%atio".
*!e model is based o" t!e t!eory t!at, for a" or$a"i%atio" to perform #ell, t!ese seve" eleme"ts "eed to be ali$"ed a"d mutually rei"forci"$. So, t!e model ca" be used to !elp ide"tify #!at "eeds to be reali$"ed to improve performa"ce, or to mai"tai" ali$"me"t (a"d performa"ce) duri"$ ot!er types of c!a"$e. .!atever t!e type of c!a"$e A restructuri"$, "e# processes, or$a"i%atio"al mer$er, "e# systems, c!a"$e of leaders!ip, a"d so o" A t!e model ca" be used to u"dersta"d !o# t!e or$a"i%atio"al eleme"ts are i"terrelated, a"d so e"sure t!at t!e #ider impact of c!a"$es made i" o"e area is ta'e" i"to co"sideratio". .!e" it comes to as'i"$ t!e ri$!t +uestio"s, t!e #ebsite, 4i"d *ools (mi"dtools.com), !as developed a c!ec'list a"d a matrix to 'eep trac' of !o# t!e seve" eleme"ts ali$" #it! eac! ot!er. BB;0C* C0 BD *80 4B60E (*o a"aly%e !o# #ell a" or$a"i%atio" is positio"ed to ac!ieve its i"te"ded obFective Usa$e
Improve the performance of a company Examine the likely effects of future changes within a company lign departments and processes during a merger or ac!uisition "etermine how #est to implement a proposed strategy
$he #asic premise of the model is that there are seven internal aspects of an organi%ation that need to #e aligned if it is to #e successful
8ard 0leme"ts
Soft 0leme"ts
Eear" !o# to use t!e @S Drame#or', #it! ;ames 4a"'telo# G Amy Carlso".
8o# do you $o about a"aly%i"$ !o# #ell your or$a"i%atio" is positio"ed to ac!ieve its i"te"ded obFectiveH *!is is a +uestio" t!at !as bee" as'ed for ma"y years, a"d t!ere are ma"y differe"t a"s#ers. Some approac!es loo' at i"ter"al factors, ot!ers loo' at exter"al o"es, some combi"e t!ese perspectives, a"d ot!ers loo' for co"$rue"ce bet#ee" various aspects of t!e or$a"i%atio" bei"$ studied. Ultimately, t!e issue comes do#" to #!ic! factors to study. .!ile some models of or$a"i%atio"al effective"ess $o i" a"d out of fas!io", o"e t!at !as persisted is t!e 4cIi"sey @S frame#or'. 6eveloped i" t!e early ,>?-s by *om <eters a"d /obert .aterma", t#o co"sulta"ts #or'i"$ at t!e 4cIi"sey G Compa"y co"sulti"$ firm, t!e basic premise of t!e model is t!at t!ere are seve" i"ter"al aspects of a" or$a"i%atio" t!at "eed to be ali$"ed if it is to be successful. *!e @S model ca" be used i" a #ide variety of situatio"s #!ere a" ali$"me"t perspective is useful, for example to !elp youJ
Improve the performance of a company' Examine the likely effects of future changes within a company' lign departments and processes during a merger or ac!uisition' "etermine how #est to implement a proposed strategy'
*ip: *!e 4cIi"sey @S model ca" be applied to eleme"ts of a team or a proFect as #ell. *!e ali$"me"t issues apply, re$ardless of !o# you decide to defi"e t!e scope of t!e areas you study.
!ar# Elements
Soft Elements
=8ard= eleme"ts are easier to defi"e or ide"tify a"d ma"a$eme"t ca" directly i"flue"ce t!emJ *!ese are strate$y stateme"tsK or$a"i%atio" c!arts a"d reporti"$ li"esK a"d formal processes a"d * systems. =Soft= eleme"ts, o" t!e ot!er !a"d, ca" be more difficult to describe, a"d are less ta"$ible a"d more i"flue"ced by culture. 8o#ever, t!ese soft eleme"ts are as importa"t as t!e !ard eleme"ts if t!e or$a"i%atio" is $oi"$ to be successful. *!e #ay t!e model is prese"ted i" Di$ure , belo# depicts t!e i"terdepe"de"cy of t!e eleme"ts a"d i"dicates !o# a c!a"$e i" o"e affects all t!e ot!ers.
Strategy$ the plan devised to maintain and #uild competitive advantage over the competition' Structure$ the way the organi%ation is structured and who reports to whom'
Systems$ the daily activities and procedures that staff mem#ers engage in to get the (o# done' Share# %alues$ 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 capa#ilities' Skills$ the actual skills and competencies of the employees working for the company'
+ote: <laci"$ S!ared Calues i" t!e middle of t!e model emp!asi%es t!at t!ese values are ce"tral to t!e developme"t of all t!e ot!er critical eleme"ts. *!e compa"yLs structure, strate$y, systems, style, staff a"d s'ills all stem from #!y t!e or$a"i%atio" #as ori$i"ally created, a"d #!at it sta"ds for. *!e ori$i"al visio" of t!e compa"y #as formed from t!e values of t!e creators. As t!e values c!a"$e, so do all t!e ot!er eleme"ts.
your o#" +uestio"s, based o" your or$a"i%atio"Ls specific circumsta"ces a"d accumulated #isdom.
7S 'hecklist (uestions
8ere are some of t!e +uestio"s t!at youLll "eed to explore to !elp you u"dersta"d your situatio" i" terms of t!e @S frame#or'. Use t!em to a"aly%e your curre"t (<oi"t A) situatio" first, a"d t!e" repeat t!e exercise for your proposed situatio" (<oi"t B). Strateg(:
What is our strategy* +ow do we intend to achieve our o#(ectives* +ow do we deal with competitive pressure* +ow are changes in customer demands dealt with* +ow is strategy ad(usted for environmental issues*
Stru&ture:
+ow is the company,team divided* What is the hierarchy* +ow do the various departments coordinate activities* +ow do the team mem#ers organi%e and align themselves* Is decision making and controlling centrali%ed or decentrali%ed* Is this as it should #e, given what we-re doing* Where are the lines of communication* Explicit and implicit*
S(ste$s:
What are the main systems that run the organi%ation* .onsider financial and +/ systems as well as communications and document storage' Where are the controls and how are they monitored and evaluated* What internal rules and processes does the team use to keep on track*
Share, -alues:
What are the core values* What is the corporate,team culture* +ow strong are the values* What are the fundamental values that the company,team was #uilt on*
St(le:
+ow effective is that leadership* "o employees,team mem#ers tend to #e competitive or cooperative* re there real teams functioning within the organi%ation or are they (ust nominal groups*
Sta%%:
What positions or speciali%ations are represented within the team* What positions need to #e filled* re there gaps in re!uired competencies*
Skills:
What are the strongest skills represented within the company,team* re there any skills gaps* What is the company,team known for doing well* "o the current employees,team mem#ers have the a#ility to do the (o#* +ow are skills monitored and assessed*
7S Matri) (uestions
Usi"$ t!e i"formatio" you !ave $at!ered, "o# exami"e #!ere t!ere are $aps a"d i"co"siste"cies bet#ee" eleme"ts. /emember you ca" use t!is to loo' at eit!er your curre"t or your desired or$a"i%atio". Clic' !ere to do#"load our 4cIi"sey @S .or's!eet, #!ic! co"tai"s a matrix t!at you ca" use to c!ec' off ali$"me"t bet#ee" eac! of t!e eleme"ts as you $o t!rou$! t!e follo#i"$ stepsJ
&tart with your &hared Values: re they consistent with your structure, strategy, and systems* If not, what needs to change* $hen look at the hard elements' +ow well does each one support the others* Identify where changes need to #e made' 0ext look at the other soft elements' "o they support the desired hard elements* "o they support one another* If not, what needs to change* s you ad(ust and align the elements, you-ll need to use an iterative 1and often time consuming2 process of making ad(ustments, and then re3 analy%ing how that impacts other elements and their alignment' $he end result of #etter performance will #e worth it'
*ip: Dor similar approac!es to t!is, see our articles o" t!e Bur'e)Eit#i" C!a"$e 4odel, a"d t!e
Co"$rue"ce 4odel. Mou may also fi"d our articles o" t!e C!a"$e Curve, mpact A"alysis a"d Ee#i"Ls C!a"$e 4a"a$eme"t 4odel useful.
Key Points
*!e 4cIi"sey @Ss model is o"e t!at ca" be applied to almost a"y or$a"i%atio"al or team effective"ess issue. f somet!i"$ #it!i" your or$a"i%atio" or team is"Lt #or'i"$, c!a"ces are t!ere is i"co"siste"cy bet#ee" some of t!e eleme"ts ide"tified by t!is classic model. B"ce t!ese i"co"siste"cies are revealed, you ca" #or' to ali$" t!e i"ter"al eleme"ts to ma'e sure t!ey are all co"tributi"$ to t!e s!ared $oals a"d values. *!e process of a"aly%i"$ #!ere you are ri$!t "o# i" terms of t!ese eleme"ts is #ort!#!ile i" a"d of itself. But by ta'i"$ t!is a"alysis to t!e "ext level a"d determi"i"$ t!e ultimate state for eac! of t!e factors, you ca" really move your or$a"i%atio" or team for#ard.
*E Matri)
*!e .usiness port%olio is t!e collectio" of busi"esses a"d products t!at ma'e up t!e compa"y. *!e best busi"ess portfolio is o"e t!at fits t!e compa"yLs stre"$t!s a"d !elps exploit t!e most attractive opportu"ities. *!e compa"y mustJ (,) A"alyse its curre"t busi"ess portfolio a"d decide #!ic! busi"esses s!ould receive more or less i"vestme"t, a"d (2) 6evelop $ro#t! strate$ies for addi"$ "e# products a"d busi"esses to t!e portfolio, #!ilst at t!e same time decidi"$ #!e" products a"d busi"esses s!ould "o lo"$er be retai"ed. *!e t#o best)'"o#" portfolio pla""i"$ met!ods are t!e Bosto" Co"sulti"$ Group <ortfolio 4atrix a"d t!e 4cIi"sey 7 Ge"eral 0lectric 4atrix (discussed i" t!is revisio" "ote). " bot! met!ods, t!e first step is to ide"tify t!e various Strate$ic Busi"ess U"its (=SBULs=) i" a compa"y portfolio. A" SBU is a u"it of t!e compa"y t!at !as a separate missio" a"d obFectives a"d t!at ca" be pla""ed i"depe"de"tly from t!e ot!er busi"esses. A" SBU ca" be a compa"y divisio", a product li"e or eve" i"dividual bra"ds ) it all depe"ds o" !o# t!e compa"y is or$a"ised. *he M&'inse( / General 0le&tri& Matrix *!e 4cIi"sey7G0 4atrix overcomes a "umber of t!e disadva"ta$es of t!e BCG Box. Dirstly, $arket attra&tiveness replaces $arket growth as t!e dime"sio" of i"dustry attractive"ess, a"d i"cludes a broader ra"$e of factors ot!er t!a" Fust t!e mar'et $ro#t! rate. Seco"dly, &o$petitive strength replaces $arket share as t!e dime"sio" by #!ic! t!e competitive positio" of eac! SBU is assessed.
*!e dia$ram belo# illustrates some of t!e possible eleme"ts t!at determi"e mar'et attractive"ess a"d competitive stre"$t! by applyi"$ t!e 4cIi"sey7G0 4atrix to t!e UI retaili"$ mar'etJ
Fa&tors that 1%%e&t Market 1ttra&tiveness .!ilst a"y assessme"t of mar'et attractive"ess is "ecessarily subFective, t!ere are several factors #!ic! ca" !elp determi"e attractive"ess. *!ese are listed belo#J ) 4ar'et Si%e ) 4ar'et $ro#t! ) 4ar'et profitability ) <rici"$ tre"ds ) Competitive i"te"sity 7 rivalry ) Bverall ris' of retur"s i" t!e i"dustry ) Bpportu"ity to differe"tiate products a"d services ) Se$me"tatio" ) 6istributio" structure (e.$. retail, direct, #!olesale Fa&tors that 1%%e&t Co$petitive Strength Dactors to co"sider i"cludeJ ) Stre"$t! of assets a"d compete"cies ) /elative bra"d stre"$t! ) 4ar'et s!are ) Customer loyalty ) /elative cost positio" (cost structure compared #it! competitors) ) 6istributio" stre"$t! ) /ecord of tec!"olo$ical or ot!er i""ovatio" ) Access to fi"a"cial a"d ot!er i"vestme"t resources
*!e surfaces of t!e #!eels represe"t t!e si%e of sales, t!eir radius is calculated by t!e follo#i"$ formulaJ
'
9.
:. BCG a"alysis is mai"ly used for 4ulti Cate$ory 7 4ulti <roduct compa"ies. All cate$ories a"d products to$et!er are said to be Busi"ess portfolio. *!us, t!e various e"tities of your busi"ess portfolio may move for#ard by a differe"t pace a"d #it! a differe"t strate$y. *!e BCG a"alysis actually !elps you i" decidi"$ #!ic! e"tities i" your busi"ess portfolio are actually profitable, #!ic! are duds, #!ic! you s!ould co"ce"trate o" a"d #!ic! $ives you a competitive adva"ta$e over ot!ers. @. B"ce you '"o# #!ic! busi"esses sta"d #!ere i" your busi"ess portfolio, you also come to '"o# #!ic! busi"esses "eed i"vestme"ts, #!ic! "eeds !arvesti"$ (ma'i"$ mo"ey), #!ic! "eeds divesti"$ (reduci"$ i"vestme"t) a"d #!ic! "eeds to be completely ta'e" out of t!e busi"ess portfolio. Dor a maFor or$a"i%atio" li'e 8UE, *C etc #!ic! !ave multiple cate$ories a"d #it!i" t!e cate$ories, t!ey !ave multiple li"es of products, t!e BCG a"alysis becomes very importa"t. At a !olistic level, t!ey $et to ma'e a decisio" o" #!ic! product to co"ti"ue a"d #!ic! product to be divested. .!ic! product ca" $ive "e# retur"s #it! $ood i"vestme"t, a"d #!ic! products are reac!i"$ t!e apex of mar'et s!are. ?. BCG Growth Share Matrix A *!e BCG $ro#t! s!are matrix #as developed by 8e"derso" of t!e BCG $roup i" ,>@-Os. *!e matrix classifies busi"esses 7 SBU&s by >. 1) Relative Market Share A *!e mar'et s!are of t!e busi"ess 7 SBU 7 <roduct i" t!e mar'et as compared to its competitors a"d overall product 7 cate$ory. ,-. 2) Market growth rate A *!e $ro#t! rate of t!e i"dustry as a #!ole is ta'e" i"to co"sideratio" from #!ic! t!e $ro#t! rate of t!e product is extrapolated. *!is $ro#t! rate is t!e" pitc!ed o" t!e $rap!. ,,. *!us by !avi"$ 2 basic but at t!e same time very importa"t factors o" P axis a"d M axis, t!e BCG matrix ma'es sure t!at t!e classificatio"s are co"crete. Calculati"$ t!e 4ar'et $ro#t! rate comprises of bot! i"dustry $ro#t! a"d product $ro#t! rate t!ereby $ivi"$ a fair '"o#led$e of #!ere t!e product 7 SBU sta"ds i" compariso" to t!e "dustry. *!e mar'et s!are o" t!e ot!er !a"d comprises of t!e competitio" a"d t!e product pote"tial i" t!e mar'et. *!us #!e" #e co"sider $ro#t! rate a"d mar'et s!are to$et!er, it automatically $ives us a" overvie# of t!e competitio" a"d t!e i"dustry sta"dards as #ell as a" idea of #!at t!e future mi$!t bri"$ for t!e product. ,2. B"ce t!e busi"esses !ave bee" classified, t!ey are placed i"to four differe"t +uadra"ts of t!e matrix. *!e +uadra"ts of t!e matrix are divided i"to ,2. 1) Cash Cows A 8i$! mar'et s!are but lo# $ro#t! rate (most profitable). ,5. 2) Stars A 8i$! mar'et s!are a"d 8i$! $ro#t! rate (!i$! competitio") ,9. 3) !uestion $arks A Eo# mar'et s!are a"d !i$! $ro#t! rate (u"certai"ty) ,:. 4) "ogs A Eo# mar'et s!are a"d lo# $ro#t! rate (less profitable or may eve" be "e$ative profitability) ,@. B" t!e basis of t!is classificatio", strate$ies are decided for eac! SBU 7 <roduct. Eets discuss t!e c!aracteristics a"d strate$ies of eac! +uadra"t i" detail.
,?. 1) Cash Cows A *!e cor"ersto"e of a"y multi product busi"ess, cas! co#s are products #!ic! are !avi"$ a !i$! mar'et s!are i" a lo# $ro#i"$ mar'et. As t!e mar'et is "ot $ro#i"$, t!at cas! co# $ai"s t!e maximum adva"ta$e by $e"erati"$ maximum reve"ue due to its !i$! mar'et s!are. *!us for a"y compa"y, t!e cas! co#s are t!e o"es #!ic! re+uire least i"vestme"t but at t!e same time $ive !i$!er retur"s. *!ese !i$!er retur"s e"!a"ce t!e overall profitability of t!e firm because t!is excess reve"ue ca" be used i" ot!er busi"esses #!ic! are Stars, 6o$s or 3uestio" mar's. ,>. Strate$ies for cas! co# A *!e cas! co#s are t!e most stable for a"y busi"ess a"d !e"ce t!e strate$y $e"erally i"cludes rete"tio" of t!e mar'et s!are. As t!e mar'et is "ot $ro#i"$, ac+uisitio" is less a"d rete"tio" is !i$!. *!us customer satisfactio" pro$rams, loyalty pro$rams a"d ot!er suc! promotio"al met!ods form t!e core of t!e mar'eti"$ pla" for a cas! co# product 7 SBU. 2-. 2) Stars A *!e best product #!ic! comes i" mi"d #!e" t!i"'i"$ of Stars is t!e telecom products. f you loo' at a"y top 9 telecom compa"y, t!e mar'et s!are is $ood but t!e $ro#t! rate too is $ood. *!us because t!ese t#o factors are !i$!, t!e telecom compa"ies are al#ays i" competitive mode a"d t!ey !ave to Fu$$le bet#ee" i"vestme"t a"d !arvesti"$ vis i"vesti"$ mo"ey a"d ta'i"$ out mo"ey time to time. U"li'e cas! co#s, Stars ca""ot be complace"t #!e" t!ey are top o" because t!ey ca" immediately be overta'e" by a"ot!er compa"y #!ic! capitali%es o" t!e mar'et $ro#t! rate. 8o#ever, if t!e strate$ies are successful, a Star ca" become a cas! co# i" t!e lo"$ ru". 2,. Strate$ies for Stars A All types of mar'eti"$, sales promotio" a"d advertisi"$ strate$ies are used for Stars. *!is is because i" cas! co#, already t!ese strate$ies !ave bee" used a"d t!ey !ave resulted i" t!e formatio" of a cas! co#. Similarly i" Stars, because of t!e !i$! competitio" a"d risi"$ mar'et s!are, t!e co"ce"tratio" a"d i"vestme"t "eeds to be !i$! i" mar'eti"$ activities so as to i"crease a"d retai" mar'et s!are. 22. 3) !uestion Marks A Several times, a compa"y mi$!t come up #it! a" i""ovative product #!ic! immediately $ai"s $ood $ro#t! rate. 8o#ever t!e mar'et s!are of suc! a product is u"'"o#". *!e product mi$!t lose customer i"terest a"d mi$!t "ot be bou$!t a"ymore i" #!ic! case it #ill "ot $ai" mar'et s!are, t!e $ro#t! rate #ill $o do#" a"d it #ill ultimately become a 6o$. B" t!e ot!er !a"d, t!e product mi$!t i"crease customer i"terest a"d more a"d more people mi$!t buy t!e product t!us ma'i"$ t!e product a !i$! mar'et s!are product. Drom !ere t!e product ca" move o" to be a Cas! Co# as it !as lo#er competitio" a"d !i$! mar'et s!are. *!us 3uestio" mar's are products #!ic! may $ive !i$! retur"s but at t!e same time may also flop a"d may !ave to be ta'e" out of t!e mar'et. *!is u"certai"ty $ives t!e +uadra"t t!e "ame Q3uestio" 4ar'R. *!e maFor problem associated #it! !avi"$ 3uestio" mar's is t!e amou"t of i"vestme"t #!ic! it mi$!t "eed a"d #!et!er t!e i"vestme"t #ill $ive retur"s i" t!e e"d or #!et!er it #ill be completely #asted. 22. Strate$ies for 3uestio" mar's A As t!ey are "e# e"try products #it! !i$! $ro#t! rate, t!e $ro#t! rate "eeds to be capitali%ed i" suc! a ma""er t!at +uestio" mar's tur" i"to !i$! mar'et s!are products. 1e# Customer ac+uisitio" strate$ies are t!e best strate$ies for co"verti"$ 3uestio" mar's to Stars or Cas! co#s. Durt!ermore, time to time mar'et researc! also !elps i" determi"i"$ co"sumer psyc!olo$y for t!e product
as #ell as t!e possible future of t!e product a"d a !ard decisio" mi$!t !ave to be ta'e" if t!e product $oes i"to "e$ative profitability. 25. 4) "ogs A <roducts are classified as do$s #!e" t!ey !ave lo# mar'et s!are a"d lo# $ro#t! rate. *!us t!ese products "eit!er $e"erate !i$! amou"t of cas! "or re+uire !i$!er i"vestme"ts. 8o#ever, t!ey are co"sidered as "e$ative profitability products mai"ly because t!e mo"ey already i"vested i" t!e product ca" be used some#!ere else. *!us over !ere busi"esses !ave to ta'e a decisio" #!et!er t!ey s!ould divest t!ese products or t!ey ca" revamp t!em a"d t!ereby ma'e t!em saleable a$ai" #!ic! #ill subse+ue"tly i"crease t!e mar'et s!are of t!e product. 29. Strate$ies for 6o$s A 6epe"di"$ o" t!e amou"t of cas! #!ic! is already i"vested i" t!is +uadra"t, t!e compa"y ca" eit!er divest t!e product alto$et!er or it ca" revamp t!e product t!rou$! rebra"di"$ 7 i""ovatio" 7 addi"$ features etc. 8o#ever, movi"$ a do$ to#ards a star or a cas! co# is very difficult. t ca" be moved o"ly to t!e +uestio" mar' re$io" #!ere a$ai" t!e future of t!e product is u"'"o#". *!us i" cases of 6o$ products, divestme"t strate$y is used. 2:. Se5uen&es in BCG Matrix
2@. 2?. Su&&ess Se5uen&e in BCG Matrix A *!e Success se+ue"ce of BCG matrix !appe"s #!e" a +uestio" mar' becomes a Star a"d fi"ally it becomes a cas! co#. *!is is t!e best se+ue"ce #!ic! really $ive a boost to t!e compa"ies profits a"d $ro#t!. *!e success se+ue"ce u"li'e t!e disaster se+ue"ce is e"tirely depe"de"t o" t!e right decision making. 2>. "isaster se5uen&e in BCG Matrix A 6isaster se+ue"ce of BCG matrix !appe"s #!e" a product #!ic! is a cas! co#, due to competitive pressure mi$!t be moved to
a star. t fails out from t!e competitio" a"d it is moved to a +uestio" mar' a"d fi"ally it may !ave to be divested because of its lo# mar'et s!are a"d lo# $ro#t! rate. *!us t!e disaster se+ue"ce mi$!t !appe" because of wrong decision making. *!is se+ue"ce affects t!e compa"y as a lot of i"vestme"ts are lost to t!e divested product. Alo"$ #it! t!is t!e mo"ey comi"$ i" from t!e cas! co# #!ic! is used for ot!er products too is lost. 2-. Strategies .ase, on the BCG Matrix. 2,. *!ere are four strate$ies possible for a"y product 7 SBU a"d t!ese are t!e strate$ies #!ic! are used after t!e BCG a"alysis. *!ese strate$ies are 22. ,) Build A By i"creasi"$ i"vestme"t, t!e product is $ive" a" impetus suc! t!at t!e product i"creases its mar'et s!are. 0xample A <us!i"$ a 3uestio" mar' i"to a Star a"d fi"ally a cas! co# (Success se+ue"ce) 22. 2) 8old A *!e compa"y ca""ot i"vest or it !as ot!er i"vestme"t commitme"ts due to #!ic! it !olds t!e product i" t!e same +uadra"t. 0xample A 8oldi"$ a star t!ere itself as !i$!er i"vestme"t to move a star i"to cas! co# is curre"tly "ot possible. 25. 2) 8arvest A Best observed i" t!e Cas! co# sce"ario, #!erei" t!e compa"y reduces t!e amou"t of i"vestme"t a"d tries to ta'e out maximum cas! flo# from t!e said product #!ic! i"creases t!e overall profitability. 29. 5) 6ivest A Best observed i" case of 6o$ +uadra"t products #!ic! are $e"erally divested to release t!e amou"t of mo"ey already stuc' i" t!e busi"ess. 2:. *!us t!e BCG matrix is t!e best #ay for a busi"ess portfolio a"alysis. *!e strate$ies recomme"ded after BCG a"alysis !elp t!e firm decide o" t!e ri$!t li"e of actio" a"d !elp t!em impleme"t t!e same.