Product Strategies

Product Life-cycle Product Portfolio Planning Product Growth Strategies

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Product Portfolio Planning

Strategic Marketing Planning

Tools/Models. Boston Consulting Group (BCG) Matrix General Electric (GE) Matrix

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Goals of the topic

How planning models can be

useful aids in developing a marketing program

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Designing Business Portfolio -The collection of business Business Portfolio

and products that make up the company . Portfolio Analysis is a tool by which the management identifies and evaluates the Strategic Business Units( SBU)

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Use of Portfolio Analysis

The company can decide which business

receive more, less or no investments and returns. Helps to develop new growth strategies by adding new products or business to the portfolio.

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Strategic Business Units (SBU

Eg. Unilever-SBUs Food Brands Home care Brands Personal care Brands

It can be a companys division or

a product-line within the division.

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Strategic Business Units

TATA

IT (Information Technology) : TCS Consumer Durable : Automobiles, Titan etc. Textiles : Tata Fabrics, etc
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Strategic Business Units (SBU)

Strategic Business Units should

Be a separately identifiable

business Have a distinct mission Have separate competitors Have a separate group of executives charged with profit responsibility Have its own strategic plan
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The BCG ( Boston Consulting Group) Matrix

Market Share/ Market Growth Matrix: Matrix A marketing planning tool that classifies a firms

SBUs or products according to Industry growth rates and Market shares relative to competing products
Stars Cash Cows Dogs Question Marks

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COMPANYS MARKET SHARE High Low

High

INDUSTRY GROWTH RATE

Stars

Question marks

Low

Cash cows

Dogs
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Relevance & Importance of BCG Matrix

TheBCGMatrixhas2dimensions: RelativeMarketshareand Marketgrowth. The basic idea behind it is : if a product has a bigger marketshareoriftheproduct'smarketgrowsfaster,itis betterforthecompany.
A company should seek a balanced portfolio of SBUs with a mix of stars, cash cows, and questions marks, but hopefully no dogs.

Stars and Qs Marks are both company

business that operate in high growth industries. The difference b/w them is the firm's market share relative to other main operators in the industry. Where as a Star is a Market Leader, a Question Mark is a follower. Cash Cows and Dogs are both company business that operates in lowgrowth industries. It is the market share position that distinguishes a Cash Cow from a Dog, though both operate in low-growth industries. A Cash Cow" is a market Leader while Dog is a Poor follower.
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Stars: are net users of resources. A Star needs a good

deal of investment support as it operates in a high growth market. It may not bring in immediate profits, but holds out great potential for the future. Strategy: invest more funds for future growth. Qs .Marks: : they also are net users of resources. But, their future is uncertain. and they are in the high risk category. Strategy: Either invest more funds for future or disinvest. Cash Cows: are net generator of resources. A cash cow brings a lot of cash and profit to your company, investment needs of a cash cow is minimal being it in a low-growth market. Strategy: milk profits to finance growth of stars & QMs. Dogs: dogs are business with weak market share in weak (low-growth) market. they are cash-traps and draggers of your company resources. Stg: Withdraw

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Limitations of BCG Matrix Highmarketshareisnottheonlysuccessfactor. Marketgrowthisnottheonlyindicatorfor attractivenessofamarket. Ahighmarketsharedoesnotnecessarilyleadto profitabilityallthetime.

The model neglects small competitors that have fastgrowingmarketshares.

ABOUT GE MATRIX
Developed by McKinsey & Company in

1970s. GE is a model to perform business portfolio analysis on the SBUs. GE is rated in terms of Market Attractiveness & Business Strength It is an Enlarged & Sophisticated version of BCG.

Classification
Competitive Strength
Strong Medium Weak

Market Attractiveness

Low

Medium

High

Market Attractiveness
Annual market growth rate Overall market size Market structure Market rivalry Market entry barriers Social, political & Legal factors

Competitive Strength
Market share Reputation Distribution capability Market Knowledge Service quality Innovation capability Cost Advantages

Strategies
1. Protect Position Invest to grow 1 Effort on maintaining strength 2. Invest to Build Challenge for leadership Build selectively on strength

3. Build Selectively Invest in most attractive segment Build up ability to counter competition Emphasize profitability by raising productivity

Strategies
4. Protect & Refocus Manage for current earning Defend strength 5. Selectivity for Earning 4 Protect existing program Investments in profitable segments 6. Build Selectively Specialize around limited strength Seek ways to overcome weaknesses Withdraw if indication of sustainable growth are lacking

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Strategies
7. Limited Expansion for Harvest Look for ways to expand

7 without high risk 8. Manage for Earnings Protect position in profitable 8 9 segment Upgrade product line Minimize investment 9. Divest Sell at time that will maximize cash value Cut fixed costs and avoid investment meanwhile

GE Matrix For TATA

Strong High IT

Competitive Strengths Weak

Consumer Durables

Market Attractiveness
Low

Textiles

BCG & GE Matrix

Relative Position Business Strength

Market Attractiveness

(Market Share)

Market Growth

BCG v/s GE BCG

Market Growth Market share 4 cell Multi Products Primary tools

GE
Market Attractiveness Market strength 9 cell Multi Business Units Secondary tools

Advantages of GE Matrix
Provides guidelines for setting strategic objective

based upon a products position in the matrix The Analysis is much better than BCG matrix because more factors are being taken into account, leading to better resource allocation decisions. Disadvantages It is harder to use then BCG Matrix and its flexibility can provide an opportunity for Managerial bias
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The Contribution of Portfolio Planning

The Models emphasize the important strategic

point that different products should have different roles in a product portfolio Different reward systems and Managers should be linked to them. The models act as an aid to managerial judgement but should not succeed that judgement The models can be seen as an aid ti Strategic thinking in Multi-product, Multi -Market Companies
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