• Each business has different potentiality and profitability
Ø so multi-business firm has to plan for each one of its business
§ Developed by Bruce Henderson of the Boston Consulting Group, USA
§ Acc to this, the business or product are classified
Øas low or high performances depending upon
Øtwo Dimension :
§ Is a four cell matrix ( 2 x 2 )
1. Market Share
§ Is the Total percentage of the total market that is being serviced by the company
§ Higher the market share, higher proportion of the market the company control
Sales
§ Sales this year and leading competitors sales this year
§ Horizontal axis represent Market Share
company competitors
2. Industry Growth :
§ Is
used as a measure of a Market’s attractiveness, Profitability, Distribution
channel, customers etc
§ Vertical axis represent Industry Growth
Industry Sales this year – Industry Sales last year.
Sales
20219-2020 2020-2021
High
Question Marks Stars
Industry Growth
Dog Cash Cow
Low
Low High
Firms Market Share
1. Stars :
§ High industry growth rate
§ High market share
§ stars are the Market Leader
§ Generates enough cash to maintain their high Market Share
§ When market growth rate slows, stars become cash cow.
§ Strategy for Star:- Growth Strategy
ØExpansion strategy to achieve higher
ØR&D to introduce better services and features
ØEffective after sale-service to enhance the customers
ØAppropriate promotion mix
2. Question Marks
§ High industry growth
§ Low market share
§ New product with the potentials for success
§ Need more cash for development and to gain market share
§ Can become STAR if enough investment is made or they may become DOG if
ignored.
§ Strategy for Question Mark:- Growth Strategy
ØPenetration Pricing
ØEffective sales promotion
ØDealers incentives
ØEnhancing customers relationship
3. Cash Cow
§ Low industry growth
§ High market share
§ Earn huge amount of cash but growth rate is slow
§ Brings money to maintain their Market Share
§ Compared with product life cycle , these are matured product
§ Strategy for Cash Cow:- Stability Strategy
ØRetentive advertising
ØGuarantees and warranties depending upon the nature of product
ØIntroduction of new models or design
4. Dog
§ Low industry growth
§ Low market share
§ Compared with PLC, these are late maturity or declining Stage
§ Don’t have potential to bring in much cash
§ Should be either sold off or managed carefully or withdrawn
ØHelps to concentrate its efforts on question mark or stars
§ Strategy for Dog:- Retrenchment Strategy
ØAdopt divestment of business unit or product line
ØClosed down the unviable business
BCG Matrix For ITC Ltd
High Question Marks Stars
-FMCG :- Food -Argi business
-Hotel
-paperboard &
packaging
Industry Growth
Dog Cash Cow
Low -ITC Infotech -FMCG:- Cigarettes
Low Firms Market Share High
§ This model is an attempt to win over the weaknesses of
BCG portfolio Matrix
§ Called as an extension of BCG Matrix
§ Also known as Stop-Light strategy model
§ Developed by General Electronic Company in collaboration with Mc
Kinsey
§ It is based on Two Parameters:-
1. Industry Attractiveness
2. Competitive Position
§ When industry concerned is highly attractive
Øand companies has the best of strength
Øthe business is rated as Most important one to the company
§ When industry concerned is less attractive
Øand companies has the very low strength
Øthe business is rated as Least important one to the company
§ The other business will occupy a position
Øsome where between the two extremes
1. Market Size
2. Market Growth
3. Market Profitability
4. Pricing Trend
5. Competitive intensity/rivalry
6. Overall risk of returns in the industry
7. Opportunity to differentiate product and services
8. Segmentation
9. Distribution Structure
§ Industry attractiveness are grouped on the basis of:
ØLow, Medium and High
1. Strength of assets and competency
2. Relative brand strength
3. Market share
4. Customer loyalty
5. Relative cost position
6. Distribution strength
7. Record of technological or other innovation
8. Access to financial and other investment resources
§ Competitive position are grouped on the basis of
ØWeak, Average and Strong
Zone
Industry Attractiveness
High
GREEN
Medium YELLOW
RED
Low
Weak Average Strong
Firm’s Competitive Position
1. Green Zone
§ Go Ahead
§ Strategy is to invest and expand
§ Zone is know for the Adopt of Expansion Strategy or Market Development
§ May go for Cost Leadership Strategy or Product Differentiation Strategy
§ Huge cash is generated in this zone
2. Yellow Zone
§ Wait and Watch
§ Not mush growth possibility
§ Hold and maintain the current position
§ Strategies used is Stability
3. Red Zone
§ Stop
§ Business is unattractive
§ Low priority is given to these business
§ Business opts for Retrenchment type of strategies
Zone
High WAGON R SWIFT DEZIRE SWIFT
Industry Attractiveness
GREEN
Medium VERSA SX4 ALTO YELLOW
RED
Low OMNI BALENO A STAR
Weak Average Strong
Firm’s Competitive Position
§ Mostly used as an organizational analysis tool
Ø to assess and monitor the internal situation
§ Helps to identify which elements needs to be
Ø realigned to improve performance
§ Is the management model developed by :-
Øconsultants at McKinsey & company Consulting Firm –
ØRobert H. Waterman, jr and Tom Peters in 1980’s
§ It highlights the interconnection between 7 factors and their role
Ø in successful implementation of strategy
§ 7 variables if properly aligned, strategy implementation becomes
easy
§ It consists of 3 Hard Elements:- Structure, Strategy, System
ØMore tangible, easily identified and influenced by management
§ It consist of 4 Soft Elements :- Skills, Style, Staff and Shared values
ØDifficult to describe, more intangible and influenced by corporate
culture
1. Strategy
§ Set of decision and action taken after analyzing the environment
Øfor getting the sustainable competitive advantages
§ Broad framework to reach organizational goal
§ Following question needs to be answered :-
1. What is our strategy?
2. How do we intend to achieve our objectives?
3. How do we deal with competitive pressure?
4. How are changes in customers demand dealt with?
5. How is strategy adjusted for environment issues?
2. Structure
§ EstablishedPattern of relationships among different components or part of the
organization
§ Network of Authority and Responsibility relationship
§ Indicates interrelationship between different units of the organization
§ Following question needs to be answered :-
1. How is the organizational structured or divided?
2. What is the hierarchy?
3. How do the various departments coordinate activities?
4. How do the team members organize and align themselves?
5. Is decision making and controlling centralized or decentralized
3. Systems
§ Processes and routine activities in an organization
§ Represent the flow of activities
§ Following question needs to be answered :-
1. What are the main system that run the organization?
2. What are the controls and how are they monitored and evaluated?
3. What internal rule and processes does the departments use to keep on track?
4. Shared Values
§ Guiding principles that lay the foundation of businesses
§ The belief, attitude and assumption shared by people represent corporate culture
§ What organization stand for and believes in
§ Following question needs to be answered :-
1. What are the core values?
2. What is the corporate culture?
3. How strong are the values?
4. What are the fundamental values that the company was bult on ?
5. Skills
§ Means the core competencies and capabilities of the employees
§ Conceptual skills, human skills, technical skills, administrative skills, decision
making skills, problem solving skills etc
§ Refers to the Specialization
§ Following question needs to be answered :-
1. What are the strongest skills od the members in the company?
2. Are there any skills gaps?
3. Do the current employees have the ability to do the job?
4. How are skills monitored and assessed?
6. Style
§ Refers to management style
§2 organization differ from each other as regards to style of working .
ØSome are conservative and profit oriented
Øwhile others are professional and service-centered
§ Following question needs to be answered :-
1. Which style of management is more relevant in different situations?
2. Are the employees satisfied with the leadership style of the managers?
3. What needs to be done to make the leadership style more effective?
7. Staff
§ Means the people their knowledge skills and experience
§ Important to manage its human capital to create competitive advantages
§ “Right man to the Right job and at right Time”
§ Result oriented managers are the Back Bone of an Organization
§ Following question needs to be answered :-
1. What are the strong competencies of the staff?
2. What position need to be filled to complete the organizational task effectively?
3. Are there gaps in required competencies of the staff?
4. What can be done to attain commitment and dedication of the staff?
§ He advocate that a structural analysis of different industries be
made
Øso that the firm is in a better position to identify its Strengths and
Weaknesses.
§ A model was proposed consisting of Five competitive forces
Øthat determine the intensity of industry Competition and Profitability
1. Rivalry among Competitors
2. Bargaining Powers of the Suppliers
3. Bargaining Powers of the Buyers
4. Threat of Substitution
5. Threat of New Entry
Potential
entrants
Threats of new
entrants
Bargaining
power of Industry
supplier competitors
Suppliers Buyers
Rivalry among Bargaining
existing firms power of
buyers
Threat of substitute
products or services
Substitutes
§ Competition is a game where one person or player loses at the
expenses of the other.
§ When the rivalry is weak, there is likely to be lesser competition
§ When the rivalry is High, the level of competition is also high
§ Competitive Rivalry is most likely to be high in those industries
Øwhere there is a threat of Substitute product
§ Competitive Rivalry will be high if :-
1. Little differentiation between the product sold
2. Competitors are approximately the same size
3. Competitors have similar Strategies
4. Exit barriers
§
§ Their ability to force an increase in the price of the product or service
or make buyers accept a lower quality of product or services.
§ Suppliers are essential for the success of an organization as
Øraw material are need to complete the finished product of the
organization
§ High Supplier bargaining power has a
ØPositive feature for exiting firm and new entrants
§ Low Supplier bargaining power prevents
Øa firm from passing in its cost increase or
Øto make the buyer accept a lower quality of product and service at
higher price
§ The bargaining power of suppliers is high under these
conditions:-
1. When the suppliers are few and the buyers are many
2. When product or services are unique
3. When substitutes are not available
4. when the switching cost of supplier is low
5. When the supplier is not critically dependent on the product or
service supplied
6. When the buyers buys in small quantities
7. When the suppliers have the ability to integrate forward.
§ Is the ability of the Buyers to force a reduction in the price of
product or service,
Ø demand a higher quality or better service at a lower prize.
ØHigh Buyers bargaining power has a negative feature for exiting firm
and new entrants
ØLow Buyers bargaining power make the buyers accept a lower quality
of product and services at a higher price
§ The bargaining power of Buyer is high under these conditions:-
1. When the buyers are few in number
2. When the few buyers place large order individually
3. When alternative suppliers are present
4. When the switching cost of buyers from one supplier to the other is
low
5. Buyer is price sensitive
6. When the buyer itself has the ability to integrate backwards
§ Substitute products or services are those that apparently are different
but satisfy the same set of customers need.
§ They are alternative or identical products that customers can
Ø purchase over your product that offers
Øthe same benefit for the same or less price
§ Availability of close substitutes is a negative competitive force for an
industry
§ Product price is restricted by the price of the substitute product
§ This happen when:-
1. Price of the substitute product falls
2. Easy for consumer to switch from one substitute product to another
3. Buyers are willing to substitute.
§ Is possible especially in a profitable and growing industry.
§ This are the potential competitors which are not competing in an
industry at present
Øbut have the capacity to give competition in near future
§ Profitability market attract more competitors and their entry should be
restricted by:
1. Product differentiation
2. Brand equity
3. Brand loyalty etc
