The Analysis Of Bcg Matrix Marketing Essay

The Analysis Of Bcg Matrix Marketing EssayIn vocation, there atomic number 18 times when an establishment needs to expand or change the mart or field. There are tons of ideas about things ace could do. However, it is hard to determine which idea go forth be the best. Therefore, strategic securities industrying planning tools result be important and beneficial, such(prenominal) as BCG matrix, Ansoff Matrix or Porter 5 forces and so forth, to attend one to evaluate the options and decide on the one that suits the organization and situation best. As a result, it gives the best extradite on the considerable coronation that an organization allow for need to make.Strategic grocerying focusing involves the process of deciding the marketing strategy to follow and to ensure it is followed correctly, in order to compete against its rivals successfully. In an attempt to assist strategic marketing process, a number of different strategic marketing planning tools have been created. Ig or Ansoff, Michael Porter and the Boston Consulting Group have the best known clay sculptures in the field of work. Strategies are developed according to the objectives within an organization. The establishment of the objectives will normally produce a difference between what had been achieved and what target needs to be met. The ingestions of strategies are to exposit how this gap is going to be solved, and objectives met. Strategic Management is a systematic approach to the major and increasingly important responsibility of general management to horizon and relate the firm to its environment in a way which will assure its continued success and make it secure from surprises(Ansoff, 1990).This writing, it will focus on the BCG Matrix, which is one of the models like PESTEL, SWOT, Ansoff matrix, Gap analysis, GE matrix and Porter 5 forces. It is often used to assess the profits of business or resource apportionment and divestment decisions by the marketers. The content of this report will explain and analyse the application of BCG Matrix with some examples. Some of the other analytical tools will also be mentioned in this work.Analysis of BCG matrixBCG Matrix is developed by Bruce Henderson of the Boston Consulting Group in the year of 1968 (BCG, 2012). It is one of the Portfolio analyses. It is used to determine high or low performers of businesses or crossroads depending upon their market harvest-tide rate and telling market allot. The idea behind this Matrix is that the higher the market share or a better market grows of the product, it is better for the organization. There are four categories in BCG Matrix, which are Stars, Cash cow, Question mark and Dogs (Philip.K, et al., 2008). Furthermore, horizontal axis is given for relative market share position and vertical axis for industry growth rate (Philip.K, et al., 2008). Planners are to classify their products or businesses into the four categories according to their position on the matrix. It r eturns a framework for analysis and comparison of products or businesses for multinational companies with diverse products. The advantages of using BCG Matrix are to have the ability to prioritise a business or product portfolio it is to know what products are doing well and what are non performing. It provides a useful insight into the potential opportunities and problems associated with a particular product. It is often a convenient graphical form that is easily understood by the staffs who are the decision makers. Taking Nestle company (table 1.0) as an example, prepared dishes and cooking aids, PetCare and confectionary would be classed as Cash cow, beverage products would be a star, whereas pharmaceutical products as Question mark. Water products would most likely to be classed as a Dog. The BCG matrix is linked to the Product life cycle. Introduction, growth, maturity and decline, it represents Question marks, Stars, Cash overawe and dogs in the BCG matrix respectively. Ref erring back to the table 1.0, it shows that PetCare and Confectionery products are at the late maturity period in the Product life cycle. Therefore, Nestle must come out with new and better ideas, in order to hold back or slow down the product from further decline in sales, or perhaps becoming a Dog. However, it is expected that different product will have different life cycle. Therefore, some stars with short life cycle will be better to harvest rather than to commit further coronation (Graeme. D and John. E, 2007). In a multinational company, it is essential for its products to have high and low growth rate, such as stars to assure future of the company, cash cows that supply money for further growth and converting questions marks into stars, it is because a balanced product portfolio will maximise organisation revenue. As mentioned by Bruce Henderson Only a diversified company with a balanced portfolio can use its strengths to truly capitalize on growth opportunities(BCG.P, 201 0). The benefits of high growth products include high return at the cost of wide ranging resource to market. For low growth rate products, its benefits are customers familiarity with the product, thus, lesser cost for marketing and a constant source of revenue.With the help of BCG matrix, it can be identified how organization cash resources can be used to maximize a companys future growth and profitability. It provides the criteria for determining which products or business one should invest in, hold, harvest or divest. However, the BCG matrix is only useful to a certain extent, and its limitation makes it increasingly less accurate. The BCG matrix was created in mid-seventies therefore, it is expected to be less accurate in the current society especially during periodic recession (Blythe, 2006). The situation in the current business market is much more complicated than before. Abell and Hammond recommended that it should add two more practical strategies, Freeze and Cut into the M atrix (Abell, et al., 1979). Freeze basically stopping all investment and do not plan new ones during a recession or crisis, and cut means that cutting services by reducing some activities. The model of BCG matrix discouraged organizations to invest in businesses with a less than 10% growth rate in a year. During the hard time, many companies will not have a growth of 10%.Thus, it is not accurate to rely on BCG matrix during an economic downturn it might create confusion in the companys direction. The connection between market share and profitability is arguable because sometimes low share businesses can be profitable too and vice versa (Babette Craig, 2012). As mention by experts, the markets are difficult to determine with a huge amount of overlaps and complex segmentation (Macmillan. H, 2000). There are many portfolios in material businesses consist of a high percentage of dog businesses and few star businesses (Macmillan. H, 2000). Thus, portfolio analysis is criticized for of fering little help in these circumstances. Growth rate and market share are only one aspect of industry attractiveness and overall competitive position respectively. The market definition and noticement are not perfect as there are some problems faced (Wensley. R, 1981). Hence, poor definition of business market might lead to some misclassification, such as dogs, become cash cows. Moreover, the matrix mainly focus on the investment in current products of a company, thus, it might neglect alternative investment such as setting new product lines or investing in new technology which could be better than investing in current products or services. The matrix also ignores the potential competitive responses. When an organization tried to build their market shares and support growth, it is likely to get responses from the competitors as retaliation (Blythe, 2006). Furthermore, it is too simplistic and general just to use high and low to form four categories, which lead to a low accuracy a nalysis. In addition, the matrix is based on cash revenue, whereby profit should be a better phrase to use as it means the financial gain after all the deduction of get down from the revenue. General electric (GE) matrix developed by Mckinsey is a similar matrix that overcomes some of the disadvantage of BCG matrix. It uses market attractiveness instead of market growth rate which included a broader range of factors compare to growth rate. It also replaced market share into competitive strength which assessed each SBU with competitive positioning (Kozami,2002). However, this paper will not go into the details of GE matrix due to the words constraint.With the obvious limitations of BCG Matrix, it is not recommended to use the matrix alone. It is an portfolio analysis tools which focus on the internal of an organization, thus, it is always best to use with external analysis tools such as SWOT. SWOT will look at matters like the strength and failing of the company, and the opportunit ies and threats that might occur. It is used to measure the degree of strategic fit between the organization and its environment. As a combination with BCG matrix, BCG matrix will focus on the internal factors and SWOT will be focusing on the external factors, therefore, the O T of SWOT will be mainly suggest to use alongside with BCG matrix. For example, with the O T, the organization can recognise the opportunities and threats in Nestle such as an increase in health conscious society (PRweb, 2012) provide a huge opportunity for Nestle to produce more health care products and raw ingredient prices for chocolate production are increasing will affect the profit margin as threat (Christopher, 2011). If only BCG matrix is used, the planners will miss the external factors like the society or raw materials set which might cause problems to the organization. According to experts, it mentioned that a mixture of two or more analysis tools is recommended for a holistic view of strategic s cenario (Wind, et al, 1983). Therefore, it is essential for an organization to capture the internal and external factors to strengthen the company.ConclusionThis paper focused on the analysis of BCG matrix, it evaluated the usefulness and weakness of the model. Recommendations also had been advised for further enhancement of the usefulness of the model. Although BCG Matrix has a number of limitations, it is still one of the most popular portfolio planning tools used by big companies with diverse products. It can measure the growth rate and relative market share of each sector in a table form. The table shows a clear understanding on how an organization is performing. With a simple and clear understanding, the company can develop strategies to deal with the sectors, and achieve the organizations aimed goals and objectives. It is also useful for small businesses to survey the companys market share and growth, in relation to relative market to see how products are performing. Lastly, BCG Matrix is not a tool to replace management decision or vision. It is a tool to help managers or planners to evaluate their strategy alternatives together with other analysis tools, such as SWOT. It is a tool with flaws, but still suffices to be a good tool for portfolio analysis. ReferencesAbell, Derek, and Hammond John S, 1979. Strategic market planning problems and analytical approaches. 1st ed. New Jersey Englewood Cliffs.Ansoff, Igor, 1990. Implanting Strategic Management. 2nd ed. New York scholar Hall .Babette, E, 2012. Analysis Without Paralysis 12 Tools to Make Better Strategic Decisions. 2nd ed. New Jersey Financial Times.BCG. 2012. BCG History. Online Available at http//www.bcg.com/about_bcg/history/history_1968.aspx. Accessed 04 November 12.BCG. Perspectives. 2012. The product portfolio. Online Available at https//www.bcgperspectives.com/content/Classics/strategy_the_product_portfolio/. Accessed 05 November 12.Blythe, Jim, 2006. Principles Practice of Marketing. 1st ed. London Thomson learning.Christopher Adams . 2011. Chocolate lovers face price rise as ingredients soar. 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