London College Of Business

Subject : Assignment :

CM704 Business and Marketing Strategy Group Assignment Re Submission of individual part

Subimtted by : College ID : Submitted to : Class : Group : Module : Session : Submission Date : Word Count :

Muhammad Ahsan Riaz 130479MAR E. Wanki & Dr. Wang Hui MBA (Finance) A CM 704 April 2011-April 2012 08th Dec 2011 1217

Q 3) BCG Matrix Apple Inc Larger organizations often find it hard to decide in which proportion, they should allocate resources among different small business units. There are often smaller segments, products and business lines which combined together to form a larger business unit. The business portfolio will perform best if the organisation will stress on its strengths and avoid its weaknesses and exploit the striking opportunities that will bring maximum benefit for the organization both financially and in the form of increased market share. For this purpose, an organization must take following in to account.
1) First of all, critically analyse its present position, relevant market share and also take

in to consideration the stage of the product life cycle our products are in.
2) Adopt new development strategies for adding new product lines, divesting any of the

current ones on the basis of poor performance or loss of market share or if the product is on declining stage of product life cycle. There are several methods which could be used for portfolio planning but BCG Consulting Group or BCG matrix is the one which is being used most often. For this purpose an organization first of all has to categorize its Strategic Business Units. An SBU in an organization can be defined as the smallest business unit that has a distinct operations and objectives, can generate its own cash independent of other business units and an organization can make plannings for this SBU independent of other business segments. It could be a separate division, department, product line, separate Brand name or separate geographical location, its all depends on the organisation of the business entity.

According to BCG matrix, the SBUs are divided in to four categories, The Stars, The Cash Cows, the Dogs & finally The Dogs. Stars These are the products or Businesses that are outperforming their rivals in the market, having greater market share than their counterparts and there are greater opportunities in the market for growth.Normally,these products needs lots of investment in research and development and innovation to stay at market leaders position but eventually other competitors will enter in to the market ,taking the advantage of the research already done in that particular field. Our organization will lose market share and this product will become Cash Cow.

Cash Cows These are the products in which our organization normally enjoys market leaders position having maximum market share but there are lesser or no further opportunities for growth. These products have reached maturity stage of their product life cycle and we dont need to invest further in to these products. Organizations need only to managed properly to generate continues stream of revenues, which are essential for the investment in Stars. Question Marks Question Marks are the products in which our organization has relatively lower market share but there are lots of growth opportunities in the market. This reveals that if we can invest further in research and development and product innovation we can capture further market share. This is a very tricky decision to be made by the management at organization as due to scare resources and financial constraints they cant invest in all positive NPV investments so they will have to make priorities, in which product they will invest and which ones they will divest. Dogs Dogs are the products in which the organization has lower market share than its competitors and the market in which it operates is not very attractive as well. So, there are lower or no growth opportunities even if we decide to invest further. These products may generate sufficient cash to reach neither break-even point, so organization is neither making any lose nor making profit. So, it will not be a sensible decision to invest further in these products by business point of view. In our case the organisation we are working on is Apple Inc, Apple is a very successful company and renowned worldwide for its product innovation and heavy investment in its research and development department due to which apple is a pioneer and market leader in its field. The list of top 30 successful Apple products is as under, Macintosh 128k, iMac , iPod ,Apple II ,iTunes Music Store,Mac OS X ,LaserWriter, Titanium PowerBook G4,QuickTime ,iMac Core Duo ,iLife ,iBook , AirPort ,Mac mini , Final Cut Pro,Power Mac G5,AppleScript ,The Apple decal,Fifth-generation iPod ,MacWrite and MacPaint,iTunes ,System 7,PowerBook 100 series ,Hypercard ,Mac II ,Power Mac G4 Cube ,XServe RAID ,Newton ,First-generation Power Macs ,20th Anniversary Mac. So it will be quite hard to apply BCG matrix on apple due to such large number of successful products.It has a very strong portfolio of highly successful products and business lines which are at different stages of their respective product life cycle. Stars I have categorized iPhone and iPod in Star category which means they both need further investment in product development and there are greater opportunities available in the market for growth. Latest figures reveal that the growth rate for iPods is currently 28% and for those of iPhones its 48%.Apple enjoys 60% more market share in iPod than its closest rival Scandisk in the market. In iPhones, Apple is not the market leader but has 28% market share where manufacturer of Blackberry RIM has 41% market share. So, Apple is a challenger for RIM with significant proportion of relative market share. Both iPhone and iPods are very critical for Apples success in the long term. Organisations need Stars which will eventually later become Cash Cows and will be critical for future cash flow generations for the organization. Cash Cow I have placed Apples iTunes digital downloading software as a cash cow. Apple clearly is a market leader in this market segment with 82% market share, its closest rival is Napster with

only 3% relative market share. The huge difference of 79% shows that Apple has outplayed all its counterparts in this market segment. Growth rate for iTunes is 7.6% which indicates that it is a stable and mature product and it does not needs further heavy investments for product development by Apple Inc. This stream of cash flow is essential for providing cash for Question mark products. Question Mark I have placed Mac Os Xs and Mac Software in Question mark category, there is a possibility to capture further market share if provided with funds for product development and innovation, otherwise they will fall back in to Dog catogry.Apple has a comparatively lower market share in both market segments and there are further opportunities available as the growth rate is quite high. Apple enjoys 31.7% market share for Mac Os X and 0.09% relative market share while for Mac Software the growth rate is 32% and relative market share is 0.01%.These lower percentages may suggest that Apple should pay attention on development of its other products and should divest from Computer market completely. But market synergies exist between Apples computer business and its other product lines, so divesting from computers might affect adversely for its other products. So any decision of such kind should be made after careful thinking and keeping these factors in to account. Dogs Apples Macs could be considered underdog category as Apple is not a market leader in this market segment and does not enjoys majority percentage of relevant market share and there are few chances of capturing further market share even further investment in product development is done.

References

Henderson, Bruce (1974, #149). "The Experience Curve Reviewed: V. Price Stability" (Reprint). Perspectives (The Boston Consulting Group). Retrieved March 24, 2007.

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