London College Of Business

Subject :

CM704 Business and Marketing Strategy

Assignment :

Group Assignment
Re Submission of individual part

Subimtted by :

Muhammad Ahsan Riaz

College ID :

130479MAR

Submitted to :

E. Wanki & Dr. Wang Hui

Class :

MBA (Finance)

Group :

Module :

CM 704

Session :

April 2011-April 2012

Submission Date :

08th Dec 2011

Word Count :

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
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