Escolar Documentos
Profissional Documentos
Cultura Documentos
With the high development of the information technology, the uncertainties of market
and finance give rise to the shortened product life cycles, corrupted marketing
environment and frequently reduce in price (Carmo, Ken, 2003). The traditional strategic
analysis methodology, such as, product positioning matrices, SWOT analysis, Porter's
five force model recommended by Michael E. Porter(1998), are not enough to develop a
comprehensive marketing strategy for companies in such fierce business competition.
Robert and Antonio (1998) found that effective and analytical activities could help
augment the overall return on management. Referring to this, the paper examines a
strategic analysis tool - Boston Group Portfolio Matrix. This essay will firstly discuss the
definition of product life cycle and the Boston Matrix, and its ultimate principle in the
analysis of product assortment. Following this, it will declare the model limitations of
Boston Group Portfolio Matrix. After that, this paper will explain how to use the model in
the applications, and discuss the appropriate strategies for the company the
assignments have mentioned. Finally, it will focus on the suggestions when referring to
the limitations of using the BCG Matrix for strategic planning.
The BCG Matrix has driven from the early 1970's, and has been produced by the
Boston Consulting Group (James and Charles, 1997). Based on the theory of product
life cycle, the BCG Matrix has been of the most famous portfolio management Decision
Making Tools in giving priority to the product portfolio in a firm or section. Kotler(1997)
considered the Boston Group Portfolio Matrix Model as the noted business portfolio
model. The Boston Group Portfolio Matrix has two dimensions - market share relative to
competition, and market growth (Burgelman, Modesto, Steven, 2000). In the
commercial department, market share is significant because of the advantage to have a
greater share than opponents. At the same time, the market growth is decisive because
the growing markets offer more chance for companies than lower growth markets.
2.2 The ultimate principle of BCG Matrix
The matrix model, demonstrated in Figure 2 (BCG Matrix, 2009), has been created to
show how a balanceable range of services or products could be offered (Carl, George,
1998; Carl, Michael, 2006). These four areas have been given characteristic titles to
indicate their strategic sense.
2.2.2 Stars
In the market context, star products placed in the top left quadrant, have high relative
market share running in an area with high growth. In order to generate large amounts of
income, they will probably need to invest. When the market growth rate reduces,
investment will also cut down, and the stars will turn into the cash cows. For example,
the Apple Computer has a great share in the quickly growing market share rate for light
digital music player.
The bottom right quadrant stands for the business with low market share in low growth
area. It is comparatively tough to get rid of the low market share situation.
In the application, the advice for management is to invest the capital obtaining from the
"Cash Cows" into the "Stars". In order to balance a product portfolio well, it is vital to
add the number of number of "Stars" that can grow healthily. Of course, making sure
there are a lot of Cows to generate income. Obviously, the Boston Group Portfolio
Matrix has its own advantages, the point is that it takes emphasis on the profitable
services and helps the managers to develop strategies on the product assortment.
2.2.4 Dogs
These are the dead-end products whose time has been and gone and likely most offer
no future profits. Simply keeping them on the market is wasting resources generated by
Star and Cash Cow brands. Dogs should be disposed of unless they somehow
contribute to the sales of other brands/products within the portfolio.
Although it has some certain limitations, the BCG Portfolio matrix remains a simple and
effective method to look at the corporation's product portfolio with a glimpse. And it is
valuable for the company to make a correct decision on allotting firm's resource and
making the following market planning. Tim (2008) and Malcolm (2007) stated clearly
that the strategic marketing plan is significant for every company.
6.0 Conclusion
To sum up, because of the characteristic of the BCG Matrix, analytical methods of a
new BCG Matrix is on the development. Specifically, Nelson and Winter(1982)
recommended a revolutionary economic model used for testing various results of the
matrix's investment rules. Phelan (2004) believed that the BCG matrix adapted to the
exploratory policy model. It is profound for managers to use the valuable information
engendering from the BCG matrix as the foundation for strategic decisions on which
business should draw the further investment, shaping the fraction of resource
distribution strategy (Dawn Brewer, 2010). Armstrong and Brodie (1994) deemed that
Portfolio matrix had been widely regulated. However, initially experienced by the Boston
Consulting Group, the BCG matrix was undoubtedly an available tool.