BCG Matrix Ansoff Product

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BCG Matrix and Ansoff Product with examples

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MARKETING MANAGEMENT 13th edition:

MARKETING MANAGEMENT 1 3 th edition 2 Developing Marketing Strategies and Plans Kotler Keller

BCG MATRIX:

CHP: 2 &11 - 2 BCG MATRIX Develop a market plan for a product of your choice.

PowerPoint Presentation:

CHP: 2 &11 - 3 Analyzing Current SBU’s The Boston Consulting Group’s Growth-Share Matrix

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BOSTON CONSULTING GROUP (BCG) MATRIX is developed by BRUCE HENDERSON of the BOSTON CONSULTING GROUP IN THE EARLY 1970’s. According to this technique, businesses or products are classified as low or high performers depending upon their market growth rate and relative market share.

MARKET SHARE:

MARKET SHARE Market share is the percentage of the total market that is being serviced by your company, measured either in revenue terms or unit volume terms. RELATIVE MARKET SHARE RMS = Business unit sales this year Leading rival sales this year The higher your market share, the higher proportion of the market you control.

Market share of world’s largest music companies:

RMS = BUSINESS UNITS SALES THIS YEAR = 16 ---------------------------------------------------- 0.59% LEADING RIVAL SALES THIS YEAR 27 Company Universal Music group Time Warner Music Sony BMG independents Market share in 2007 27% 17 16 14 10 17 Market share of world’s largest music companies

MARKET GROWTH RATE:

MARKET GROWTH RATE Market growth is used as a measure of a market’s attractiveness. MGR = Individual sales - individual sales this year last year Individual sales last year Markets experiencing high growth are ones where the total market share available is expanding, and there’s plenty of opportunity for everyone to make money.

BOSTON CONSULTING GROUP APPROACH:

8 BOSTON CONSULTING GROUP APPROACH Stars High growth and shares Question Marks Sell off turn into Stars Cash Cows Low Growth high share Dogs Sell off or liquidate Low Profit Potential High Low Market Share High Low Anticipated Growth Rate Profit Potential Heavy Investment to grow High growth low share Require cash to hold on to Market Share Produces Cash

STARS High growth, High market share:

STARS High growth, High market share Stars are leaders in business. They also require heavy investment, to maintain its large market share. It leads to large amount of cash consumption and cash generation. Attempts should be made to hold the market share otherwise the star will become a CASH COW.

CASH COWS :

CASH COWS Low growth , High market share They are foundation of the company and often the stars of yesterday. They generate more cash than required. They extract the profits by investing as little cash as possible They are located in an industry that is mature, not growing or declining.

DOGS Low growth, Low market share :

DOGS Low growth, Low market share Dogs are the cash traps. Dogs do not have potential to bring in much cash. Number of dogs in the company should be minimized. Business is situated at a declining stage.

QUESTION MARKS High growth , Low market share :

QUESTION MARKS High growth , Low market share Most businesses start of as question marks. They will absorb great amounts of cash if the market share remains unchanged, (low). Why question marks? Question marks have potential to become star and eventually cash cow but can also become a dog. Investments should be high for question marks.

ITC TOBACCO – cash cow :

CHP: 2 &11 - 13 ITC TOBACCO – cash cow It’s a leader in terms of Vol of 110000 crores 97 billion stick cigarette market. The segment is witnessing declined in vol the last 3 years. Last 5 Years rs. 1000 crores has been pumped into cigarette business Rs 500 crores plans of investment There is an inevitable shift of consumers away from smoking habit. In spite of dropping volumes ITC is able to maintain its profitability by increasing margins.

Ansoff’s Product/Market Matrix:

Ansoff’s Product/Market Matrix 4. Diversification 2. Market development New markets 1. Market penetration Existing markets Existing products 3. Product development New products

Ways to Elaborate a Given Business:

Existing Product New Product Penetration Strategies Market Development Strategies Product Development Strategies Diversification Strategies Ways to Elaborate a Given Business Figure 5 101

Ways to Elaborate a Given Business:

Product Development Diversification Market Penetration Market Development Sell more of the same to existing customers Sell the existing products to new types of customers Selling new products to existing customers Selling new products to new customers Ways to Elaborate a Given Business 101

MARKET PENETRATION:

MARKET PENETRATION Selling more of an EXISTING product to an EXISTING MARKET This is going deeper into the market. Hence called MARKET PENETRATION More Promotion

MARKET DEVELOPMENT:

MARKET DEVELOPMENT Selling an EXISTING product to an NEW MARKET Hence called MARKET DEVELOPEMENT

PRODUCT DEVELOPMENT:

PRODUCT DEVELOPMENT Selling an NEW product to an EXISTING MARKET Hence called PRODUCT DEVELOPMENT Changes to the product – New Coke Vanilla Flavor

PRODUCT DIVERSIFICATION:

PRODUCT DIVERSIFICATION Selling a NEW Product to NEW MARKET Diet Coke targeted at people who are health conscious. Hence Product Diversification

Market Penetration Strategy:

CHP: 2 &11 - 21 Market Penetration Strategy This focuses growth on the existing product range by encouraging higher levels of take up of a service among existing target market. E.g. Supplier of Orange juice encouraging customers to drink when they might otherwise consume milk.

Market Development Strategy:

Market Development Strategy This strategy builds upon the existing product range, which an organization has established, but seeks to find new groups of customers for it.

Product Development Strategy:

CHP: 2 &11 - 23 Product Development Strategy Organizations may choose to develop new product for existing market. E.g. NIVEA Visage soft facial cleansing WIPES show Product Development. Women are looking for new ways to clean and care for skin.

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