This is referred to in short as BCG matrix. This is an important matrix in marketing. Asyou could see here a small brief this thing about this BCG matrix it was developed by theBoston consulting group company a well known consulting firm and it was firstpublished in this journal of long range planning in the year 1977 ok.What does this matrix give? It plots the market share of a company, it is actually therelative market share, the market growth rate against the relative market share of thecompany. Why it is called relative market share? Because it is relative with respect to theleader. As you can see in this graph this graph is a semi log graph that is on the x-axis itis on the logarithmic scale, on the y-axis it is on the normal scale.On the x-axis, you have the relative market share, on the y-axis you have the marketgrowth rate. Any company which is operating in the market we divide it or we bring itinto different compartments and call it by SBUs. What is an SBU? An SBU stands for a
Strategic Business Unit. What is the objective of this strategic business unit? Theobjective of this strategic business unit is it has its own product line, it has its owncompetitors and it has a manager for marketing strategic planning that is to devicemarketing strategies, strategic planning etcetera.These three characteristics of an SBU we make use of and divide a company intodifferent SBUs. Take for example, Bharat Electronics in Bangalore it caters to so manydefense products and an SBU can be tailor-made to the defense products division only.Similarly, with respect to ITI, you can have an SBU with respect to telephones, you canhave an SBU with respect to defense. So, this is how you bring an a company intodifferent SBUs.Taking these SBUs into account this BCT matrix is drawn. As I mentioned this is amatrix of the market growth rate against the relative market share that x-axis being onthe logarithmic scale and the y-axis being on the normal scale. The dividing line is 10percent here. If you see this graph this graph is divided into four compartments. The firstcompartment is called question marks, the second compartment is stars, the thirdcompartment is cash cows, the fourth is dogs.Any market which has a growth rate of 10 percent, and above is considered to be good inany context. It fits in the Indian context also. This is for this matrix is drawn for ahypothetical company and this matrix when it is drawn for a hypothetical company youcan see in this matrix that there are three SBUs which are in the question marks. What doyou mean by saying there are three SBUs?.To put it in the simple English language they are trying to find their feet in the market.You have launched a product and that product is has entered the market, now when itwhen the product has entered the market till it stabilizes you do not know what is goingto happen to that particular SBU. Any SBU which enters the market initially will be inthe question marks.For this company when this diagram was drawn by BCG matrix they had in mind apharmaceutical company and for this pharmaceutical company these three SBUs wereshown - 1, 2 and 3 they were trying to find their feet in the market. Whenever an SBU isin the question marks stage depending upon how strong it is, you pump in money tobuild that market. So, the SBU objectives should be to build for question marks.
You want that company SBU to move from question marks to stars, you do not want it togo away suppose it goes away let us say a product introduced from the question marksitself it vanishes then you would not find that SBU all in this BCG matrix. Before itvanishes it may go to dogs and then vanish.If you see this particular diagram you have got three SBUs which are in the questionmarks and for these three SBUs the objective should be of the company to move theseSBUs to stars. In order to move them to stars you require pumping enough investmentwhether it is with respect to promotion, whether it is with respect to incentives or anyother type of program.The marketing communication mix you are trying to emphasize upon and trying toensure this SBU objective when it is in question marks you want to build that SBU sothat it can move towards stars. When the SBU move towards stars you would like thatSBU to be as long as possible in the stars that is you would like to prolong the life of thatSBU in the stars.Any SBU which moves from the question marks to the stars may after sometime or willafter sometime move towards the cash cow. When it goes towards the cash cow what isthe type of objective you will adopt? If you see this diagram this there is one SBU of thiscompany which is in the cash cow and that come that cash cow is almost the leader in themarket. It is moving towards 10x.If you see here this is when it is moving towards 10x it becomes the market leader. Whenit becomes a market leader the objective of that SBU for the objective for the companywith respect to that SBU should be to hold on. You do not require lot of investment forthat cash cow still you get money out of it and when you get money in terms of revenues,when you get good amount of returns from this SBU you hold onto this cash cow andthis type of strategy you will adopt for a strong cash cow.How do you identify a strong cash cow? You identify a strong cash cow depending uponits position in the market with respect to the leader. When it is moving towards 10x, it isalmost the leader in the marketplace and you want to milk that cash cow to the maximumpossible extent. From the cash cow stage an SBU moves towards dogs. Suppose the cashcow was not a very strong cash cow, let us say.
matrix or it can be other matrixes, but for this particular course we will stay foot withthis BCG growth share matrix because it is ubiquitously used by most of the companies.Any company in the market would like to first use the BCG growth share matrix to findout how its SBUs are with respect to the market leader, where do they stand anddepending upon where they stand the companies might like to change their strategies ordraw their strategies or redraw their strategies. All these things are possible. This is awonderful way of visualizing the market in terms of SBUs.You put it into different compartments and depending on what is the product or theproduct line, the competition it is facing you keep a person in charge of the strategicplanning for that particular SBU. You create an SBU depending on your product line,how much it is going to contribute to your total sales revenue, sometimes you may findthat one SBU may be contributing more than 30 percent towards your total sales revenue.What does that mean? It means that this SBU you should be giving maximum attentionyou cannot allow this SBU to slide down because it is going to impinge on your salesrevenue. This is a wonderful matrix which was put initially by the BCG company andused now also by almost all the companies which are operating in the competitivemarket. Why we are why are we considering this matrix here?Even though we may be in 2019, we find many of the Indian companies not using thismatrix. Though the scenario is fierce competition many of our Indian companies are notaware of some of these techniques which are used by the Western companies. It is hightime that we also that is Indian companies also make use of these matrixes to keepabreast of what is going on in this competitive market. We cannot afford to lag behind.This is this BCG growth matrix which is very helpful in initially analyzing the market.
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This is with this we move to the next one where we look at strategic marketing. What arewe trying to look at? When we are looking at strategic marketing when we say we arelooking at strategic marketing we are looking at analysis of opportunities, choosingobjectives, developing strategy, formulating plans and carrying out implementation andcontrol.We are looking at analysis of opportunities, choosing objectives, developing strategyformulating plans and carrying out implementation and control. In other words, there arethree compartments which you can visualize for the strategic marketing. One is withrespect to analysis, the second is with respect to planning, the third is with respect tocontrol.The analysis stage involves identifying the market opportunities, the planning stageinvolves looking at the company objectives, then drawing up the marketing strategies,after the marketing strategies you draw the marketing plan. When we go along, we willdiscuss this in a little more detail. After this marketing plan the third stage or the thirdcompartment is where we look at marketing implementation and marketing control.In other words, this strategic marketing can be visualized in three compartments: onewith respect to analysis, second with respect to planning, third with respect to control. Ithas in all six; it has in all six blocks. If you put this in six boxes, first box will be marketopportunities, second box will be company objectives, third block will be third box will
be marketing strategies, fourth will be marketing plan, fifth will be marketingimplementation and sixth will be marketing control.Now, we give a formal definition for company marketing opportunities, how do youdefine this company marketing opportunity. It can be looked at as an arena of relevantmarketing action in which a particular company is likely to enjoy a differential advantagearena of relevant marketing action in which a particular company is likely to enjoy adifferential advantage.You can give an example for this. Take for example, the Horlicks you have in the marketas some brands of Horlicks. One is called the Kesar Badam, the second is called theWomen’s Horlicks. Women’s Horlicks coming in different flavours one is chocolateflavor, another is the caramel flavor. The Kesar Badam having both kesar and badam.These two products which are introduced by this company they enjoy a differentialadvantage that is they the product characteristics are such that the other competitors theyare not as of now able to put out a challenge for this particular products which areintroduced by this company. You have the Kesar Badam, you have this WomensHorlicks in the market holding a very great sway. If you go to any retail marketing storeor even a wholesale marketing store you find a good demand for these two products.This is what is called a differential advantage. Similarly, if you take this Gillettecompanies Mach 3, what is this Mach 3? The company claims that it is making use of atriple blade technology to give the user a very smooth shave, that is three blades inslanting positions and this technology as of now has not been able to be replicated byother competitors.This company enjoys a differential advantage with respect to this Mach 3. This you cansee when you are going to different stores people asking for that Mach 3 and this Mach 3holding onto this market share for a considerably long time. This is how companies haveidentified opportunities, marketing opportunities and once that marketing opportunitieshas clicked for them they are able to create a space for that particular product or productline where they enjoy a differential advantage.With this we look at how a company can look at growth opportunities what are themethods by which it can increase the growth? There are three ways you can look at
growth opportunities – one is intensive growth, second is integrative growth, third isdiversification. Growth opportunities can be intensive growth opportunities, integrativegrowth opportunities or diversification.Suppose it is an intensive growth opportunities. You could visualize the intensive growthopportunities with respect to market penetration, market development and then productdevelopment. What do you mean by market penetration? You are penetrating the marketby your product. There might there might already be a product there does not matterbecause that one particular product or that particular competitor or competitors cannot befilling in the entire market space.You might or you might also come to that market space with your product that is whatyou are seeing right now with respect to many of the products which are being sold in themarketplace especially with respect to consumer marketing. You have different juicescoming from different companies. Each company claiming that it is a very good qualityjuice with all that take the example of Amul Lassi. You are not getting a similar productlike the Amul Lassi in the market.This Amul Lassi in the market enjoys a differential advantage compared to others. Whenyou are putting a market let us say you are putting your own lassi into this market spacelet us say you have to compete with this existing brands like the Amul or whatever.In order to compete with the existing brands this existing brands may not be taking upthe entire market space that is available, with your lassi also you can corner or you cantake a small chunk of the marketplace. Any new product which is introduced into themarket able to get about 2 to 3 percent of the market share is good enough.This is where you are looking at market penetration. Once you penetrate the market theidea is to develop on that market that is you increase the market share. Once you increasethat market share you may also try to find out whether the market wants different typesof products in the same line.You may have a lassi, you may have a mango lassi, some other type of lassi all thosetypes of things which the market would be willing to lap up. How do you develop thedifferent types of products. All these three, that is a market penetration, market
development or the product development come in the category of intensive growthopportunities.Then we are when we are looking at integrative growth opportunities again we arelooking at backward, forward and horizontal. What is this backward, forward andhorizontal? Backward is where you take control of the supply line, forward is where youtake control of the distribution line and horizontal is where you take control of yourcompetitors.When do you go in for these integrative opportunities? You go in for integrativeopportunities when the basic industry has got strong growth future. There is there is Ihave taken an example of a company called automotive axles in Pune. Into theautomotive industry supplies to major automotive players in the Indian market be TVS orBajaj or name it, all these companies are supplied by the products of automotive axles.If a company is if the basic industry has got a very strong future growth future then youcan look at these three integrative growth opportunities. So, automotive axles has to keepup it is orders to a company say like TVS, it cannot afford to default on it is deliveryschedules. These delivery schedules are affected by the supply line.Suppose there is a break in the supply line linkage that is the supply chain linkage, thenyour delivery lines are going to be affected. So, in order to ensure that this will nothappen you may try to find out whether you can take charge of the supply line to theextent possible. Similarly, with respect to the distribution line if it is possible.Your order chain will always be on time this is the second growth opportunity. The thirdgrowth opportunity is what we call diversification. When you look at diversification it iswhen you look when the market outside the present marketing present core marketingsystem provides you a great opportunity.For example, you look at ITC it was facing lot of problems whether it was with respectto curbs on the use of tobacco or smoking. So, government insisting that on each of thecigarette packs put a warning sign to the consumer saying that smoking is injurious tohealth with even with that warning if he still smokes that is up to him.
From the company side you put that warning in a box saying that smoking is injurious toyour health. And, each time a budget used to come one of the candidates for increasingthe price used to be your cigarettes that is the cigarette price always used to go upwhenever a budget is presented.Given this type of a scenario ITC was looking at whether it can go to another field oranother marketing system up way from the present core marketing system which can bea good opportunity for the company. A market research study undertaken identified forITC, the hotel industry as an opportunity outside it is core marketing system. It wassuggested to ITC to look at hotel industry as an opportunity.The result ITC took the plunge and the hotel which came was the Windsor Manor inBangalore very near to the Vidhan Soudha and it is considered to be one of the mostpopular 5-star hotels in Bangalore even to this day. So, even after nearly three decades ofoperation you find that this hotel is still able to maintain its prime place with respect tothe star hotel industry.That is where you look at diversification that is something which is away from the coremarketing system ITC in the cigarette business coming away from that cigarette businessto an entirely new field like the hotel industry and still succeeding in that. A wonderfulexperiment which was done, and done very successfully by this company.(Refer Slide Time: 36:54)
We look at diversification in more detail. What is this concentric diversification, what isthis horizontal diversification and what is this conglomerate diversification. You can as Imention to you can have three types of diversification it can be concentric, it can behorizontal or it can be conglomerate. What is concentric diversification?When you are introducing new products that have technological stroke, marketingsynergies with the existing product line the appeal to new class of customers. Theexample that is taken here is ITI it came out with a product what is called the earthstations, this is used for satellite communication. You find so many companies makinguse of this earth stations produced by ITI.It was a new company was created for this purpose called the ITI sat com which was toassist in getting data and this was found to be extremely useful for the planning processinitially now having lot of other applications as well. So, you get the data from the fieldfirst at the village level then at the taluk level, then at the district level, then at the statecapital level, then the national capital level all through this ITIs earth stations or thesatellite communication.This is an example of concentric diversification when you are looking at new productsthat have technological marketing synergies with the existing product line appeal to newclass of customers. What about this horizontal diversification? You are coming out withnew products, but they have an appeal to the present customers though technologicallyunrelated.Take the example of ITI itself it was coming out with mechanical telephones that is youmight have seen the big black telephone of ITI. When the market started becomingcompetitive it was felt by the existing customers of ITI only or the market segments whynot ITI come out with a sleek telephone, why this heavy black telephone with thismechanical dialing. The result towards the end of 80s, ITI came out with what is calledthe cordless telephone.This cordless telephone was a very satisfying entry to ITI with respect to their newproduct segment and their existing customers also found this product to be one handy,second easily usable third can be taken out of this base and to a distance that is a personis let us say wants to talk in a room you can take it out from the hall based and go to the
room talk complete that and come back and put the phone down in the base. All this waspossible using the cordless phone. This is an example of horizontal diversification.When we come to what is called the conglomerate diversification what is it that you aredoing? You are looking at new products we appeal is to new class of customers it is notyour existing customers. What are you trying to do? It offsets some deficiency or itpresents a great environmental opportunity. For a company like ITC, this hotel industryprovided a great environmental opportunities with which was lapped up by the companyand came out with a large number of hotels starting from Windsor Manor in Bangalore todifferent parts of the country and also the globe ok.These are the three types of growth opportunities you can visualize for a company. Oneis the intensive growth opportunities second is the integrative growth opportunities thirdis the diversification. In all these three growth opportunities again there are three – threein each of them making up to nine ok. We will stop here we will continue.
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