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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.
(Refer Slide Time: 19:33)
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