MARKETING STRATEGY

ASSIGNMENT
SUBMITTED TO:- PROF. SATVINDER BEDI

GROUP MEMBERS M2
AYSHA FARIDI
ADNAN TEMRIKAR
ASAD ALI ATTARWALA
TAHIR SHAIKH

(05)
(19)
(29)
(34)

Q1. What is BCG Matrix? Explain Benefits and Limitations of BCG

Matrix.
Introduction
The BCG-matrix is also known as growthshare matrix , Boston matrix, Boston Consulting
Group analysis, portfolio diagram it is a chart that was created by Bruce D. Henderson for the
Boston Consulting Group in 1970 to help corporations to analyze their business units, that is
their product lines. This helps the company allocate resources and is used as an analytical tool in
brand marketing, product management, strategic management, and portfolio analysis
The BCG model is based on Product life cycle theory that can be used to determine what
priorities should be given in the product portfolio of a business unit. To ensure long term value
creation, a company should have a portfolio of product that contain both high growth products in
needs of cash input and low growth product that generate a lot of cash. It has two dimension
market growth and market share. The basic idea behind it is that the bigger the market share a
product has or the faster the products market grows the better it is for the company.

BCG Matrix.

Resources are allocated to business units according to where they are situated on the grid as
follows:

Cash Cows is where a company has high market share in a slow-growing industry. These
units typically generate cash in excess of the amount of cash needed to maintain the
business. They are regarded as staid and boring, in a "mature" market, yet corporations
value owning them due to their cash generating qualities. They are to be "milked"
continuously with as little investment as possible, since such investment would be wasted
in an industry with low growth.
It is desirable to maintain strong position as long as possible and strategic option
includesi) Product development
ii) Concentric Diversification
iii) If the position weakens as a result of loss of market share or market contraction then
option would include retrenchment.

Dogs, more charitably called pets, are units with low market share in a mature, slowgrowing industry. These units typically "break even", generating barely enough cash to
maintain the business's market share. Though owning a break-even unit provides the
social benefit of providing jobs and possible synergies that assist other business units,
from an accounting point of view such a unit is worthless, not generating cash for the
company. They depress a profitable company's return on assets ratio, used by many
investors to judge how well a company is being managed. Dogs, it is thought, should be
sold off.
Strategic option would includei) Retrenchment (if it is believed that it could be revitalized)
ii) Liquidation
iii) Divorcement (if you can find some one to buy)

Question Marks (also known as problem children) are business operating in a high
market growth, but having a low market share. They are a starting point for most
businesses. Question marks have a potential to gain market share and become stars, and
eventually cash cows when market growth slows. If question marks do not succeed in
becoming a market leader, then after perhaps years of cash consumption, they will
degenerate into dogs when market growth declines. Question marks must be analyzed
carefully in order to determine whether they are worth the investment required to grow
market share.

Strategic option would includei) Market Penetration

ii) Market Development

iii) Product development

Stars are units with a high market share in a fast-growing industry. They are graduated
question marks with a market or niche leading trajectory, The hope is that stars become
next cash cows. Stars require high funding to fight competitions and maintain a growth
rate. When industry growth slows, if they remain a niche leader or are amongst market
leaders it have been able to maintain their category leadership stars become cash cows,
else they become dogs due to low relative market share.
Strategic option would includei) Integration Forward, Backward and horizontal.
ii) Market penetration
iii) Market Development
iv) Product development
v) Joint ventures

As a particular industry matures and its growth slows, all business units become either cash cows
or dogs. The natural cycle for most business units is that they start as question marks, then turn
into stars. Eventually the market stops growing thus the business unit becomes a cash cow. At the
end of the cycle the cash cow turns into a dog. As BCG stated in 1970:Only a diversified
company with a balanced portfolio can use its strengths to truly capitalize on its growth
opportunities. The balanced portfolio has:
Stars whose high share and high growth assure the future,
Cash cows that supply funds for that future growth, and
Question marks to be converted into stars with the added funds.

Benefits of the BCG-Matrix:

The BCG-Matrix is helpful for managers to evaluate balance in the companiess current
portfolio of Stars, Cash Cows, Question Marks and Dogs.

BCG-Matrix is applicable to large companies that seek volume and experience effects.

The model is simple and easy to understand.

It provides a base for management to decide and prepare for future actions.

If a company is able to use the experience curve to its advantage, it should be able to
manufacture and sell new products at a price that is low enough to get early market share
leadership. Once it becomes a star, it is destined to be profitable.

Limitations of the BCG-Matrix:

It neglects the effects of synergies between business units.

High market share is not the only success factor.
Market growth is not the only indicator for attractiveness of a market.
Sometimes Dogs can earn even more cash as Cash Cows.
The problems of getting data on the market share and market growth.
There is no clear definition of what constitutes a market.
A high market share does not necessarily lead to profitability all the time.
The model uses only two dimensions market share and growth rate. This may tempt
management to emphasize a particular product, or to divest prematurely.
A business with a low market share can be profitable too.
The model neglects small competitors that have fast growing market shares.

Q2. State the objectives of product portfolio analysis.

Portfolio analysis has been devised to help associations in bringing their gap between strategy
formulation and strategy implementation by having following key objectives

1. To analyse product and service:

Portfolio analysis is the systemic way to analyse the product and service that make up an
associations business portfolio. All association (except the simplest and the smallest) are
involved in more than one business. For example, and association publishing business
might include a professional journal, a lay magazine ,specialized newsletter geared to
different member segment, CDs websites, social networking sites, etc.

2. To develop growth strategies: It is very essential to develop growth strategies for

adding new business to the portfolio and to analyse its current business portfolio and
decide which business should receive more or less investment. In other words, it helps
companies in deciding where to make the hard choice and where to put their money.
3. To decide on product visibility: Portfolio analysis is used to decide which of the
product and service should be emphasized and which should be phased out, based on the
objective criteria. Portfolio analysis consists of subjecting each of the associations
product and service throughout the progression of finer screens. During a time cutbacks
and scarce resources, it is essential to screen out programs and services that are not
essential to most members.

Q3. Define New Product. Explain the classification of new product

with examples.

New products are goods and services that differ significantly in their characteristics or intended
uses from products previously produced by the firm. Context: The first microprocessors and
digital cameras were examples of new products using new technologies.
From the analysis of PLC, it is clear why the companies should launch new products in the
market. The prime success factor behind new-product development is unique and superior
product.
There are 2 principal dimensions need to considered:
i). How new is the product to the company?
ii). How new is it to the marketplace?

This led them to propose a 6-stage classification as shown below.

1) New-to-the-world products:
These types of new products create an entirely new market. For example, introduction of
products like laptops and palmtops has created a new market of mobile computing.

2) New product lines:

New products may allow a company to enter an established market for the first time. Philips has
developed flat TV to target a new segment of already crowded CTV market.

3) Additions to existing product lines:

New products can supplement a companys established product lines. For instance, McDonalds
introduced pudina flavoured burgers for Indian consumers.

4) Improvements and revisions of existing products:

These are the new products that replace existing products by providing improved performance or
greater perceived value. For example,
Microsoft replaced its MS-DOS by Windows as an improved, user-friendly GUI (Graphical User
Interface) based operating system. They also updated Windows regularly and launched the
versions of Windows 95, 98, 2000 and XP.

5) Repositioning:
Existing products can be targeted to new markets or market segments. For example, Sahara
Airlines is revising its fares to target the railway AC 2/3 tier passengers.

6) Cost reductions:
New products may be developed that provide similar performance at lower cost. The mobile
service providers like Airtel, Hutch and Reliance India Mobile are introducing new post-paid
schemes with low rental and outgoing facility.

Q4 a) Classes of Categories Adopters:

Innovators These people are venturesome; although they make up a very small part of the
total market, innovators play a very important role. They are interested in anything new, and are
quick to adopt new and innovative products. Innovators knew about the product months before
it is introduced and paid a high price to be among the first to have this new product. They are
easily acceptable to new ideas. There is always a willingness on their part to try out new
products even at the risk. These people are usually found to be more educated and generally
follow a lifestyle matching the high social class status
Early Adopters - Young and restless; early adopters are opinion leaders. They pay attention to
what the innovators have discovered and find a practical use for the innovation. They then
communicate to their followers the usefulness of the new product. They play a very important
role by influencing the attitude and changing the behavior of the later adopters. Their
personality indicates them as educated, high social status with a favorable financial position
more successful than average and with a willingness to try new products.
Early Majority - Value shoppers; the early majority carefully observe the early adopters, but
wait to adopt innovative products until they are sure they will get value from them. The early
majority will only adopt a new product if they are sure the new product will provide usefulness
to their lives - and not be a waste of their time and money. These people are more deliberate as
compared to the innovators or early adopters. They can be referred to as middle class persons
with reasonable education, occupation, and income.
Late majority - Skeptics; the late majority wait until an innovation has been accepted by a
majority of consumers and the price has dropped to adopt the new product. The late majority
typically adopt innovative products because they feel as if everyone else is doing it. These
people unlike the earlier mentioned categories of adopters to the innovation are more
conservative in their approach and do not immediately respond in favor of change, these people
are with limited education and have an average social status, and having limited purchasing
power.
Laggards - Traditionalists; laggards are the very last group to adopt a new product. Laggards
are content with what they have, and they adopt new products unenthusiastically and only

because they feel as if they have to. As the term laggards indicate, these are people who are
lagging behind in acceptance of innovation. These people are very conservative and traditional
bound and vary or are suspicious of changes. A lot deliberation, caution and suspicion are
exhibited in their buying behavior for new products.

b) Basic Elements of Diffusion Process.

Diffusion is the process by which an innovation is communicated through certain channels over
time among the members of a social system. Diffusion is a special type of communication
concerned with the spread of messages that are perceived as new ideas.
An innovation, simply put, is an idea perceived as new by the individual.
An innovation is an idea, practice, or object that is perceived as new by an individual or other
unit of adoption. The characteristics of an innovation, as perceived by the members of a social
system, determine its rate of adoption.
The four main elements in the diffusion of new ideas are:
(1) The innovation
(2) Communication channels
(3) Time
(4) The social system (context)

1. The innovation
The innovation, to spread and be adopted should show:
The characteristics which determine an innovation's rate of adoption are:
(1) Relative advantage
(2) Compatibility
(3) Complexity
(4) Trialability
(5) Observability to those people within the social system.

2. Communication Channels :Communication is the process by which participants create and share information with one
another in order to reach a mutual understanding. A communication channel is the means by
which messages get from one individual to another. Mass media channels are more effective in
creating knowledge of innovations, whereas interpersonal channels are more effective in forming
and changing attitudes toward a new idea, and thus in influencing the decision to adopt or reject
a new idea. Most individuals evaluate an innovation, not on the basis of scientific research by
experts, but through the subjective evaluations of near-peers who have adopted the innovation.

3. Time:-

The time dimension is involved in diffusion in three ways.

First, time is involved in the innovation-decision process. The innovation decision process is
the mental process through which an individual (or other decision making unit) passes from first
knowledge of an innovation to forming an attitude toward the innovation, to a decision to adopt
or reject, to implementation of the new idea, and to confirmation of this decision. An individual
seeks information at various stages in the innovation-decision process in order to decrease
uncertainty about an innovation's expected consequences.
5-Step Process:
(1) Knowledge person becomes aware of an innovation and has some idea of how it functions
(2) Persuasion person forms a favorable or unfavorable attitude toward the innovation
(3) Decision person engages in activities that lead to a choice to adopt or reject the
innovation
(4) Implementation person puts an innovation into use
(5) Confirmation person evaluates the results of an innovation-decision already made

The second way in which time is involved in diffusion is in the innovativeness of

an individual or other unit of adoption. Innovativeness is the degree to which an
individual or other unit of adoption is relatively earlier in adopting new ideas than other
members of a social system. There are five adopter categories, or classifications of the
members of a social system on the basis on their innovativeness:
(1) Innovators 2.5%
(2) Early adopters 13.5%
(3) Early majority 34%
(4) Late majority 34%
(5) Laggards 16%

The third way in which time is involved in diffusion is in rate of adoption. The rate of adoption
is the relative speed with which an innovation is adopted by members of a social system. The
rate of adoption is usually measured as the number of members of the system that adopt the
innovation in a given time period.

4. The social system:The fourth main element in the diffusion of new ideas is the social system. A social system is
defined as a set of interrelated units that are engaged in joint problem-solving to accomplish a
common goal. The members or units of a social system may be individuals, informal groups,
organizations, and/or subsystems. The social system constitutes a boundary within which an
innovation diffuses. How the system's social structure affects diffusion has been studied. A
second area of research involved how norms affect diffusion. Norms are the established behavior
patterns for the members of a social system. A third area of research has had to do with opinion
leadership, the degree to which an individual is able to influence informally other individuals'

attitudes or over behavior in a desired way with relative frequency. A change agent is an
individual who attempts to influence clients' innovation-decisions in a direction that is deemed
desirable by a change agency.