MARKETING MANAGEMENT

13th edition

2 Developing Marketing Strategies and Plans

Kotler

Keller

BCG MATRIX

Develop a market plan for a product of your choice.

CHP: 2&11-2

Analyzing Current SBUs The Boston Consulting Groups Growth-Share Matrix

CHP: 2&11-3

 BOSTON CONSULTING GROUP (BCG) MATRIX is developed by BRUCE HENDERSON of the BOSTON CONSULTING GROUP IN THE EARLY 1970s. 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 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 worlds largest music companies

Company Universal Music group Time Warner Music Sony BMG independents Market share in 2007 27% 17 16 14 10 17
0.59%

RMS = BUSINESS UNITS SALES THIS YEAR = 16 ---------------------------------------------------LEADING RIVAL SALES THIS YEAR 27

MARKET GROWTH RATE

Market growth is used as a measure of a markets 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 theres plenty of opportunity for everyone to make money.

BOSTON CONSULTING GROUP APPROACH

High Low Market Share Question Marks High growth low share

Low

Stars

High growth and shares Profit Potential Anticipated Growth Rate

Sell off turn into Stars Heavy Investment to grow Require cash to hold on to Market Share Cash Cows Low Growth high share Produces Cash Dogs

Sell off or liquidate

Low Profit Potential

High

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
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 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
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.

ITC TOBACCO cash cow

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

Ansoffs Product/Market Matrix

Existing products

New products

Existing markets

1. Market penetration

3. Product development

New markets

2. Market development

4. Diversification

Ways to Elaborate a Given Business

Existing Product New Product

Penetration Strategies Market Development Strategies

Product Development Strategies Diversification Strategies

Figure 5

101

Ways to Elaborate a Given Business

Market Penetration

Product Development

Sell more of the same to existing customers Sell the existing products to new types of customers
Market Development

Selling new products to existing customers Selling new products to new customers
Diversification
101

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
Selling an EXISTING product to an NEW MARKET

Hence called MARKET DEVELOPEMENT

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

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

Hence Product Diversification

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.

CHP: 2&11-21

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

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.

CHP: 2&11-23