January 7, 2010

MBA Strategic Analysis and Choice You

MBA Strategic Analysis and Choice You are required to critically examine the BCG growth/share matrix for an organisation of your choice.

 

This may be a domestic organisation or a multinational company.

 

It can be a service provider or a manufacturer.

 

The specific question is what are the benefits and limitations of companies using this matrix as a competitive tool, in terms of potential effects on their competitive position and the reaction of competitors.

 

 Use examples from the organisation to demonstrate the benefits and pitfalls of using this approach.

 

You can draw on primary and/or secondary sources of information about the organisation. The client is from Saudi Arabia.

 

 

The Boston Consulting Group developed the growth-share matrix to analyze the problem of resource deployment among the business units or products of multibusiness firms1. The business units or products are analyzed by placing each one in the matrix shown in Exhibit 4-2 according to their (1) expected growth rate (vertical axis), measured by anticipated growth rate in sales, and (2) relative market share (horizontal axis), measured as the unit's share divided by that of its largest competitor. Thus businesses or products in quadrant I with low expected growth rates and low relative market standing are labeled "dogs" or "cash traps." They should be managed to minimize cash flow by retrenchment, divestiture, or even liquidation. These units or products are likely to be characterized by high costs, low quality, less effective marketing procedures, and so on, which would collectively contribute to weak competitive position and low potential for profits.2

Those in quadrant II, with high projected growth rates and low market standing, are interpretive problems. The reason is that although they are operating in markets with expected growth potential, they currently are experiencing competitive disadvantage. Management can invest cash to correct the market weakness so as to take advantage of expected market growth or, if not convinced of their ability to improve market share, it can retrench, divest, or liquidate to minimize the cash drain.


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