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TEAM PROJECT
I. GROWTH STRATEGIES
Businesses can follow many growth strategies 1. Read over the material in this
when they wish to expand. These strategies worksheet.
typically focus on new products and/or new
markets. (In this discussion, services are 2. Summarize the 3 main topics on
referred to as the products of a service a PostIt Pad: Intensive growth
business.) Three broad categories of growth strategies
strategies are: Integrative growth strategies
• Intensive growth strategies
• Integrative growth strategies Diversification growth strategies
Market penetration can also involve pursuing new customers in current target markets.
Basically, the business uses marketing tactics to try to gain customers from its
competitors. This increases a business's market share. Market share is the percentage
of the total sales captured by a product or a business in a particular market. In other
words:
If a company sells $1,000 worth of tennis rackets in a town where total sales of tennis
rackets are $5,000, the company has a one‐fifth, or 20%, market share.
add small toys as extras to cereal boxes. Product development is typically costly for a
business but can be a successful means of growth if the new or enhanced offering is
popular with customers.
Integrative Growth Strategies
Every business has a core business, which is the most important focus of the business.
For example, the core business of McDonald's is selling fast food. A diversification
growth strategy is a growth strategy in which a business grows by offering products or
services that are different from its core business. There are two types of diversification
growth strategies:
Using the BCG Matrix (Growth Market Share Matrix) to review your product portfolio
The Boston Consulting group’s product portfolio matrix (BCG matrix) is designed to help
with long-term strategic planning, to help a business consider growth opportunities by
reviewing its portfolio of products to decide where to invest, to discontinue or develop
products. It's also known as the Growth/Share Matrix.
The Matrix is divided into 4 quadrants derived on market growth and relative market
share, as shown in the diagram below.
1. Dogs: These are products with low growth or market share.
2. Question marks or Problem Child: Products in high growth markets with low
market share.
4. Cash cows: Products in low growth markets with high market share
For example, in the automotive sector, when a car line ends, there is still a need for
spare parts. As SAAB ceased trading and producing new cars, a whole business has
emerged providing SAAB parts.
Question marks: Named this, as it’s not known if they will become a star or drop into
the dog quadrant. These products often require significant investment to push them
into the star quadrant. The challenge is that a lot of investment may be required to
get a return. For example, Rovio, creators of the very successful Angry Birds game
has developed many other games you may not have heard of. Computer games
companies often develop hundreds of games before gaining one successful game.
It’s not always easy to spot the future star and this can result in potentially wasted
funds.
Stars: Can be the market leader though require ongoing investment to sustain. They
generate more ROI than other product categories.
Cash cows: ‘Milk these products as much as possible without killing the cow!. Often
mature, well established products.The company Procter & Gamble which
manufactures Pampers nappies to Lynx deodorants has often been described as a
‘cash cow company’.
Use the model as an overview of your products, rather than detailed analysis. If market
share is small, use the 'relevant market share' axis is based on your competitors rather
than entire market.
Looking at the British retailer, Marks & Spencer, they have a wide range of products and
many different lines. We can identify every element of the BCG matrix across their
ranges:
Stars
Example: Lingerie. M&S was known as the place for ladies underwear at a time when
choice was limited. In a multi-channel environment, M&S lingerie is still the UK’s market
leader with high growth and high market share.
Example: Food. For years M&S refused to consider food and today has over 400
Simply Food stores across the UK. Whilst not a major supermarket, M&S Simply Food
has a following which demonstrates high growth and low market share.
Cash Cows
Example: Classic range. Low growth and high market share, the M&S Classic range
has strong supporters.
Dogs
You can also apply the BCG model to areas other than your product strategy. We
developed this matrix as an example of how a brand might evaluate its investment in
various marketing channels. The medium is different, but the strategy remains the
same- milk the cows, don't waste money on the dogs, invest in the stars and give the
question marks some experimental funds to see if they can become stars.
The BCG Model is seen as simplistic and it can be difficult to classify products in
smaller businesses where the relative market share is too small to quantify. It’s also
based on the concept that market share can be achieved by spending more on the
marketing budget.
No organization have unlimited resources, strategists must go with the strategies which
are most feasible and beneficial for the business.Strategy formulation commit an
organization to specific products,services, markets, resources and technologies over an
extended period of time. Strategies are developed for long term competitive advantage
over its competitors.
STRATEGY IMPLEMENTATION
Strategy implementation is the second stage of strategic management. Strategy
implementation can be only proceed after completion of strategy formulation stage,
when strategists are done with strategies selection. This stage includes number of
activities such as defining policies, building organizational structure, allocating resource
to implementing strategy, assigning tasks to each functional area employees and
tracking the progress of strategy implementation.[large]
This stage is often referred as action stage because each individuals is looking to get
the thing implemented according to the strategy. To execute the strategy in a right way
each individual must ask himself or herself the following questions.
STRATEGY EVALUATION
Strategy evaluation is the last stage of strategic management, the purpose of this stage
to monitor the implemented strategies and find out whether they are working or not to
achieve organization objectives.Strategy evaluation consist of three fundamental
activities reviewing external and internal factors that are bases for current strategies,
measuring performance and taking corrective action. Each implemented strategy is
evaluated to determine the outcomes, if the outcomes are meeting the expectation it
means strategy is successfully otherwise corrective action is required.
A firm's relative position within its industry determines whether a firm's profitability is
above or below the industry average. The fundamental basis of above average
profitability in the long run is sustainable competitive advantage. There are two basic
types of competitive advantage a firm can possess: low cost or differentiation. The two
basic types of competitive advantage combined with the scope of activities for which a
firm seeks to achieve them, lead to three generic strategies for achieving above
average performance in an industry: cost leadership, differentiation, and focus. The
focus strategy has two variants, cost focus and differentiation focus.
1. Cost Leadership
In cost leadership, a firm sets out to become the low cost producer in its industry. The
sources of cost advantage are varied and depend on the structure of the industry. They
may include the pursuit of economies of scale, proprietary technology, preferential
access to raw materials and other factors. A low cost producer must find and exploit all
sources of cost advantage. if a firm can achieve and sustain overall cost leadership,
then it will be an above average performer in its industry, provided it can command
prices at or near the industry average.
2. Differentiation
In a differentiation strategy a firm seeks to be unique in its industry along some
dimensions that are widely valued by buyers. It selects one or more attributes that many
buyers in an industry perceive as important, and uniquely positions itself to meet those
needs. It is rewarded for its uniqueness with a premium price.
3. Focus
The generic strategy of focus rests on the choice of a narrow competitive scope within
an industry. The focuser selects a segment or group of segments in the industry and
tailors its strategy to serving them to the exclusion of others.
The focus strategy has two variants.
(a) In cost focus a firm seeks a cost advantage in its target segment, while
in (b) differentiation focus a firm seeks differentiation in its target segment. Both variants
of the focus strategy rest on differences between a focuser's target segment and other
segments in the industry. The target segments must either have buyers with unusual
needs or else the production and delivery system that best serves the target segment
must differ from that of other industry segments. Cost focus exploits differences in cost
behaviour in some segments, while differentiation focus exploits the special needs of
buyers in certain segments.