The Boston Consulting Group Box ("BCG Box")

Using the BCG Box (an example is illustrated above) a company classifies all its SBU's according to two dimensions: On the horizontal axis: relative market share - this serves as a measure of SBU strength in the market On the vertical axis: market growth rate - this provides a measure of market attractiveness By dividing the matrix into four areas, four types of SBU can be distinguished: Stars - Stars are high growth businesses or products competing in markets where they are relatively strong compared with the competition. Often they need heavy investment to sustain their growth. Eventually their growth will slow and, assuming they maintain their relative market share, will become cash cows. Cash Cows - Cash cows are low-growth businesses or products with a relatively high market share. These are mature, successful businesses with relatively little need for investment. They need to be managed for continued profit - so that they

continue to generate the strong cash flows that the company needs for its Stars. Question marks - Question marks are businesses or products with low market share but which operate in higher growth markets. This suggests that they have potential, but may require substantial investment in order to grow market share at the expense of more powerful competitors. Management have to think hard about "question marks" - which ones should they invest in? Which ones should they allow to fail or shrink? Dogs - Unsurprisingly, the term "dogs" refers to businesses or products that have low relative share in unattractive, lowgrowth markets. Dogs may generate enough cash to break-even, but they are rarely, if ever, worth investing in. Using the BCG Box to determine strategy Once a company has classified its SBU's, it must decide what to do with them. In the diagram above, the company has one large cash cow (the size of the circle is proportional to the SBU's sales), a large dog and two, smaller stars and question marks. Conventional strategic thinking suggests there are four possible strategies for each SBU: (1) Build Share: here the company can invest to increase market share (for example turning a "question mark" into a star) (2) Hold: here the company invests just enough to keep the SBU in its present position (3) Harvest: here the company reduces the amount of investment in order to maximise the short-term cash flows and profits from the SBU. This may have the effect of turning Stars into Cash Cows.

(4) Divest: the company can divest the SBU by phasing it out or selling it - in order to use the resources elsewhere (e.g. investing in the more promising "question marks")

Ansoff matrix

the company introduces new policies to enter into new market , i.e. target new market, then it can know its result by placing itself into this ANSOFF MATRIX. The company can know and find that whether its new policies are accepted by the market or not.

 And finally the company can increase its level of new opportunities. growth, is faced with four choices for action (these can be combined or mixed). These options are: Market Penetration. Concentrating on existing products to existing markets. Market Development. Finding and developing new markets for existing products. Product Development. Developing new products for existing markets. Diversification. Developing new products and new markets. Market Penetration Existing products for existing markets. Focusing on existing products for existing markets, means that the firm aims to increase sales within its present market place. To be successful at market penetration firms must be aware of what hasmade the product a success in the first place. The firms marketing strategy should be based on this existing relationship. There are several penetration strategies open to firms. These strategies include: The easiest method is to attract customers who have not yet become regular users, but are occasional users. This can be a

successful strategy where there is fast market growth and new consumers are just 'testing the water'. Attack competitors sales. This will often happen in mature markets, where increased sales will have to come from Specification requirement The Ansoff Matrix marketing strategies with differing degrees of risk. The Ansoff Matrix approaches product mix or portfolio management from a different point of view to Product Life Cycle Analysis and the Boston Matrix. Instead of focusing on profitability or sales, the Ansoff Matrix outlines the options open to firms if they wish to grow, improve profitability and revenue. These options indicate to how to manage the development of the product range. The Ansoff Matrix looks similar to the Boston Matrix in that it is a two-by-two analysis, but in this case the axes of the matrix relate to whether marketing strategy is targeted at existing customers or new

customers and if existing products should be used or as an alternative new products should be developed. We see the structure below. The Ansoff Matrix We can see from the matrix, that an business looking to increase sales and create 2008 Spec. Issue 2 Sept. 2009 Page 1 The Ansoff Matrix Existing Products New Products Existing Markets Market Penetration Product Development New Markets Market Development Diversification competitors. The strategy in this case will be adjustment of the marketing mix, altering one or more of theelements such as price or promotion techniques. Tesco has been successful in this type of strategy over the last 10 years, taking customers from all it s supermarket rivals. Internet service providers are continually trying to win customers from competitors. A third strategy can be to increase consumption amongst existing users. consumption goods and consumer durables Market Development Develop markets for existing products. If the business takes the option of market development, the objective will be to find new markets for the firms existing products. There are two broad market development strategies. These are:

Identify users in different markets with similar needs to existing customers. Identify new customers who would use a product in a different way. One method of achieving the first of these, different markets, is to find new geographical markets. The original Beetle car which ceased production for the UK market, around 1975, were still being sold in Mexico 1990. Another example of identification of new customers, is the targeting of Lucozade as a sports drink rather than something to have next to your bed when you have flu or measles. Any launch into a new geographical market is an example of the first of these options. Product Development New products for existing markets A third option available is to develop new products for existing markets. In this case the business will attempt to increase profitability and growth by introducing new products targeted at the existing customer base. The first and most popular option of product development in the consumption goods market is to produce and market new products which are closely associated with the products or brands which customers already consume. So Mars confectionery, now produces Mars Ice Cream, Mars drinks etc. Virgin is another good example. For the teenage market we had Virgin Mega stores and Virgin Cola - two products targeted at the same market. A further example is the move into financial services and banking by firms such as Marks & Spencer and Tesco.

There are also product development strategies that can be used with industrial or producer markets. These strategies are based on examining the purchasing habits of customers Title Ansoff Matrix Page 2 and then expanding the product range to match these habits. For example a company producing caravans may group heating and lighting component purchases as one category. The supplier of heating components and parts may then provide new products for existing markets by also supply lighting components and parts. Diversification Develop new products for new marketsThe final option available is to develop new products for new markets. This may be attempted if the firm sees a new opportunity, and has investment funds available or alternatively the firm may be forced into this type of action because of pressures in existing markets or on existing product ranges. This diversification option comes with the greatest level of risk, as it is not based on existing knowledge within the firm. Virgin's move into trains has not been as successful as was initially hoped, and the criticisms of the service provided may have some effect on the overall strength of the brand. On the other hand Nokia, Europe's most successful mobile phone manufacturer, started out life as a producer of paper products. In this case diversification has been incredibly successful Conclusion. The Ansoff Matrix is: a model for outlining the range of marketing options open to a firm

a method of managing the marketing of a product or brand over its life cycle. The final decisions, new markets, new products etc. are of course down to the firms involved, but the role of the matrix is not to make decisions but to provide an outline of alternative methods of achieving the final goal - growth.