MKTG 2201 Lecture Notes - Lecture 2: Boston Consulting Group, Strategic Planning, Cash Flow

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Marketing chapter 2 company and marketing strategy
Strategic planning
Every company needs to have a game plan for long-term survival and
growth
Companies also need to have operational and annual marketing goals
Planning helps maintain a strategic fit between its goals and capabilities
so that everyone that is part of a marketing team is aware and actively
participates in achieving that goal
Steps in strategic goals
Defining the company mission setting company objectives and goals
designing the business portfolio then it is up to each functional area of the
business to develop strategies that can help the company achieve its overall
objective
Business portfolio a combination of the companys products
Portfolio analysis
Managements evaluation of the products and businesses that make up
the company
o )dentify the strategic business units SBUs
o Assess their attractiveness and decide on the level of support SBU
deserves
Whether they are actually useful to the company
Direct resources toward more profitable businesses and phase down or
drop its weaker ones
Boston Consulting Group Matrix A method that classifies all its strategic business
units in terms of market growth. In order to analyze the overall product portfolio of a
business in terms
Star: High market growth / High market share
Successful product in an expanding market.
The firm will be keen to maintain the market position for this product in a
fast-changing market.
Promotion costs will be high to help differentiate the product and reinforce
its brand image.
Despite the promotion costs, a star will generate a lot of
Cash cows / Question Mark: High market growth / low market share
The problem child consumes resources but it generates little return.
If its a newly launched product its going to need heavy promotional costs to
become established ($ from cash cow)
The future is uncertain so quick decision need to be made if sales do not
improve such as revised design, re-launch or even withdraw from the market.
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It should have potential, as it is a growing market sector.
Businesses need to look carefully at which problem children are worth
developing and investing in and which need to be dropped and stop selling.
Dogs: Low market growth / low market share
Dog products offer little to a business either in terms of existing sales and cash
flow or future prospects because the market is not growing.
They may need to be replaced shortly or the firm could decide to withdraw
from the market sector altogether and position itself into faster growing
sectors.
Boston Matrix and Strategic Analysis
Building - supporting question marks products with additional advertising
or further distribution outlets. The finance for this could be obtained
from established cash cow products
Holding - continuing support for start products so that they can maintain
their good market position. Work may be needed to “freshen” the product
in the eyes of the consumers so that high sales growth can be sustained
Milking - taking the positive cash flow from established products and
investing in other products in the portfolio
Divesting - identifying the worst performing dogs and stopping the
production and supply of these. This strategic decision should not be taken
lightly as it will involve other issues such as the impact on the workforce
and whether the spare capacity freed up by stopping production can be
used profitably for another product
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The problem with matrix
They can be difficult to construct
Time consuming
Costly to implement the changes suggested
They do not account for future changes in trends, the economy or the
government
Companies refrain from using this as they are now more decentralized in
their strategic planning
Companies also focus their marketing strategies by cross-functional
departments working more closely with the marketing department
Product/market expansion grid
A portfolio planning tool for identifying company growth opportunities
through
o Market penetration
o Market development
o Product development
o Diversification
Market penetration company growth by increasing sales of CURRENT products
to CURRENT market segments without changing the product.
Making an increasing number of sales through their current product lines
and markets
Making improvements to the marketing mix
o Promotion
o Pricing
o Distribution distribute in other locations
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