The idea behind the matrix is that there should be a relationship between a company's current and future products and the markets in which it operates. Any industry involves a very wide range of products that can be produced and markets in which to operate, so the company has a wide choice of directions for growth. The company needs to determine its current position in the industry and choose the direction of its growth that would provide the best position for it in the future.
Thus, the company's strategy should be determined by three main factors:
- The status quo as a set of products and markets in which the company currently operates
- growth vector, which sets the direction of the company's development based on its current position
- Competitive advantage- key features of existing and future products and markets that can provide the firm with a strong competitive position.
Ansoff matrix structure
The Ansoff matrix is a square formed along two axes:- horizontal axis of the matrix- products of the company, which are divided into existing and new
- matrix vertical axis- the company's markets, which are also divided into existing and new
Strategies in the Ansoff Matrix
Market penetration strategy (existing product - existing market)Increasing market penetration is the simplest and most obvious strategy for most companies. They are already on the market, their main goal is to increase sales. The main tool here is to increase the competitiveness of products, so the main attention in this strategy should be directed to improving the efficiency of business processes, due to which it is possible to increase both the consumption of products by existing consumers and the attraction of new customers. Possible sources growth can be:
- increase in market share
- increasing the frequency of product use (including through loyalty programs)
- increasing the amount of product use
- opening new areas of product application for existing consumers
This strategy is the second possible solution in which companies are trying to adapt their existing products for new markets. To do this, it is necessary to identify new potential consumers of existing products. Companies whose marketing competencies are strong enough to be a key driver of development can successfully go this route by:
- geographical expansion of the market
- use of new distribution channels
- search for new market segments that are not yet consumers of this product group
A third possible growth path is to offer products in the existing market that have updated features in a way that improves their market fit. This path is most preferable for those companies whose key competencies lie in the field of technology and technical development. Opportunities for growth are based on:
- adding new product features or product with higher quality, incl. product repositioning
- expansion of the product line (including through new options for offering existing products)
- development of a new generation of products
- development of fundamentally new products
The last of the possible strategies is the most risky for the company, because. implies entering a fundamentally new territory for it. Her choice is justified in cases where:
- the company does not see opportunities to achieve its goals, remaining within the first three strategies
- the new direction of activity promises to be much more profitable than the development of existing ones
- when the available information is not enough to be sure of the stability of the existing business
- development of a new direction does not require serious investments
Diversification can take one of the following forms.
Horizontal- the company remains within the existing external environment, its new direction of activity complements the existing lines of business, which allows using the synergy effect through the use of existing distribution channels, promotion and other marketing tools.
vertical- the company's activities enter the previous or next stage of production or sale of the company's existing products. At the same time, the company can benefit from increased economic efficiency, but increases its own risks.
concentric- development of the existing product line by including products close to it, which have technological or marketing differences from existing ones, but are focused on new customers. This strategy provides economic benefits while reducing risk.
conglomerate- the new direction of the company's activity is in no way connected with the existing ones.
In Western literature, approximately the following estimates of costs and the likelihood of success are given, depending on the strategy of the firm:
| strategy | expenses | success rate |
| Penetration | ~ | 50% |
| Market expansion | x4 times | 20% |
| Product development | x8 times | 33% |
| diversification | x12-16 times | 5% |
History of the Ansoff Matrix
Igor Ansoff is a Russian-born mathematician who emigrated to the United States at the age of 19. After earning a degree in applied mathematics, he found a way to use mathematical tools in business. In the early 1950s, he joined the Rand Corporation in strategic planning, later moving to Lockheed Corporation, where he rose to the position of vice president of planning. The Ansoff matrix was developed by him during this period as an applied mathematical tool for strategic analysis. It was first published in the Harvard Business Review (Sep/Oct 1957) and was later described in the monograph Corporate Strategy (1965). Since then, the Ansoff matrix has remained one of the most famous and popular applied strategic planning tools.
The Ansoff matrix (named after its inventor Igor Ansoff) is a marketing strategic analysis tool that helps manage the development of any company by choosing the best option for its business activity. This choice is made taking into account the current and projected market conditions, as well as our own capabilities.
The Ansoff matrix has a dimension of 2x2 and consists of four fields, each of which represents a certain strategy. Structurally, this matrix is formed from two axes:
- horizontal, which presents the manufactured and planned products of the company,
- vertical, which presents the used and expected to be developed market sectors or target audiences.
Thus, each field of the Ansoff matrix identifies alternative strategic opportunities for growth through:
- manufactured products and used market sectors (Strategy "Market Penetration"),
- manufactured products and market sectors intended for development (Market expansion strategy),
- products planned for production and used market sectors (strategy "Product Development"),
- products planned for production and market sectors intended for development (strategy "Diversification").
The current operation of the company takes place in the used market sector, in which it has a certain level of experience and reputation. It is in the used market sector that the company has a current target audience that prefers the products offered.
The proposed market sectors the company does not have much experience, but they are attractive in terms of expanding its existing business activities. In this part of the market there is an audience that does not purchase the offered product for any reason. At the same time, the new market sector may be part of the regional market.
Manufactured products are a range that is contained in the company's portfolio and has a history of sales.
The products planned for production are not in the company's portfolio and have no sales history, but are able to attract new customers or replace manufactured products.
Let's consider each strategy in more detail.
Market penetration
In this case, the company's position in the market is maintained and strengthened through marketing activities. The strategy is characterized by minimal risks, since the company's activities take place in a familiar market sector.
The effectiveness of such a strategy is maximum with a growing market, which allows the company to increase the sale of its products in the occupied market sector. For this are used:
- active promotion of products,
- setting competitive prices.
As a result, it is possible to increase sales by attracting new customers and increasing consumption by already attracted customers.
Market expansion
In this case, new markets are developed by selling products in new market sectors:
- regional,
- national,
- international.
The effectiveness of such a strategy is maximum when the company's goal is to increase the sale of its products. This can be implemented:
- development of new market sectors,
- entering new geographic markets, with growing or potential demand,
- new ways to offer products,
- new methods of distribution and implementation,
- increasing the intensity of product promotion.
The features of the Market Expansion strategy are:
- significant financial costs
- big risks.
Product development
In this case, the products planned for production are offered in already developed market sectors, which allows increasing the company's market position.
The effectiveness of such a strategy is maximum if the company has several trademarks, which are not declining in demand among regular customers. Thus, the company can start producing new products or modify existing products. Its implementation is carried out to consumers who already use the company's products and are not going to refuse it. As a result, the process of promoting new and upgraded products is effective because they are produced by a company that is well known to consumers.
The Product Development strategy is best suited for companies whose activities are focused on the application and development of innovative technologies.
Diversification
In this case:
- the company develops new market sectors, which allows to reduce risks in already used market sectors,
- production expands with new products.
This strategy prevents the company from being dependent on a narrow assortment group. The products planned for production are oriented towards untapped market sectors. At the same time, there is a change in the priority goals of distribution, marketing and promotion of new products.
The downside of this strategy is that the company's strength is scattered.
The "Diversification" strategy is appropriate for companies:
- unable to achieve their goals by other strategies,
- involving higher profits than from current activities,
- unsure of the stability of current activities,
- that do not require significant capital investments to move into new market sectors.
FEDERAL AGENCY FOR EDUCATION OF THE RUSSIAN FEDERATION
STATE EDUCATIONAL INSTITUTION OF HIGHER PROFESSIONAL EDUCATION
"TYUMEN STATE OIL AND GAS UNIVERSITY"
Institute of Management and Business
Department of SM
discipline: Strategic management
on the topic: "The matrix of I. Ansoff and D. Abel"
Completed: Art. 4 courses
Ostyakova O.O.
Checked by: assistant
Kovalzhina L.S.
Tyumen, 2010
Ansoff matrix structure
Theoretical part
Igor Ansoff is a Russian-born mathematician who emigrated to the United States at the age of 19. After earning a degree in applied mathematics, he found a way to use mathematical tools in business. In the early 1950s, he joined the Rand Corporation in strategic planning, later moving to Lockheed Corporation, where he rose to the position of vice president of planning. The Ansoff matrix was developed by him during this period as an applied mathematical tool for strategic analysis. It was first published in the Harvard Business Review (Sep/Oct 1957) and was later described in the monograph Corporate Strategy (1965). Since then, the Ansoff matrix has remained one of the most famous and popular applied strategic planning tools.
I. Ansoff's product/market development model (Ansoff's matrix) allows using several strategies simultaneously. It is based on the premise that the most appropriate strategy for intensive sales growth can be determined by the decision to sell existing or new products in existing or new markets. This Ansoff matrix is a chart designed to help managers make strategy decisions and also serves as a diagnostic tool. Igor Ansoff's matrix is intended to describe the possible strategies of an enterprise in a growing market.
On one axis in the matrix, the type of product is considered - old or new, on the other axis - the type of market, also old or new.
The Ansoff matrix is a field formed by two axes - the horizontal axis "company's products" (divided into existing and new ones) and the vertical axis "company's markets", which are also divided into existing and new ones. At the intersection of these two axes, four quadrants are formed:
Table 1.
Strategy for improving performance (market penetration). When choosing this strategy, the company is recommended to pay attention to marketing activities for existing products in existing markets: conduct a study of the target market of the enterprise, develop measures to promote products and increase the efficiency of activities in the existing market.
Market penetration strategy (existing product - existing market). A natural strategy for most companies seeking to increase the share of existing products in their respective market. Expanding market penetration is the most obvious strategy, and its most common practical expression is the desire to increase sales. The main tools can be: improving the quality of goods, increasing the efficiency of business processes, attracting new customers through advertising. The sources of sales growth can also be: an increase in the frequency of using the product (for example, through loyalty programs), an increase in the amount of use of the product.
Possible sources of growth could be:
increase in market share;
increasing the frequency of using the product (including through loyalty programs);
increase in the amount of use of the product;
opening up new areas of product application for existing consumers.
Product expansion (Product development (new product - existing market)) is a strategy for developing new or improving existing products in order to increase sales. A company can implement such a strategy in an already known market by finding and filling market niches. Income in this case is provided by maintaining market share in the future. Such a strategy is most preferable in terms of risk minimization, since the company operates in a familiar market.
The offer in the existing market of new goods - strategy of development of the goods. Within the framework of this strategy, it is possible to introduce fundamentally new products to the market, improve old ones, and expand the product line (diversity). This strategy is typical for high-tech companies (electronics, automotive).
Opportunities for growth are based on:
adding new properties of a product or a product with increased quality, incl. product repositioning;
expansion of the product line (including through new options for offering existing products);
development of a new generation of products;
development of fundamentally new products.
Market development strategy (existing product - new market). This strategy is aimed at finding a new market or a new market segment for already mastered goods. Income is provided through the expansion of the sales market within the geographic region, and beyond it. Such a strategy is associated with significant costs and is more risky than both previous ones, but more profitable. However, it is difficult to enter new geographic markets directly, as they are occupied by other companies.
This strategy means adapting and bringing existing products to new markets. To successfully implement the strategy, it is necessary to confirm the presence of potential consumers of existing products in the new market. Options include geographic expansion, the use of new distribution channels, the search for new consumer groups that are not yet buyers of the product.
Companies whose marketing competencies are strong enough to be a key driver of development can successfully go this route by:
geographical expansion of the market;
use of new distribution channels;
search for new market segments that are not yet consumers of this product group.
The diversification strategy (new product - new market) involves the development of new types of products simultaneously with the development of new markets. At the same time, goods can be new for all companies operating in the target market or only for this business entity. Such a strategy provides profit, stability and sustainability of the company in the distant future, but it is the most risky and costly.
Launching a product of a fundamentally new type to a new market for the company. The most costly and risky strategy. Used when growth opportunities in existing markets are exhausted, when market conditions change, when a company leaves an existing market, profitable opportunities and high potential gains from capturing a new market.
The last of the possible strategies is the most risky for the company, because. implies entering a fundamentally new territory for it. Her choice is justified in cases where:
the company does not see opportunities to achieve its goals, remaining within the first three strategies;
a new direction of activity promises to be much more profitable than the development of existing ones;
when the available information is not enough to be sure of the stability of the existing business;
development of a new direction does not require serious investments.
Diversification can take one of the following forms.
Horizontal - the company remains within the existing external environment, its new direction of activity complements the existing lines of business, which allows using the synergy effect through the use of existing distribution channels, promotion and other marketing tools.
Vertical - the company's activities enter the previous or next stage of production or sale of the company's existing products. At the same time, the company can benefit from increased economic efficiency, but increases its own risks.
Concentric - the development of an existing product line by including products close to it, which have technological or marketing differences from existing ones, but are focused on new customers. This strategy provides economic benefits while reducing risk.
Conglomerate - a new direction of the company's activity is in no way connected with the existing ones.
The advantages of using planning according to the I. Ansoff matrix are visibility and ease of use.
The disadvantages of using planning according to the I. Ansoff matrix are a one-sided orientation to growth and restrictions in the context of two characteristics (product - market).
D. Abel matrix
Historically, there are several stages in the definition of a business. Initially, the business was defined based on the product produced: the production of cars, hairdressing services, transportation of goods across railway etc. Then T. Levitt introduced the concept of "marketing myopia" and argued that a business must be determined based on the needs of the market, and the main criterion for choosing a business is its consistency with market requirements. The example he cited regarding the definition of the business of American railroads became a classic. According to T. Levitt, the railways would be a prosperous industry if they used not a product definition of business - transportation by rail, but a market one. From a market position, railways should provide services for the transportation of goods and people, hairdressers should become beauty salons, etc. In later studies, I. Ansoff shows that focusing only on market requirements when choosing a new business (product) does not guarantee a synergistic effect . This effect occurs when there is a connection between the old business and the new one. I. Ansoff believes:
That a business should be defined on the basis of taking into account two factors “product-market” (Ansoff matrix);
The main criterion for determining and selecting a new business should be a synergistic effect.
The D. Abel matrix, in fact, corrected the shortcomings of the model proposed by I. Ansoff. Abel proposed to define the field of business in three dimensions:
customer groups served (who?);
customer needs (what?);
the technology used in the development and production of the product (how?).
Figure 1. The field of possible strategies (according to D. Abel).
The first important criterion for assessing the Abel matrix is the compliance of the considered industry with the general direction of the company, in order to use synergies in technology and marketing. Other selection criteria are the attractiveness of the industry and the "strength" of the business (competitiveness).
D. Abel developed I. Ansoff's approach by proposing an additional third factor for determining business - technology. First, the position of the original business is established on the diagram. Then, moving from the starting position along the three axes, the enterprise can find other market segments, a different use of products to meet identified consumer needs, or identify opportunities to reduce production costs by changing production technology and marketing products.
R. Cooper (Cooper) considers the use of a three-dimensional approach on the example of a company that manufactures equipment for the manufacture of mixtures in the pulp and paper industry. The existence of new areas of activity for a given company can be viewed along three axes. New consumer groups: chemical industry, oil refining, food industry. These industries can also use the company's equipment for the manufacture of mixtures. Expanding needs characteristics suggests that buyers may require additional transactions. The combination of new consumer groups with additional customer requirements provides a set of possible business directions. For example, a company may develop a grinding function for the food and chemical industries, a special pumping function for refining oil in the chemical industry, and so on. Each of these capabilities represents a new area for the company. At the same time, the company can also move in the third direction, improving the technologies for performing the considered operations. It can use the principles of magnetohydrodynamics to move fluids, apply bio-oxidation processes and other technologies.
In Russian practice, one can also find relevant examples. Omsk plant of washing machines produced washing machine"Siberia" with a centrifuge. Then, based on the existing technology for the production of centrifuges, the production of separators for small rural dairies was organized. Consequently, a new application of the existing technology was found.
Thus, the set of possible strategic directions for business development is significantly expanding. This raises the problem of determining the criteria for choosing the best area. The first and most important criterion is the alignment of the area under consideration with the overall direction of the company in order to use synergies in technology and marketing. Other selection criteria are the attractiveness of the area and the strength of the business. The attractiveness of the region, in turn, is evaluated by two factors: market attractiveness and technological complexity. The strength of the business is determined by the market advantages of the product and the company's synergies in technology and marketing.
Abstract >> Management and matrix D. abel, ; model...or high). Matrix AND. Ansoff and matrix D. abel Product/Market Development Model I. Ansoff (matrix Ansoff) allows you to use...
The growth of any company is also reflected in its business activity. Business activity has three growth opportunities:
- intensive growth due to the development of own resources;
- through integration (acquisition of other enterprises);
- due to diversification (care in other areas of activity).
Growth strategies are models of enterprise management by choosing the types of its business activity, taking into account internal and external opportunities.
Growth can be managed using such tools as the matrix of external acquisitions (“domain of activity / type of strategy”), the new BCG matrix (“goods / costs”) and the Ansoff matrix (“product / market”).
Matrix by Igor Ansoff
American mathematician Igor Ansoff called the founder of the concept of strategic management. He owns the development of one of the most famous and popular applied strategic planning tools - the matrix "Product-Market", which is called the Ansoff matrix. The development was first published in 1957 in Harvard Business Review in the article "Diversification Strategies", and in 1965 it was described in the monograph "Corporate Strategy". The technique has passed the test of time and has repeatedly confirmed its effectiveness when choosing marketing strategies development.
Structure and categories of the Ansoff matrix
The structure of the Ansoff matrix is a square formed along two axes, where the horizontal axis is the company's products, which are divided into existing and new ones, and the vertical axis is the company's markets, which are also divided into existing and new ones.
Thus, the Ansoff matrix defines categories of growth opportunities between existing products and existing markets, existing products and new markets, new products and existing markets, and new products and new markets.
Market Penetration Strategy
The Ansoff method allows you to choose one of four alternative strategies.
Market Penetration Strategy (Market penetration) involves selling an already existing product in existing markets. This is the simplest and most obvious strategy for most companies. They are already on the market, so their main goal is to increase sales. The main tool here is to increase the competitiveness of products. Attention in this strategy should be directed to improving the efficiency of business processes, this will help increase the consumption of products by existing consumers and attract new customers.
Possible sources of growth can be: increasing market share, increasing the frequency of product use (including through loyalty programs), increasing the number of product use, opening up new areas of product use for existing consumers. Typical tools are discounts on large orders, bonus cards and customer relationship management.
Income in this case is provided by maintaining market share in the future. Such a strategy is most preferable in terms of risk minimization, since the company operates in a familiar market.
Strategy "Expansion"
Strategy Expansion (Market development) involves selling an existing product in new markets. This strategy is the second possible solution in which companies can adapt their existing products for new markets. To do this, it is necessary to identify new potential consumers of existing products. Companies whose marketing competencies are effective enough to be a key driver of development can successfully follow this path through the geographical expansion of the market, the use of new distribution channels, and the search for new market segments that are not yet consumers of this product group. Income is provided through the expansion of the sales market within the geographic region and beyond. Such a strategy is associated with significant costs and has quite serious risks.
Product development strategy
Strategy Product Development (product development) involves the sale of a new product in existing markets. For this growth path, it is necessary to offer products with updated and market-adapted characteristics to the already existing market. This path is the most advantageous for those companies whose key competencies lie in the field of technology and technical development. Opportunities for growth are based on adding new features to a product or creating a higher quality product; expanding the product line (including through new options for offering existing products); developing a new generation of products; development of fundamentally new products.
The Diversification Strategy and Its Four Forms
Strategy Diversification (Diversification) involves the sale of new products in new markets. This strategy is the most risky for the company, because implies an exit to a fundamentally new territory for it. The choice of this strategy is justified in cases where:
- the company does not see opportunities to achieve its goals, remaining within the first three strategies;
- a new direction of activity promises to be much more profitable than the development of existing ones;
- there is not enough information available to be sure of the stability of the existing business;
- the development of a new direction does not require serious investments.
Diversification can take four forms.
Horizontal shape. In this case, the company remains within the existing external environment, its new direction of activity complements the existing lines of business, which allows using the synergy effect through the use of existing distribution channels, promotion and other marketing tools.
Vertical form. In this case, the company's activity enters the previous or next stage of production or sale of existing products. At the same time, the company can benefit from increased economic efficiency, but increases its own risks.
concentric shape. In this case, it is supposed to develop the product line by including products close to it, which have technological or marketing differences from existing ones, but are focused on new customers. This strategy provides economic benefits while reducing risk.
conglomerate form. In this case, the new direction of the company's activity is in no way connected with the existing ones.
Creativity in using the Ansoff Matrix
Using the Ansoff matrix, it is important to remember that it is inappropriate to use the strategy chosen for growth statically, no matter how successful it may seem to the owners of the company. Choosing a strategy is a creative process. It cannot end with any immediate action. It usually ends with the establishment of general directions, the promotion of which ensures the growth and strengthening of the company's position.
The formulated strategy should be used to develop strategic projects by the search method and there is no need for it as soon as the real course of events brings the company to the desired level of development. While formulating strategies, it is not possible to foresee all the possibilities that will open up when drafting specific activities. Therefore, it must be borne in mind that the information available is often quite generalized, incomplete and inaccurate. Therefore, the appearance of more accurate information is a strong argument for doubting the correctness and validity of the chosen strategy and a reason to change it.
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Ansoff matrix(product-market matrix) - analytical tool strategic management, developed by the founder of this science, an American of Russian origin, Igor Ansoff.
The Ansoff matrix is a field formed by two axes - the horizontal axis "company's products" (divided into existing and new ones) and the vertical axis "company's markets", which are also divided into existing and new ones. At the intersection of these two axes, four quadrants are formed:
|
Existing product |
New product |
|
|
Existing market |
Market penetration |
Product development |
|
new market |
Market Development |
Diversification |
The Product-Market Opportunity Matrix provides for the use of four alternative marketing strategies to maintain and/or increase sales: market penetration, market development, product development, and diversification.
The choice of an alternative depends on the degree of market saturation and the company's ability to constantly update production. Two or more strategies may be combined.
Market penetration strategy - strengthening marketing activities to strengthen and strengthen the company's position in the market.
Market development strategy - the development of new markets by selling old products in new regional, national or international markets.
Product Development Strategy - Selling new products in old markets with the aim of increasing market power.
Diversification strategy - the company enters new markets in order to reduce risks in existing markets. The production program includes products that the company has not yet produced. The main danger of this strategy is the dispersion of forces.
The choice of strategy depends on the resources of the enterprise and the willingness to take risks
Market penetration strategy effective when the market is growing or not yet saturated. The firm can expand the sale of existing products in existing markets with the help of their offensive promotion, the use of competitive prices. This increases sales by attracting those who have not previously used the company's products, as well as competing customers, and increases demand from already attracted consumers.
Market development strategy effective if the firm seeks to increase sales of existing products. It can penetrate new geographic markets; enter new market segments, the demand for which is not yet satisfied; re-propose existing products; use new methods of distribution and marketing; intensify efforts to promote their products.
Product development strategy is effective when the firm has a number of successful brands and enjoys the loyalty of consumers. The firm develops new or modified products for existing markets. It focuses on new models, quality improvements, and other small innovations that are closely related to already introduced products, and sells them to consumers who favor this company and its brands. Traditional marketing methods are used; promotion emphasizes that new products are produced by a well-known firm.
Diversification strategy used to ensure that the company does not become too dependent on one product group. The company starts production new products targeting new markets. The goals of distribution, marketing and promotion are different from the traditional ones for this company.
Boston Matrix Model "Market Share - Market Growth"
The figure below shows the Boston Matrix advisory group, in this variant using indicators of the relative market share ( X axis) and relative market growth rate ( Y-axis) for individual evaluated products.
Boston Consulting Group Matrix
The relative indicators range from 0 to 1. For the market share indicator, in this case, an inverse scale is used, i.e. in the matrix it varies from 1 to 0, although in some cases a direct scale can also be used. The growth rate of the market is determined for some time interval, say, for a year.
This matrix is based on the following assumptions: the greater the growth rate, the greater the development opportunities; the more market share, the stronger the position of the organization in the competitive struggle.
The intersection of these two coordinates forms four squares. If products are characterized by high values of both indicators, then they are called "stars", they should be supported and strengthened. True, the stars have one drawback: since the market is developing at a high rate, the stars require high investments, thus "eating up" the money they have earned. If the products are characterized by a high value of the indicator X and low Y, then they are called "cash cows" and are the organization's cash generators, since they do not need to invest in product and market development (the market does not grow or grows slightly), but there is no future behind them. With a low value of the indicator X and high Y products are called "difficult children"; they must be specially studied in order to establish whether they can turn into "stars" with certain investments. When as an indicator X, and the indicator Y have low values, then the products are called "losers" ("dogs"), bringing either small profits or small losses; they should be disposed of whenever possible, if there are no good reasons for their preservation (possible resumption of demand, they are socially significant products, etc.).
In addition, to display negative values of changes in sales volume, a more complex form of the considered matrix is used. Two additional positions appear on it: "war horses" that bring in little money, and "dodo birds" that bring losses to the organization.
Along with the visibility and apparent ease of use, the Boston Consulting Group Matrix has certain disadvantages:
difficulties in collecting data on market share and market growth rate. To overcome this shortcoming, qualitative scales can be used that use such gradations as greater than, less than, equal to, etc.;
the matrix of the Boston Consulting Group gives a static picture of the position of strategic economic units, types of business in the market, on the basis of which it is impossible to make forecast estimates like: "Where will the studied products be located in the matrix in one year?";
it does not take into account the interdependence (synergistic effect) of individual types of business: if such a dependence exists, this matrix gives distorted results and a multi-criteria assessment should be carried out for each of these areas, which is done when using the General Electric (GE) matrix.
Boston Matrix
|
Relative market share | |||
|
Small |
|||
|
Market Growth Rate |
dark horses |
||
|
cash cows |
Characteristic BCG matrices
Stars- develop rapidly and have a large market share. Rapid growth requires heavy investment. Over time, growth slows down and they turn into "Cash Cows".
cash cows(Money bags) - low growth rates and large market share. They do not require large investments, they bring high income, which the company uses to pay its bills and to support other lines of its activity.
dark horses(Wild cats, difficult children, question marks) - low market share, but high growth. They require large funds to maintain market share, and even more so to increase it. Due to the high capital investment and risk, company management needs to analyze which dark horses will become stars and which ones should be eliminated.
Dogs(Lame ducks, dead weight) - low market share, low growth rate. Generate enough income to support themselves, but do not become sufficient sources to finance other projects. We need to get rid of the dogs.
Disadvantages of the Boston Matrix:
The BCG model is based on a fuzzy definition of the market and market share for business industries.
Market share value is overestimated. Many factors that affect the profitability of the industry are overlooked.
The BCG model breaks down when it is applied to industries with low level competition.
High growth rates are far from the main sign of the industry's attractiveness.
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