Page 173 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Unit 9: Strategic Analysis and Choice

Notes
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Caution Although their market share is relatively small, the market for question marks is
growing rapidly. Investments to create growth may yield big results in the future, though
this is far from certain. Further investigation into how and where to invest is advised.

Dogs (Low Growth, Low Market Share)

These are products that have low market shares in low-growth businesses. These products will
need low investment but they are unlikely to be major profit earners. In practice, they may
actually absorb cash required to hold their position. They are often regarded as unattractive for
the long term and recommended for disposal. The general features of dogs are:

1. They are not profit earners
2. They absorb cash
3. They are unattractive and often recommended for disposal.

Turnaround can be one of the strategies to pursue because many dogs have bounced back and
become viable and profitable after asset and cost reduction. The suggested strategy is to drop or
divest the dogs when they are not profitable. If profitable, do not invest, but make the best out
of its current value. This may even mean selling the division’s operations.

Task Make an analysis of Maruti Suzuki products on the basis of BCG Matrix.

Strategic Implications

The BCG growth-share matrix links the industry growth characteristic with the company's
market share (i.e. competitive strength), and develops a visual display of the company's market
involvement, thereby indirectly indicating current resource deployment. The underlying logic
is that investment is required for growth while maintaining or building market share. But while
doing so, a strong competitive business i.e. a business having high market share operating in an
industry with low growth rate will provide surplus cash for deployment elsewhere in the
corporation. Thus, growth uses cash whereas market share is a potential source of cash. In terms
of BCG classification, the cash position of various types of businesses can be visualized as shown
Table 9.1.
Table 9.1: Cash Position of Various Businesses

S.No. Business Cash Cash Use Net Cash Balance
Type Source
1. Cow More Less Funds available, so milk and deploy
2. Star More More Build competitive position and grow
3. Dog Less Less Divest or redeploy proceeds
4. Question Less More Funds needed to invest selectively to improve
Mark competitive position

Thus, in a way, the BCG matrix can be regarded as a pictorial representation of the sources and
uses of funds statement. Market share is considered valuable because it is a source of profits.
Projects are the fruits of accumulated experience giving rise to cost advantage.

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