Page 264 - DMGT510_SERVICES_MARKETING

Unit 14: Service Strategies

Notes
Example: The south based NEPC group of Khemkas had started an airline with the same
name. The SBU started functioning in the mid 90s, when the travel boom was a ‘forever’ promise
that ended with a whimper. Neither was the air travel industry- especially inland traffic -
growing nor was NEPC performing well. It resulted in a lot of bankruptcy and closures (Damania
Airways, East West Airlines, Span Airways, etc.) including NEPC Airlines.
Uses: Service firms can use the BCG matrix to build and develop market share for their SBUs. It
is mostly used to allocate and reallocate limited resources to the different SBUs at the corporate
level strategic planning. The service firm should go in for a balanced portfolio of SBUs (or
products) and it is imperative to include stars and problem children as a part of its portfolio-mix,
exclude cash crunch (by divesting) and harvest Cash cows.
Limitations: BCG matrix is a useful strategic tool but is overtly simple and the limitation is due
to the dependence on just two factors to determine whether an SBU deserves allocation of
resources or not. Secondly, it was developed in US and is useful for service firms functioning in
a mature, market-oriented environment. It may not be so suitable for mixed economies like
those of the newly liberalized East Bloc countries, and others, including India, Sweden, etc. The
Hungarian economist, Magdolna Csath has modified the BCG matrix by using two different
parameters: environmental opportunities and a service firm’s competitive strength instead of
industry growth rate and market share respectively. The model is recommended for assessing a
service firm’s present as well as desired SBUs or product portfolio.

14.1.2 General Electric Business Screen

This model is also used for allocating limited resources amongst a service firm’s SBUs or service
products, and then developing marketing and corporate level strategies for them. General
Electric developed the business screen with the help of consulting firm McKinsey & Co. which
builds on the limitations and drawbacks of the BCG matrix.
The business screen uses two factors – market attractiveness and business position/SBU strength
– to classify SBUs or products in its portfolio. Both the factors seem to be subjective but have
various criteria which help the SBUs/products get rated:

Market Attractiveness

Market size

Market growth rate

Market entry barriers

Competition – number and type of competitors

Technological requirements

Profit margins, etc.

SBU Strength/Business Position

SBU size

Market share

Research and development capabilities

Power or strength of differential advantage(s)


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