Boston Consulting Group Matrix
Boston Consulting Group Matrix is a two by two matrix that was developed by the Boston consulting group to help businesses understand the different investment opportunities among its portfolio of activities with regards to growth rates of the industry and the market share of the business. The matrix evaluates the environment in relation to potential investment prospects and challenges and advises the management accordingly. The analysis defines products as a star, question mark, cash cow, or dog. Products of firms can be referred to as a star when it holds a high market share in a market that is growing and has the potential to grow in the future while a product referred to as a question mark is that which exists in a growing market but is facing stiff competition. Cash cows on the other hand are products that produce sufficient cash used to maintain operations of other products in the firm. Cash cows have a huge market share although in markets that have slow growth rates while dogs exist in the market that is either constant or declining and more so, have low market share with diseconomies of scale (Davies & Ellison, 1999, p 68).
Companies that have applied relevant business strategies can be clearly depicted by KFC which had sought to strategize so as to expand its products in the competitive market of the chicken fast food industry. For a long period, McDonald’s fast-food stores had dominated the American fast-food market and therefore the Kentucky Fried Chicken Corporation had gone through several changes since the 1950s. The founder of Kentucky Fried Chicken Corporation laid down a number of business strategies to drive the corporation towards achieving its objective of building the largest and most profitable fast-food chain stores in the American fast-food market that is characterized by huge economic potential. Kentucky Fried Chicken Corporation adopted the use of the Boston group consulting matrix alongside SWOT analysis which has enabled the company to understand its current market position and the huge growth potential that exist in the fast food industry.
In the current chicken fast food industry, Kentucky Fried Chicken Corporation dominates the market since its adoption of business management strategies. The analysis of strengths, weaknesses, opportunities, and threats in the fast-food industry has enabled Kentucky Fried Chicken Corporation to understand the changing lifestyles and economic conditions of its customers around the world. Particularly, the opportunity analysis of Kentucky Fried Chicken Corporation made a huge contribution towards providing information that the fast-food market has a potentially huge room for limitless product expansion specifically in states that have high economic developments and a huge population.
The Boston Matrix is applied by businesses in understanding the way the market share of the business and market growth rates relate to each other and thus the financial risk that faces it with respect to expected and actual returns. The proportion of the total market share of an organization directly relates to financial returns from sustained profitability and economies of scale. Organizations that have huge market shares are an indication of a companies’ long time experience on how to be profitable in a specific market. Boston matrix helps organizations to make strategic decisions as to whether additional resources should be invested in a particular investment that has high financial returns. Additional investment decisions are only recommended where markets are expanding with high growth rates due to profit growth potential as the market provides more opportunities. On the other hand, markets that have low growth rates have no potential of increasing profits incase of additional investment.
Value Chain Activities
Primary activities and secondary activities of the value chain can be said to significantly contribute to organizations’ success in the identification of sources of advantage that are specific to each firm being evaluated. Michael Porter found out that firms do not consist of separate autonomous functions but a chain of activities that create value to the company through giving value to customers. As much as customers gain from the value created, the firm also benefits through competitive advantage gained over its competitors (Bidgoli, 2004, p 525). Primary activities of a firm are those activities that are closely connected to processes of production, marketing, and distribution of products and services by a firm. On the other hand, secondary activities are also known as support activities with the main purpose of facilitating smooth and effective operations of primary activities. The secondary activities of a firm are put in place to ensure continuity, efficiency, and effectiveness of primary activities, which are essential for the existence and profitability of a business. Secondary activities include procurement, development of technology, management of firm’s employees, and infrastructures such as buildings and transport. These activities support primary activities such as the firm’s daily operations, sales, and service delivery.
Companies such as Wal-Mart retailing company has grown big and has acquired a competitive advantage over its competitors all over the world. Wal-Mart corporations have to concentrate on value chain activities which have placed it as the leading retail company in the world that sells its products through the internet walmart.com. The company concentrated on offering the best prices to their clients through direct procurement of goods from the manufacturers and distributing them an efficient transport system and distribution centers. The company also offers products according to the individual specification of its clients using delivery plans and an effective communication system that tracks sales and inventory control. In 1983, Wal-Mart undertook to set up a satellite communication system to enhance the processes of control, supervision, and monitoring the function of the diverse distribution centers and stores of the company. All these undertakings have gone a long way in creating the valued positive relationship of the company with suppliers, employees, and customers and therefore promoting value chain activities for the general success and growth of the business.
Information resources are characterized by significant increases in value through the three critical activities of acquisition of information, processing, and distributing the acquired information. The critical activities of information acquisition enable the organization to get the necessary information for a satisfactory understanding of the environment within and outside the organization. The information is then used by all stakeholders of the organization with the support of management, human resource, and information technology. Strategic information management helps an organization to reconfigure and redirect their activities towards achieving a competitive advantage ahead of their competitors. Management configures activities through concentrating activities of high returns and dispersing the risky aspects that may lead to failure. The aspect of concentration include economies of scale and advantages of coordination while decisions for diversification are a result of business-friendly political conditions, storage costs, and highly differentiated needs of consumers.
Porter’s Classification of Generic and Bowman’s Strategies
Organizations that depend on markets where stiff competition exists need to put in place strategies that are going to help them gain a competitive advantage over their competitors by providing better needs that satisfy their customers. Organizations undertake to achieve competitive advantage by adopting Michael Porter’s strategy of market segmentation, cost leadership, and product differentiation. Competitive advantage strategy techniques are said to be applied when different firms produce the same products with different brands at differing prices and customer satisfaction. Market segmentation is applied in dimensions of customer needs, cost, and competitive dynamics of the market players. Segmentation strategy puts into consideration the aspect of ecological niches defined by environments of the customer and their specific uniqueness (Stern, Deimler & Boston Consulting Group, 2006, p.137). Michael Porter’s generic competitive strategy techniques focus satisfaction of customers at better prices with improved perceptions of the value of products and services among specific customers of the specific organization or producer.
For companies to gain a competitive advantage over their competitors, they must direct their efforts towards offering lower prices at the best customer value perceptions. Bowman’s competitive strategy clock on the other hand helps businesses to adopt specific strategies, unlike generic strategies. Firms may adopt a cost leadership strategy through low costs incurred that enable firms to charge low prices and reinvest in product differentiation, a strategy of customer perception on increased asset value that is accompanied by either increased prices or constant prices. For example, Porsche car manufacturers have a competitive advantage over other car manufacturers due to high value on quality cars but with fair prices. This competitive advantage of Porsche car has made the car manufacturers be profitable in the market (Eldring, 2009, p 3). The Porsche car manufacturer has been able to portray the best market strategy application for exemplary performance through product alignment to fit the requirements of customers.
On the other hand, companies that have not applied marketing strategies have seen their business and products underperforming in the relevant market. Underperforming products in the market can be clearly depicted by Volkswagen car manufacturers which have underperformed for several years and finally pulled out of the market. The Volkswagen Phaeton car has a negative quality perception to customers and more so the product is not sensitive to the price preferences of its customers. Although the Phaeton is the most luxurious car of Volkswagen manufacturers, it has unsatisfactory perceptions to customers. Volkswagen needs to upgrade its brand in the market to improve its perception. The Phaeton is technically proved to march qualities of Mercedes and BMW but due to lack of effective marketing strategies, it is negatively perceived (Eldring, 2009, p 3). However, perceptions of increased product value with increased charges may be adapted to a specific market segment or increased prices at low product value in the case of monopoly businesses. The clock strategies also include firms’ that risk losing their market share where they increase product price while maintaining standard value and may likewise accept to lose their market share lowering product value at standard prices.
Brown Bag Films
Knowledge Management and Competence Development
Companies that venture into businesses with limited but highly competitive investors need to apply knowledge and competitive management strategies to remain relevant in the market. Brown bag films specialized in the animation industry although it also acquired key competence in digital media and developing solutions for advertising agencies. The company is based in Ireland and has a large market share both in international and local TV stations. Brown bag Films Company is lately facing stiff competition from companies based in economically stable countries unlike Ireland, which has been facing economic difficulties.
Brown bag films have been facing stiff competition from international companies given their unfavorable economic conditions. However, the company has potential opportunities in digital media and advertising agencies and therefore may adopt Bowman’s clock strategy of developing customer perception of increased value accompanied by increased prices. According to, Michael Porter’s generic strategies, the company must diversify the animation film production and concentrate on the works of advertising agencies and digital media. The generic strategy of market segmentation should be adopted with respect to digital media and advertising agencies.
External Environment Alignment
Brown bag film Production Company has aligned itself to external environmental factors to ensure its sustained performance and existence as a competitive business. The company has faced severe external environmental factors such as economic conditions in Ireland and socio-cultural dynamics, which were major threats in the international and domestic market. Brown bag film Production has aligned itself to overcome the economic conditions by concentrating on key opportunities in digital media and works of advertising agencies. The company increased prices in the works of advertising agencies and digital media to increase its financial base. Social dimensions have been a critical external environmental factor of concern in the film production industry, which has necessitated companies to realign their productions. Modern and ever-changing socio-cultural structures have been a major threat to the existence and customer satisfaction of Brown bag Film Company. It, therefore, undertook to adopt strategies of product differentiation and market segmentation to cater to varying and modern social-cultural structures.
SWOT Analysis
Brown bag Film Company like any other companies can be characterized by strengths, weaknesses, opportunities, and threats that face it. The company has significant strengths in digital media and the works of advertising agencies. International and domestic TV stations as the users of their products benefit from the quality and reliable products that are more superior compared to those of competitors. The company has the capacity to increase the sector of digital media and works of advertising agencies alongside the commitment of the management of Brown Bag Film Production.
Despite the strengths of Brown bag film Production Company, it is also facing challenges arising from its general weakness in economic stability and lack of finances to maintain its operations. The company has lost a number of employees including talented employees due to a lack of sufficient funds to remunerate them. The loss of talented employees who were the main driving force behind animation film production was a huge blow to the company. The limited budget of the company may however be strategically solved if the company capitalizes on its strengths and opportunities to generate funds. The company should take advantage of the opportunity of utilizing the diverse and huge market share it holds both in the international and domestic market.
The dynamic socio-cultural structures are also significant opportunities for Brown Bag Film Production to venture into. Despite the opportunities and growth potential of the film production company, the threat of international competitors taking over the large market share it holds is a reality; among the threats is the retention of talented and key employees in the industry.
Competitive Advantage of Brown Bag Films
Brown Bag Film Production has been strategically aligned after the analysis of its strengths, weakness, opportunities, and threats with relation to animation film production, digital media, and works of advertising agencies. The company has been forced to hedge against threats and capitalize on its weaknesses The company undertook to increased prices in the works of advertising agencies and digital media to increase its financial base and support animation film production which was facing stiff competition. The company has a competitive advantage as it now has the ability to command maintain the large market share it had. More so it undertook to adopt strategies of product differentiation and market segmentation to cater to varying and modern social-cultural structures of the market share it commands. Its competitive advantage of satisfying the dynamic needs of the huge market share it holds has posed a major challenge to international companies who had not penetrated the market.
Reference List
Bidgoli, H., 2004. The internet encyclopedia. Volume 3. New Jersey, John Wiley and Sons.
Davies, B, and Ellison, L., 1999. Strategic direction and development of the school. London: Routledge.
Stern, C. W., Deimler, M. S. and Boston Consulting Group. 2006. The Boston Consulting Group on Strategy. NJ: John Wiley and Sons.
Eldridge J., 2009, Porters (1980) Generic strategies performance and risk: An Empirical Investigation with German Data, Diploma Verlag.