Analytical Tools of Strategic Marketing and Management - Assignment Example

BCG MATRIX: BCG matrix adopted was developed by Boston Consulting Group in 1970, to assess the position of various product lines of particular business with regard to their relative importance. This approach is used by strategic manager of all the big companies to decide on which products should they invest and which products should be divested. This approach has gained more popularity with the passage of time, as business usually tend to diversify their operation to hedge against uncertainty. A conventional BCG matrix consists of four columns. Each column shows a different category of product, namely: stars, question marks, cash cows and dogs. These products are usually categorized according to their characteristics of market growth rate and market share. A typical BCG matrix is shown in the figure below: As we all know that McDonald’s Corporation is made up of world-wide business, such as McDonald’s USA, McDonald’s Europe, McDonald’s Asia and McDonald’s America. We are going to use the lens of BCG matrix to determine the position of each of these businesses in a BCG matrix for McDonald’s Corporation. (QuickMBA, 2009) Let’s now look at the different characteristics of various columns of a BCG matrix: STARS: Stars are those products that have a large market share in a rapidly growing industry. In simple words, these are successful products that need continuous investment to maintain their dominating position in the market. According to the statistics given in McDonald’s Corporation’s annual report, McDonald’s USA is a star. It has a high market share in the market which is booming rapidly. However, due to increased competition in the market, McDonald’s Corporation should invest in McDonald’s USA heavily, so that they do not lose out market share to other competitors like Burger King or KFC. (Daft, 1997). A question-mark is a business that has low-market share in the rapidly growing industry. In order to increase the market share, the business will need more and more resources. However, it is not guaranteed that the business has enough potential to become a start. In the case of McDonald’s corporation, McDonald’s Europe falls under the category of a BCG Matrix “Question Mark”. McDonald’s Europe has found it tough to break into the food industry which is already congested with various firms in the industry. The culture diversification in the different parts of Europe has also resulted in low-demands and cash returns for McDonald’s Europe, making it a question mark. The only way to cure the problem is that McDonald should carry out a market research to find out what people want would like to eat in different countries, and then should make adjustments accordingly. Although, this would require plentiful use of resources, but may be able to turn McDonald’s Europe into a BCG “Star”. CASH COWS: Cash-Cows are those businesses that carry out their operations in a matured or low-growth industry having a very high market share. These businesses usually generate the most cash flows or cash return for the business. They provide resources and cash for the development and retention of stars and question marks. Most businesses usually milk their cash-cows (sell these business) when they are faced with a problem of illiquidity. In the case of McDonald’s Corporation, McDonald’s Asia fulfills the description of a BCG “Cash Cow”. The food industry of Asia has matured and now growing at a very slow rate. McDonald’s hold a distinct position in the food industry of Asia and hence provide very good cash return to McDonald’s corporation. This money is used for Research and Development. In other words, McDonald’s Asia is milked, when McDonald’s Corporation needs cash for R&D DOGS: A dog is a business located in a highly matured industry having very little market share. These businesses are usually divested because they do not provide substantial money gains and usually represent capital that is either lying idle or tied up, unless there are other important motives for the business rather than earning high returns. In the case of McDonald’s Corporation, McDonald’s Americas (Latin America) can be considered as a BCG “DOG”. The fact that the business caters to a very small market means that the monetary returns of this business are usually very low and there are little or no chances of improvement as the industry is matured i-e the industry is not growing any further. (Paul, 1996) STAR “MCDONALD’S USA” QUESTION MARK “MCDONALD’S EUROPE CASH COW “MCDONALD’S ASIA” DOG “MCDONALD’S LATIN AMERICA” FIGURE 1.3: BCG-MATRIX, MCDONALD’S CORPORATION Source: Richard L. DAFT, 1997 Value-CHAIN The product that I recently purchased is IPhone, which is manufactured and marketed by Apple Incorporation based in California, USA. The marketing distribution channels for the product are either you buy the set from AT & T, a mobile network based in USA or you buy it online. Therefore, the marketing distribution channels, in other words, are either from Manufacturer to agent (AT & T) and then to consumers. In the online distribution channels the parties involved are Manufacturer (Apple) and customers (those who buy the IPhone for personal use). The value chain arising from distributing the product through AT & T is the added features that an IPhone gets. For example, IPhone functions depend on the mobile network such as GSM, GPRS, EDGE, 3G, Call, SMS etc. Without these features there is not much use of IPhone and hence by distributing IPhone through AT & T, Apple is enhancing the value and use of IPhone for consumers. Similarly, the value chain for customers buying online is that segment of market which resides outside the USA. Hence, they cannot use AT & T in their country, so it much feasible for them to buy IPhone online and use it in their country on their choice of mobile network. The value they get from buying online is cheaper product as compared to if it bought from AT & T. The return value channel will be reselling IPhone back to Apple, which will refurbish them and then sell them again in the market at a higher price. The reverse value will be that when people buy refurbish sets they will know that the product is being checked by Apple itself and hence it will be more reliable than other second hand IPhones available in the market. This will result in refurbished IPhones selling at a higher price as result of reverse value. (Daft, 1994) VIRO ANALYIS: VIRO framework is used for the internal analysis of a business. It is an acronym for Value, Rareness, Imitability and the Organization. The following questions are asked in the VIRO analysis: The firm should be exploiting all the opportunities and diminishing all the threats The control of the resources should be in few hands The firm’s product should be differentiated and Imitability should not be possible The Organizations operations should be streamlined and organized We can use this framework to answer the questions regarding Coca-Cola: The firm is exploiting all opportunities as the company exists in more countries than any other companies does. Thus, Coca-Cola is has a high value and it is being able exploit all profitable opportunities and diminish all the threat such as competition by keeping its quality high and having a high marketing budget. The formula of Coca-Cola is a secret one. No one is allowed to see this formula and it is kept in a locker. As a result the resources of a company are in few hand and because of the secret formula, the product cannot be imitated. The organization is working with complete efficiency with all of its operation completely streamlined. This can be viewed by the fact that it is selling its product at the market price or the prices charged by the competing brand i-e Pepsi. The firm’s existence in so many countries means that the management exploits all opportunities and exists wherever they feel they can make profit. (Drucker, 1993) CULTURE: Culture is that whole of a company which includes its values, core-competencies, attitude and history and values of a company. Culture can also be based on important events, stories or incidents that engraved in the company’s history. Culture is considered as an important element for any firm because it is the distinguishing factor that separates one firm from another and gives value to a firm. EXAMPLE: IBM is the most innovative company in the world. It claims to be a leader in the innovative technology. The firm has achieved whatever it has because of its distinguishing culture. Employees of IBM are asked to spend 10% of their total working time doing nothing and just thinking about how modern innovation can be manufactured and what changes they can bring about in their product offerings. IBM’s corporate culture where employees are asked to devote their productive hours, just to think new ideas have made IBM the greatest innovating company in the world. (Robbins, 2008) References: Gordon Paul. (1996). Marketing Management: Strategies and Programs. McGraw Hill. Quick MBA. (2009). Knowledge to Power Your Business. Can be visited at quickmba.com Richard L. Daft. (1997). Management 4th Edition. The Dryden Publishing Gary Armstrong and Phillips Kotler. (2007). Principle of Marketing 12th Edition. Prentice Hall. Richard L. Daft. (1994). Management. The Dryden Publishing Peter Drucker (1993). The Practice of Management. Collins Read More