Boston Consulting Group Matrix, Ansoff Market Model, Porters Three Generic Strategies - Report Example

Business Strategy Table of Contents Table of Contents 2 Boston Consulting Group (Growth/Share) Matrix 3 A Brief Summary of the Model 3 Application ofthe Model in Relation to American Airlines and United States Airways Merger 4 Ansoff Product/Market Model 9 A Brief Summary of the Model 9 Application of the Model in Relation to Diversification Strategy by HTC in 2012 11 Porter’s Three Generic Strategies 14 A Brief Summary of the Model 14 Application of the Model in Relation to Panasonics Differentiation Focus Strategy 16 References 19 Boston Consulting Group (Growth/Share) Matrix A Brief Summary of the Model Source: (Costing Club, 2012) An organisation or company can have a diversified portfolio and comprise many strategic business units. The entire essence of Boston Consulting Group (Growth/Share) Matrix is to compare the respective position and development stage of each of these strategic business units and prioritising them. The analysis is based on market share and market growth (Merten, 1986). The BCG Matrix has four distinct categories as shown in the figure above. Stars: High growth rate along with high market share Cash Cows: Low growth rate as well as high market share Question Marks: High growth rate however low market share Dogs: Low growth rate as well as low market share Stars: By stars segment, it is understood that a product or business is possessing high market share in a growing market. These units usually require high investment to maintain its status (businessmate.org, 2013). Cash Cows: The cash cows signify a product or business which has high market share in a developed market. Due to the reason that the market is already developed these units require moderate investment (businessmate.org, 2013). Question Marks: These are business units or products which are already in an emerging market but having a low market share. In this situation, companies usually have two options either to invest heavily to increase market share or liquidity the business and prevent it from becoming dog as shown in BCG Matrix (businessmate.org, 2013). Dogs: Dog represents products or business units which have very low growth rate and a low market share as well. Dogs generally drain a company’s resources (businessmate.org, 2013). Application of the Model in Relation to American Airlines and United States Airways Merger Announcing the plan to merge, American Airlines and US Airways in February 2013 created the largest airline in the world. The estimated merging cost is about US$11 billion. The united carrier will maintain the American Airlines first name and will be headquartered in Charlotte Douglas International Airport, which is US Airways’ major hub. The merger will result in witnessing more American Airlines takeoffs as well as landings (Gilson, 2013). The US airline industry profits continued to lower since the scenario of deregulation in 1978 with profit figures remaining inconsistent with Standard Industry Fare Level (SIFL) which is used by the Civil Aeronautics Board to determine regulated fares (Winston, 2013). The AMR Corporation owns American Airlines and operates both international and domestic flights covering North America. Dallas International Airport is the airlines major hub and along with it is accountable for about 85% of the traffic and 83% of the generated landing fees and travelling to added destinations as compared to from the other hubs. Parent company of American Airlines stated in a bankruptcy note to a court that it suffered a loss of US$619 million in the month of February’ 2012. This is because revenue lowered from January’ 2012 and moreover the company was unsuccessful in its efforts to make up for cost of fuel and labour. The February’ 2012 marked losses of around US$375 million, the most of it was due to rejecting leases on aircraft and debt related airport bond issues. Fuel persisted to be AMRs major expenditure which stood at US$682 million in February’ 2012. The expenditure from labour was registered at US$584 million in the same period (Guardian Media Limited, 2012). Conversely, owned by the US Airways Group, US Airways has over 3.000 flights in operation and caters to the transportation needs of 190 communities in the US. The airline employs above 32,000 aviation experts in an international based platform and shares association with Star Alliance network (US Airways Inc., 2011). Comparative Analysis of Major Airlines Source: (Research and Innovative Technology Administration (RITA), 2012) The above chart depicts the analysis of losses of US Airways along with American Airlines during the years 2011 and 2012. The growth of US Airways had been comparatively low almost declining from 3.3% in the ending quarter of 2011 to 1.7% in the 1st quarter of 2012 making an average profit of only US$56 million whereas American Airlines sustaining losses of around -US$102 million (Research and Innovative Technology Administration (RITA), 2012). In this regard, it can be stated due to the prevailing losses and declines as observed in past two years, there was a major requirement brining in certain alterations in the business operations of the both the companies. Thus, the recent merger has come as no surprise. Contextually, it can be said that the merger is expected to be quite profitable. The merger will lead to savings that can be used to put a check on rising fairs consequently benefiting the customers. The sharing of expertise will lead to solution of intense problems and definitive views on the different situations. Moreover, the use of better jets among each other will lead to surplus fuel savings (Schlangenstein, 2012). Revenue In terms of Unit American Airlines stand alone effort to restructure in bankruptcy is not sufficient enough to fix the losses and furthermore sustaining loss in market share being the third largest U.S. Airline was not a profitable outcome for the organisation (Schlangenstein, 2012). By this merger, American Airlines expects to cut down its losses resulting from labour concessions. The airlines merger strategy has already shown signs of progress with leading unit revenue performance in the industry and also has shown signs of improvement in operational and customer service area. In New York Stock Exchange, the airline share prices have raised from 4.3% to 12.48% (Schlangenstein, 2012). Market Share In spite of indulging in a significant number of mergers in the recent years, the market share of American Airlines had fallen to number four from the third in the western US region and to fourth from the top in the nation’s central part and to fifth from the prevailing position of third in East (Schlangenstein, 2012). From the analysis, it is observed that the US Airways and American Airlines had reached a critical point in the BCG matrix model which is termed as question mark and was independently on the verge of becoming dog. Both the airlines from this merger tend to overcome this crucial position by sharing each other’s expertise and knowledge base along with gaining fuel efficiency from operating leverage and cutting down the loss incurring factors by various other means. The merged airline expects to benefit the customers from the resulting surplus profit by fair cut as well as introducing additional comfort and luxury segment along with increasing flights to popular destinations and consequently reaching the position of star. Experts believe that merger would primarily benefit the frequent business class passengers’ cause as under the combined resources of new career they will have a number of new flights to select from. Therefore, the merged company would definitely try to bank upon the business class for the major share of its profits. Both the airlines expect to overcome the resulted losses from the previous stand alone operations in an estimated short period of time (Schlangenstein, 2012). Ansoff Product/Market Model A Brief Summary of the Model Source: (Franteractive, n.d.) The Ansoff growth strategy matrix is a tool that facilitates businesses in formulating product and market development strategies. According to Ansoff product/market matrix, the growth of a business relies on its initiation whether it develops new or active products in new or explored markets (Luxinnovation G.I.E, 2008). Market Penetration Market Penetration is regarded as a growth strategy when the businesses concentrate on selling prevailing products into presently functional markets. In this strategy, companies attempt to increase the market share of existing products. Companies exercise this strategy by price competition, heavy advertising, promoting sales and also resorting to personal selling (Luxinnovation G.I.E, 2008). Market Development Market Development is a business growth strategy where companies explore new markets in order to sell their existing products. The market development strategy is riskier than market penetration strategy because companies go beyond their familiar environment and step into new markets, for example a new country (Luxinnovation G.I.E, 2008). Product Development Companies exercise this strategy when they attempt at introducing fresh products into existing markets. In this strategy, companies need to develop new competencies and create or modify products which can appeal to the existing markets. The companies that aim to exercise this strategy mainly endeavour to maintain their competitive edge. Companies in order to successfully implement this strategy have to undergo an intensive research and development in the product field (Luxinnovation G.I.E, 2008). Diversification Diversification strategy is much more risky than all the above strategies as companies introduce new products in new markets where they have low or no experience at all. In order to undertake this strategy, companies have to undergo intense research and analysis of all the risks and rewards associated with the implementation of this strategy. This strategy can be highly rewarding if correctly exercised (Luxinnovation G.I.E, 2008). Application of the Model in Relation to Diversification Strategy by HTC in 2012 HTC Corporation is recognised as a Taiwan based manufacturer of varied mobile phone devices such as smartphone as well as tablets. An electronics goods manufacturer, HTC primarily focuses on smartphones. HTC has not developed real operating system for its phone product line rather it has used open source or licensed Operating System (OS). The company had previously developed and sold Windows mobile smartphones in the year 2009 but presently it is intensively focused on the development of Android smartphones. This strategy has shown a sign of success as Android has become very popular among the common masses. Based on this success, HTC has produced multiple smartphone lines based on Windows 7 OS when the OS launched. HTC smartphones’ uniqueness from other smartphone manufacturers lies in the fact that it is providing various hardware configurations which tend to suit any smartphone user. Also HTC significantly modifies the Android OS used in its smartphones to a considerable extent by providing innovative frontends, user interface and especially apps which is quite distinct from other smartphone manufacturers which also include great email experience (Aviram, 2010). HTC relentlessly competes in gaining leadership in the smartphone market by introducing innovative new state of the art products which can be evidently stated from the fact that it was the first company to introduce Windows and Android phone device and was also the first to bring touch screen phone (Aviram, 2010). In this regard, it can be observed that the latest in HTC series is HTC One X which debuted in May 2012. Probably the least diversified company amid its competitors, HTC has been lacking in terms of presenting a unique selling proposition (USP), so it has been depending every year on a big high end launch to attract common masses (Mobility Feeds, 2012). Designing HTC OS Android and iOS are the leading user interfaces in the operating system battleground. Mobile companies are now exploring new opportunities beyond these options. HTC is perusing in its initiative to produce a phone which carries HTC both inside and outside, putting in simple terms, they are on their way to introduce their own distinct unique interface which promises to raise new standards in the competitive OS market. HTC does recognise the need of owning their own OS for ensuring the long-term sustainability, thus HTC is considering purchasing their own mobile operating system for use in the forthcoming devices. There had been a rumour that HTC may be considering Palm OS or the HP web-based interface but it is still not really quite clear where the company’s actual interest lies. The company is undergoing massive research and development in this venture and considering all the pros and cons associated with the introduction of the new OS. The company clearly cannot afford to lose in the individual operating system venture because a failure in this stage can cause the company a massive loss which in turn can render the process of turnaround to be almost impossible. The clear objective from the company in the OS ground is that it will not be doing anything on impulse (Caitlin, 2010). HTC is using horizontal or related diversification which is a strategy of adding related or similar product line to the existing product either through acquisition of new OS or through internal development of new product as apparent in the case of HTC. By using the strategy, HTC will attempt to grow in the mobile phone market utilising all its existing resources and capabilities and will also try to escape from the uninvited consequences of industry environments making use of the surplus cash flow (Washburn, 2013). HTC had entered North American market by introducing white-label phones for diverse service providers and other brands bringing the company into the spotlight in the year 2012. HTC has constructed strong distribution channel and a reputation branding of superior technology without getting a great deal of attention from media in this venture. This has helped it to avoid aggressive counter marketing strategy from its competitors. HTC has strongly settled in North American market and now it has endeavoured to penetrate the Chinese market by launching their new phone The EVO making it the direct competitor to iPhone 4. HTC is moving confidently into new boundaries and making its name among high profile brands and demanding the market share with it. HTC will be strongly relying on its new technologies to build the brand name. It will facilitate the company to deal with tough competition from Apple which has a strong brand loyalty amid people and also from the other pre-existing brands already in the smartphone market (Washburn, 2013). Therefore, it is quite apparent from the above analysis that HTC is following the related diversification strategy by moving from manufacturing smartphones to developing OS and introducing new product (The EVO) in new market (i.e. North America and China). Porter’s Three Generic Strategies A Brief Summary of the Model Source: (Provenmodels, n.d.) Michael Porter had depicted a model consisting of three types of strategy which include cost leadership, differentiation and focus, which are generally used by businesses to attain and sustain competitive advantage. The three strategies are correlated along with two magnitudes which are strategic scope and strategic strength (Pioneer Institute of Professional Studies, n.d.). Cost Leadership In this strategy, companies compete for a wider customer segment with respect to gaining leadership in price. The price is based on the company’s internal efficiency to widen the margin reaching above regular returns. The strategy works well when the product is standardised as well as is acceptable to many customers and also can be offered at a low price. In order to be successful as a cost leader, it is necessary to continuously put efforts to lower cost with regard to competitors’ offerings. Cost leadership creates a barrier for new entrants to the market since new firms face difficulties settling in the market by crossing the cost leader in the existing market (Pioneer Institute of Professional Studies, n.d.). Differentiation In this segment, customers are provided new value through new unique products and new uses of the products rather than by low price. Firms tend to focus in terms of creation of customer value by presenting superior quality products which is supported by good service at premium prices. The differentiation strategy is effective based on the company’s efficiency on how well it balances products’ benefits and product costs for the consumers with respect to competitive offerings. A company tries to instil image in the minds of the consumers that their product is unique and superior in quality than those of their competitors with respect to image along with reputation (Pioneer Institute of Professional Studies, n.d.). Focus (Low Cost Differentiation) It is an integrated low cost differentiation strategy in which a company aims at selecting a small segment of market to exercise this combined strategy selecting a particular target customer segment. The benefit of using this strategy also includes gaining efficiency in utilising core competencies among business units and products which help the firm to produce products with differentiated quality and low cost. Firms using this strategy may see improved ability in adapting to environmental alterations and learn fresh skills and technologies (Pioneer Institute of Professional Studies, n.d.). The downside of adopting this strategy is that pursuing the strategy for a long-term basis may lead to getting stuck in the middle which implies that the company may not be able to focus on either one of the strategies successfully i.e. maybe gaining in one while compensating on the other. This is why it is quite difficult to focus on low cost and differentiation strategy simultaneously. It is advisable to choose and stick with one strategy (Pioneer Institute of Professional Studies, n.d.). Application of the Model in Relation to Panasonics Differentiation Focus Strategy Panasonic’s Innovative Differentiation Focus Panasonic has been a pioneering company in the segment of brining in green innovations in its operations. Among the two significant initiatives, one is Green Life Innovation, which aims to make green lifestyle become realism; the other is the Green Business Innovation, which seeks to affect and offer a best green business. Panasonic aims to grow to be the top ranked green innovation company within the electronics industry, by the end of the year 2018 (Panasonic Corporation, 2013). Panasonic’s preferred methods of differentiation for its 3D TVs product is geographic and demographic segmentation. It focuses its assets to target white males over the age of 25 with an income of US$50,000 or greater in a year (MasterCard Worldwide Insights, 2008). While there are a lot of exclusive features to the Panasonic 3D TV, there are always facets that could be further appended. One feature that would add more value to the Panasonic 3D TV is changing the TV dynamics so that customers are able to view TV in 3D without having to wear glasses. Currently, viewers must wear 3D glasses to watch anything in 3D. People have said that having to wear these glasses is what is keeping them out from buying 3D TVs. These glasses at times are observed to be painful on the face and can cause headaches along with eyestrain (Panasonic, n.d.). Panasonic’s Innovative Strategies It is observed that one of the best places to stay in the whole world is California which is also the home for many successful people. The people also feel their need for personal masseur which is looked upon as a costly option. Taking advantage of the situation, massage chair has become a popular trend in the state. This is where Panasonic steps in. Panasonic’s massage chair provides all the advantages of having a personal masseur and that too at a very low cost. Panasonic’s massage chair is so efficient that it can replace the best masseur. It massages muscles and increases blood circulation in the body. Customers using this product feel very energetic and are up with more energy to peruse their daily work or activity. Panasonic has continued this massage tradition which has been coming from centuries in the modern form. It is expected to attract a particular customer segment i.e. the workaholics and for its low cost features it is anticipated to gain popularity (Panasonic Corporation, 2011). Many other massage companies are also located in California but none of them can be compared to Panasonic’s products and service quality. It can also be noted that in Japan, in the area of massage chair, Panasonic is the undisputed leader (Panasonic Corporation, 2011). Vacuum Cleaner The older model of Panasonic vacuum cleaner venture focused on producing an environmentally friendly vacuum to differentiate this top model from other alleys in order to attract environmentally conscious consumers (Panasonic Corporation, 2011). Panasonic In Medical Equipments Cycle Defrost Unique (CDU) Cycle Panasonic’s Cycle Defrost Unique cycle defrost refrigerator operates only as needed and upholds interior temperature consistency throughout cycle defrost. The freezer is needed to be manually defrosted (Panasonic Corporation, 2011). Panasonic-Designed Compressors The Panasonic’s new Cool Safe ‘ultra-low temperature compressors’ utilise a unique compressor design and oil cooling technique which reduces release temperatures and compressor heat up (Panasonic Corporation, 2011). Twin Guard® Series The freezers considerably increase protection while minimising power costs through a unique eco mode function. Eco mode maximises power utilisation by stabilising run times for every refrigeration system in reaction to cooling load (Panasonic Corporation, 2011). H2 O2 Decontamination The unique sterisonic GxP H2O2 sanitisation system offered by Panasonic facilitates to limit downtime to not more than three hours when whole chamber decontamination is desired. In this process, all core components and CO2 sampling related loop are decontaminated in situ, so there is no need for exclusion and autoclaving which results in creating no pressure on sensitive electronic apparatus (Panasonic, 2012). Therefore, it can be evidently observed that through its focus on bringing in differentiated products Panasonic has been able to create a unique place for itself amid its consumer segment. References Aviram, A., 2010. Smartphones in the U.S. Market Analysis. 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