Solution:
Assignment # 2
Question:
As a General Manager of Strategic Division, you need to identify each division into BCG Matrix for upcoming meeting with the help of information given below and ONLY suggest strategies for TEDDY BEAR UNIT of BRAVO.
Solution:
| Division | Market share position |
| Baby cart | Question marks |
| Teddy Bear | Stars |
| Toys | Cash cow |
| Baby Blocks | Dogs |
Suggest Strategies for TEDDY BEAR:
1. Forward Integration
2. Backward Integration
3. Horizontal Integration
4. Market Penetration
5. Market Development
6. Product Development
7. Joint Venture
Forward Integration:
Forward integration involves gaining ownership or increased control over distributors or retailers.
Backward Integration:
Backward Integration is a strategy of seeking ownership or increased control of a firm’s suppliers. This strategy can be especially appropriate when firm’s current suppliers are unreliable, too costly, or cannot meet the firm’s needs.
Horizontal Integration:
Horizontal Integration refers to a strategy of seeking ownership of or increased control over a firm’s competitors. One of the most significant trends in strategic management today is the increased use of horizontal integration as a growth strategy. Mergers, acquisitions and takeovers among competitors allow for increased economies of scale and enhanced transfer of resources and competencies.
Market Penetration:
A market penetration strategy seeks to increase market share for present products or services in present markets through greater marketing efforts. This strategy is widely used alone and in combination with other strategies. Market penetration includes increasing the number of salespersons, increasing advertising expenditures, offering extensive sales promotion items, or increasing publicity efforts.
Market Development:
Market development involves introducing present products or services into new geographic areas.
Product Development:
Product development is a strategy that seeks increased sales by improving or modifying present products or services. Product development usually entails large research and development expenditures.
Joint Venture:
Joint venture is a popular strategy that occurs when two or more companies form a temporary partnership or consortium for the purpose of capitalizing on some opportunity. This strategy can be considered defensive only because the firm is not undertaking the project alone. Often, the two or more sponsoring firms form a separate organization and have shared equity ownership in the new entity.
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Strategies for Teddy Bear.
We can choose market development, market development and market penetration, forward integration, backward integration and horizontal integration strategies for the teddy bear. Because teddy bear unit is star unit so we any one or mix of the strategies which I mention.
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Semester “Spring 2011” Strategic Management (MGT603)
Assignment No. 02 Marks: 20
“Strategy Development & Resource Allocation Decisions”
Bravo private limited company initially started its business with direct marketing of small Teddy Bear in the gift delivery industry at local level. With increased market demand in the local market it has introduced its business in other markets as well and added more divisions like Toys, Baby Blocks and Baby Cart. Each unit is operating independently and has its own organizational
structure and financial schemes. Most of economies are suffering rescission but Mr. Atiq Khan, CEO is very optimistic and he only visions for profitability and prosperity even in this tough situation. To know the current condition of his business, he will soon call a meeting to discuss the status and future of each division. As a General Manager of Strategic Division, you need to identify each division into BCG Matrix for upcoming meeting with the help of information given below and ONLY suggest strategies for TEDDY BEAR UNIT of BRAVO. (16+4) 20 Marks
Important Tips
1. This Assignment can be best attempted from the knowledge acquired after watching video lecture no. 23 to lecture no 27 and reading handouts as well as recommended text book).
Schedule
Opening Date and Time June 06 , 2011 At 12:01 A.M. (Mid-Night)
Due Date and Time June 10 , 2011 At 11:59 P.M. (Mid-Night)
SOLUTION:
1. Star will be Teddy Bear
2. Cash Cow will be Toys
3. Question Mark will be Baby Cart
4. Dog will be Baby Block
Strategy for Teddy Bear
Sustaining the business unit's market leadership may require extra cash, but this is worthwhile if that's what it takes for the unit to remain a leader. When growth slows, stars become cash cows if they have been able to maintain their category leadership.
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Here is the idea of solution.Put all in the Matrix available in the assignment file
% Market Share % Growth Rate
1) Baby cart 0.4 7.5 = Question Mark (4Marks)
2)Teddy Bear 0.8 17.5 =Star (4Marks)
3)Toys 0.7 -17 =Cash Cows (4Marks)
4)Baby Blocks 0.1 -7 =Dogs (4Marks)
Now give description of these.
Suggest the strategy for the Star(Teddy Bears)which always needed to cash flow from the cash cow.
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Teddyin the gift delivery industry at local level. With increased market demand in the local
Toys organizational structure and financial schemes. Most of economies are suffering rescission but Mr. Atiq Khan, CEO is very optimistic and he only visions for profitability and prosperity even
in this tough situation. To know the current condition of his business, he will soon call a meeting
to discuss the status and future of each division. As a General Manager of Strategic Division, you
need to identify each division into BCG Matrix for upcoming meeting with the help of
information given below and
The best business portfolio is one that fits the company's strengths and helps exploit the most
attractive opportunities.
The company must:
(1) Analyze its current business portfolio and decide which businesses should receive more or
less investment, and
(2) Develop growth strategies for adding new products and businesses to the portfolio, whilst at
the same time deciding when products and businesses should no longer be retained.
business portfolio is the collection of businesses and products that make up the company.
Methods of Portfolio Planning
The two best-known portfolio planning methods are from the Boston Consulting Group (the
subject of this revision note) and by General Electric/Shell. In each method, the first step is to
identify the various Strategic Business Units ("SBU's") in a company portfolio. An SBU is a unit
of the company that has a separate mission and objectives and that can be planned independently from the other businesses. An SBU can be a company division, a product line or even individual brands - it all depends on how the company is organized.
The Boston Consulting Group Box ("BCG Box")
Using the BCG Box (an example is illustrated above) a company classifies all its SBU's
according to two dimensions:
On the horizontal axis: relative market share
market
attractiveness
In our given scenario its
- this serves as a measure of SBU strength in theOn the vertical axis: market growth rate - this provides a measure of market
SBU Category
Baby Cart Question Marks
Teddy Bear Stars
Toys Cash Cows
Baby Blocks Dogs
By dividing the matrix into four areas, four types of SBU can be distinguished:
Stars -
relatively strong compared with the competition. Often they need heavy investment to sustain
their growth. Eventually their growth will slow and, assuming they maintain their relative market
share, will become cash cows.
Stars are high growth businesses or products competing in markets where they are
Cash Cows
share. These are mature, successful businesses with relatively little need for investment. They
need to be managed for continued profit - so that they continue to generate the strong cash flows
that the company needs for its Stars.
- Cash cows are low-growth businesses or products with a relatively high market
Question marks
operate in higher growth markets. This suggests that they have potential, but may require
substantial investment in order to grow market share at the expense of more powerful
competitors. Management have to think hard about "question marks" - which ones should they
invest in? Which ones should they allow to fail or shrink?
- Question marks are businesses or products with low market share but which
Dogs
share in unattractive, low-growth markets. Dogs may generate enough cash to break-even, but
they are rarely, if ever, worth investing in.
- Unsurprisingly, the term "dogs" refers to businesses or products that have low relative
Using the BCG Box to determine strategy
Once a company has classified its SBU's, it must decide what to do with them. In the diagram
above, the company has one large cash cow (the size of the circle is proportional to the SBU's
sales), a large dog and two, smaller stars and question marks.
Conventional strategic thinking suggests there are four possible kinds of strategies for each SBU:
(1) Build Share:
"question mark" into a star)
here the company can invest to increase market share (for example turning a
(2) Hold:
here the company invests just enough to keep the SBU in its present position
(3) Harvest:
cash flows and profits from the SBU. This may have the effect of turning Stars into Cash
Cows.
here the company reduces the amount of investment in order to maximise the shortterm
(4) Divest:
resources elsewhere (e.g. investing in the more promising "question marks").
the company can divest the SBU by phasing it out or selling it - in order to use the
Suggested Strategies for Teddy bear unit:
As stars represents the organization's best long run opportunities for growth and profitability,
cause they are the divisions with the high market share and also high market growth rate, they
should receive substantial investments to maintain and strengthen their market dominant
positioning. Strategies that can be applied to achieve these results are:
INTEGRATION STRATEGIES
Forward integration, backward integration, and horizontal integration are sometimes
collectively referred to as vertical integration strategies. Vertical integration strategies allow a
firm to gain control over distributors, suppliers, and/or competitors.
Forward Integration
Forward integration involves gaining ownership or increased control over distributors or
retailers.
Backward Integration
Both manufacturers and retailers purchase need materials from suppliers, backward integration is
a strategy of seeking ownership or increased control of a firm’s suppliers. This strategy can be
especially appropriate when a firm’s current suppliers are unreliable, too costly, or cannot meet
the firm’s needs.
Horizontal Integration
Horizontal integration refers to a strategy of seeking ownership of or increased control over a
firm’s competitors. One of the most significant trends in strategic management today is the
increased use of horizontal integration as a growth strategy. Mergers, acquisitions, and takeovers
among competitors allow for increased economies of scale and enhanced transfer of resources
and competencies.
INTENSIVE STRATEGIES
Market penetration, market development, and product development are sometimes
referred to as intensive strategies because they require intensive efforts to improve a firm’s
competitive position with existing products.
Market Penetration
A market penetration strategy seeks to increase market share for present products or services in
present markets through greater marketing efforts. This strategy is widely used alone and in
combination with other strategies. Market penetration includes increasing the number of
salespersons, increasing advertising expenditures, offering extensive sales promotion items, or
increasing publicity efforts.
Market Development
Market development involves introducing present products or services into new geographic
areas.
Product Development
Product development is a strategy that seeks increased sales by improving or modifying present
products or services. Product development usually entails large research and development
expenditures.
JOINT VENTURES:
Joint venture is a popular strategy that occurs when two or more companies form a temporary
partnership or consortium for the purpose of capitalizing on some opportunity. This strategy can
be considered defensive only because the firm is not undertaking the project alone. Often, the
two or more sponsoring firms form a separate organization and have shared equity ownership in
the new entity.
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As a General Manager of Strategic Division I shall present
Teddy Bear as the Star
Toys as our Cash Cow
Baby Cart as the Question Mark
Baby Block as the Dog
Sustaining the business unit's market leadership may require extra cash, but this is worthwhile if that's what it takes for the unit to remain a leader. When growth slows, stars become cash cows if they have been able to maintain their category leadership.
Suggested Strategies for the Star “Teddy Bear” in the BCG Matrix
Forward Integration
Forward integration involves gaining ownership or increased control over distributors or retailers.
Backward Integration
Both manufacturers and retailers purchase need materials from suppliers, backward integration is a strategy of seeking ownership or increased control of a firm’s suppliers. This strategy can be especially appropriate when a firm’s current suppliers are unreliable, too costly, or cannot meet the firm’s needs.
Horizontal Integration
Horizontal integration refers to a strategy of seeking ownership of or increased control over a firm’s competitors. One of the most significant trends in strategic management today is the increased use of horizontal integration as a growth strategy. Mergers, acquisitions, and takeovers among competitors allow for increased economies of scale and enhanced transfer of resources and competencies.
