Explain BCG matrix.Strategic Management for Technology & Innovation . This can be done because the SBU helps in segmenting the activities of the company in a strategic manner and the resources are thus allocated competitively. USA. It is a two dimensional analysis on management of SBU¶s (Strategic Business Units). Where do ethics fall in strategic management? 3. This is also true for the company which has different product ranges and some of them have similar capabilities in terms of research and development.MB-403 Max Marks 100 Section A Short Answer Questions attempt any four ± 20 Marks. Strategic Management involves huge capital investment. business could be classified as high or low according to their industry growth rate and relative market share. According to this matrix. It provides a graphic representation for an organization to examine different businesses in it¶s portfolio on the basi related market share and industry growth rates. In words. The strategic business unit (SBU) is created with the application of set criteria which consist of the competitors. Comment. The entire portfolio of the concerned business has to be managed by allocation of managerial and capital resources for serving the overall interest of the entire organization. The main notion which rests behind the concept of strategic business units is to gain a competitive advantage in the populated marketplace. This helps in developing a balance in the earnings. What is the importance of strategic business unit? These strategic business units are also referred to as independent business units or strategic planning units. customer groups and the overall experience of the company. The main philosophical concept behind the formation of strategic business units is to serve a clear and defined market segment along with a clear and defined strategy. 4. price models. These business units have to contain all the needs and corporate capabilities of the respective organization. . marketing and manufacturing. This helps in strategically planning the overall business of the organization. it is a comparative analysis of business potential and the evaluation of environment. sales and the assets at a level which is controlled and acceptable for taking the right amount of risks. Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2 matrix) developed by BCG. 2. Such products can also be amalgamated to form a single unit. Relative Market Share = SBU Sales this year leading competitors sales this year. It is the most renowned corpo portfolio analysis tool. It is also sometimes seen that a number of different verticals present in the same organization having similar competitors and target customers are amalgamated to form a single SBU. 1.

then a retrenchment policy may be pursued. The four cells of this matrix have been called as stars. The key theory underlying this is existence of an experience curve and that market share is achieved due to overall cost leadership. There is no specific strategy which can be adopted. then they have potential of becoming stars. They require attention to determine if the venture can be viable. Resources are allocated to the business units according to their situation on the grid. a star will become a cash cow when the industry matures.Question marks represent business units having low relative market share and located in a high growth industry.1 x Figure: BCG Matrix 1. If successful. Cash cows require little investment and generate cash that can be utilized for investment in other business units.Industry Sales last year. Due to low market share. 3. While. . SBU¶s located in this cell are attractive as they are located in a robust industry and these business units are highly competitive in the industry. the average growth rate of the industry is used. If the firm thinks it has dominant market share. if all the SBU¶s are located in different industries. Most businesses start as question marks as the company tries to enter a high growth market in which there is already a market-share. these business units face cost disadvantages. Stars. They neither generate cash nor require huge amount of cash. They are the base of an organization. They require huge amount of cash to maintain or gain market share. then it can adopt expansion strategy.Market Growth Rate = Industry sales this year . question marks and dogs.Cash Cows represents business units having a large market share in a mature. then question marks may become dogs. Generally retrenchment strategies are adopted because these firms can gain market share only at the expense of competitor¶s/rival firms. stars require huge investments to maintain their lead. Cash Cows. Question Marks. These businesses usually follow stability strategies. When cash cows loose their appeal and move towards deterioration. Question marks are generally new goods and services which have a good commercial prospective. 10 x 1x 0. Dogs. If ignored. else retrenchment strategy can be adopted. The dimension of business strength. if all the SBU¶s are in same industry. cash cows. Each of these cells represents a particular type of business. relative market share. will measure comparative advantage indicated by market dominance.Dogs represent businesses having weak market shares in low-growth markets.Stars represent business units having large market share in a fast growing industry. Net cash flow is usually modest. slow growing industry.0. These SBU¶s are the corporation¶s key source of cash. then the midpoint is set at the growth rate for the economy. with the horizontal axis representing relative market share and the vertical axis denoting market growth rate. The mid-point of relative market share is set at 1. These business firms have weak market share because of 2. BCG matrix has four cells. while if huge investment is made. The analysis requires that both measures be calculated for each SBU. They may generate cash but because of fast growing market. 4. and are specifically the core business.

6. Explain the term strategic alliance. it should be liquidated if there is fewer prospects for it to gain market share. This stage involves determining whether all parties have realistic objectives. This stage involves studying the alliance¶s feasibility. economic. STEPS IN THE FORMATION OF STRATEGIC ALLIANCE. 5. etc. These collaborations can come in many shapes and sizes. preparing appropriate partner selection criteria. Growth rate and relative market share are not the only indicators of profitability. At times. dogs may help other businesses in gaining competitive advantage. including contractual and equity forms. strategic and political. addressing termination clauses." Google 2. forming high caliber negotiating teams. and people. Thus. PROCESS 1. Explain the utility of strategic management process of a firm in Oil Sector. Number of dogs should be avoided and minimized in an organization. penalties for poor performance. 4. Alliance Development. ineffective marketing. linking of budgets and resources with strategic priorities. Strategy Development. understanding a partner¶s motives for joining the alliance and addressing resource capability gaps that may exist for a partner. and highlighting the degree to which arbitration procedures are clearly stated and understood. creating strategies for accommodating all partners¶ management styles. 3. finding the caliber of resources devoted to the alliance. Market is not clearly defined in this model. This four-celled approach is considered as to be too simplistic. Contract Negotiation. High market share does not always leads to high profits. 5. What is concentric diversification? 6. but generally businesses can be medium also. "A computer on every desktop and in every home. 2. It requires aligning alliance objectives with the overall corporate strategy. It normally is a synergistic arrangement whereby the participating organizations each brings different strengths and capabilities to the alliance. 3. 1. This stage involves addressing senior management¶s commitment. Explain the balanced scorecard model? . BCG matrix classifies businesses as low and high. But BCG Matrix is not free from limitations. and measuring and rewarding alliance performance. There are high costs also involved with high market share. 4. Comment on the two mission statements given below. 5. the true nature of business may not be reflected. running Microsoft software" Microsoft "Organize the world's information and make it universally accessible and useful. 2. Main motives for the formation of strategic alliances can be organizational. Operation and relationship management. Alliance Execution. A Strategic Alliance is a significant long/term partnership and collaborative agreement entered into by two or more companies to pursue a set of agreed upon critical goals while remaining (legally) independent organizations.high costs. This model ignores and overlooks other indicators of profitability. Section B Descriptive Type Question attempt any two ± 30 Marks. poor quality. focusing on the major issues and challenges and development of resource strategies for production. Limitations of BCG Matrix The BCG Matrix produces a framework for allocating resources among different business units and makes it possible to compare many business units at a glance. 3. objectives and rationale. Unless a dog has some other strategic aim. This exploratory stage involves analyzing a potential partner¶s strengths and weaknesses. Partner Assessment. such as1. defining each partner¶s contributions and rewards as well as protect any proprietary information. They can earn even more than cash cows sometimes. technology.

Comment on this in context to strategic management. Knowing that the present recession is short term phenomenon while investments in Petroleum industry is long term in nature.50 Marks 7. Innovation is the key to profitability of any business today. still companies have deferred investment in new projects. 8.Section C Both the questions are compulsory . Do you think that innovations have been a part of the petroleum growth story during 2007-08? *** .

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