Competition Strategies

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Amity Business School

Competitive Strategy

BCG MatrixMona Chaudhary

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Definition

• Competitive Analysis– The process of identifying key

competitors; assessing their objectives, strategies, strengths and weaknesses, and reaction patterns; and selecting which competitors to attack or avoid.

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Hypothetical Market Structure

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• Expanding the total demand– Finding new users– Discovering and promoting

new product uses– Encouraging greater product

usage• Protecting market share

– Many considerations– Continuous innovation

• Expanding market share– Profitability rises with market

share

Market LeaderMarket LeaderMarket Market ChallengerChallengerMarket Market FollowerFollowerMarket NicherMarket Nicher

Competitive Competitive PositionsPositions

http://www.barbie.com/

http://www.micron.com/

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• Option 1: challenge the market leader– High-risk but high-gain– Sustainable competitive

advantage over the leader is key to success

• Option 2: challenge firms of the same size, smaller size or challenge regional or local firms

• Full frontal vs. indirect attacks



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Pepsi is an example of market challenger that has chosen to use a full frontal attack

http://www.youtube.com/watch?v=SkELRp4wKPs

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• Follow the market leader– Focus is on improving

profit instead of market share

– Many advantages:• Learn from the market

leader’s experience• Copy or improve on

the leader’s offerings• Strong profitability



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• Serving market niches means targeting subsegments

• Good strategy for small firms with limited resources

• Offers high margins• Specialization is key

– By market, customer, product, or marketing mix lines



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• Companies can become so competitor centered that they lose their customer focus.

• Types of companies:– Competitor-centered companies– Customer-centered companies– Market-centered companies

Balancing Customer and Competitor Orientations

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Competitive Rivalry

• number of competitors • rate of industry growth • intermittent industry overcapacity • exit barriers • diversity of competitors • informational complexity • brand equity • level of advertising expense

Name of Institution

Boston Consulting Group Matrix

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Name of InstitutionINTRODUCTION

BOSTON CONSULTING GROUP (BCG) MATRIX is developed by BRUCE HENDERSON of the BOSTON CONSULTING GROUP IN THE EARLY 1970’s.

According to this technique, businesses or products are classified as low or high performers depending upon their market growth rate and relative market share.

Name of Institution

Relative Market Share &

Market Growth

• To understand the Boston Matrix you need to understand how market share and market growth interrelate.

Name of InstitutionMARKET SHARE

• Market share is the percentage of the total market that is being serviced by your company, measured either in revenue terms or unit volume terms.

• The higher your market share, the higher proportion of the market you control.

Name of InstitutionMARKET GROWTHRATE

• Market growth is used as a measure of a market’s attractiveness.

• Markets experiencing high growth are ones where the

total market share available is expanding, and there’s plenty of opportunity for everyone to make money.

Name of InstitutionTHE BCG GROWTH-SHARE

• It is a portfolio planning model which is based on the observation that a company’s business units can be classified in to four categories:

Stars Question marks Cash cows Dogs

• It is based on the combination of market growth and market share relative to the next best competitor.

Name of Institution

Name of InstitutionSTARSHigh growth, High market share

• Stars are leaders in business.• They also require heavy investment, to

maintain its large market share.• It leads to large amount of cash

consumption and cash generation.• Attempts should be made to hold the

market share otherwise the star will become a CASH COW.

Name of InstitutionSTAR

• Implications:• Stars:

– Huge potential– May have been expensive to develop– Worth spending money to promote– Consider the extent of their product life cycle

in decision making

Name of InstitutionCASH COWS Low growth , High market share

• They are foundation of the company and often the stars of yesterday.

• They generate more cash than required.• They extract the profits by investing as little

cash as possible• They are located in an industry that is mature,

not growing or declining.

Name of InstitutionThe Boston Matrix

• Implications:• Cash Cows:

– Cheap to promote– Generate large amounts of cash –

use for further R&D?– Costs of developing and promoting

have largely gone– Need to monitor their performance –

the long term?– At the maturity stage of the PLC?

Name of InstitutionDOGSLow growth, Low market share

• Dogs are the cash traps.• Dogs do not have potential to bring in

much cash.• Number of dogs in the company should

be minimized.• Business is situated at a declining

stage.


• Implications:• Dogs:

– Are they worth persevering with?– How much are they costing?– Could they be revived in some way?– How much would it cost to continue

to support such products?– How much would it cost to remove

from the market?

Name of InstitutionQUESTION MARKSHigh growth , Low market share

Most businesses start of as question marks.They will absorb great amounts of cash if the

market share remains unchanged, (low).Why question marks?Question marks have potential to become

star and eventually cash cow but can also become a dog.

Investments should be high for question marks.


• Implications:• Problem Children:

– What are the chances of these products securing a hold in the market?

– How much will it cost to promote them to a stronger position?

– Is it worth it?

Name of InstitutionBENEFITS OF BCG MATRIX

• BCG MATRIX is simple and easy to understand

• It helps you to quickly and simply screen the opportunities open to you, and helps you think about how you can make the most of them.

• It is used to identify how corporate cash resources can best be used to maximize a company’s future growth and profitability.

Name of InstitutionLIMITATIONS• BCG MATRIX uses only two dimensions, Relative

market share and market growth rate.

• Problems of getting data on market share and market growth.

• High market share does not mean profits all the time.

• Business with low market share can be profitable too.

Name of InstitutionThe Conclusion

• Though BCG MATRIX has its limitations it is one of the most FAMOUS AND SIMPLE portfolio planning matrix used by large companies having multi-products

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Documents

Competition Strategies