Planning Marketing: Business Portfolios and Growth Strategies
In order to develop and maintain a strategic fit between the organization's capabilites and goal, and its changing marketing opportunities, the organization needs a strategic plan, and to do that, managers must define the company's objective and goals.
The main priority while developing a strategic plan, is the design of a business portfolio - the collection of businesses and products that make up the company - or the analysis of the current portfolio. Why is it so important? Because this process will allow the organization managers to:
- Identify the key businesses making up the company.
- Evaluate the attractiveness of it's Strategic Business Units (also know as SBU).
- Decide how much investment and support each SBU deserves.
After the initial SBA identification phase, it's time to assess the attractiveness of the various Strategic Business Units, and i'm going to describe a well know portfolio planning method:
The Boston Group Matrix
The BGA Matrix, or growth share matrix, helps managers evaluate their company's SBA's, like the name implies, in terms of their market growth rate and relative share. It's pretty simple to understand.
Strategic Business Units are classified as:
- Cash Cows
- Question Marks
The image above illustrates the matrix we're talking about. Basically:
- Stars - High-growth, high-share businesses or products requiring heavy investment to finance their rapid growth. Eventually Stars turn into Cash Cows.
- Cash Cows - Low-growth, high-share businesses or products. Established SBU's that require less investment in order to maintain their current market share.
- Question Marks - Low-share, high-growth units, that require a big investment to hold their share.
- Dogs - Low-growth, low-share units, that may be able to maintain themselves with the cash they generate, but don't promise to be a large source of profit.
But there's also disadvantages to this system. First, it's difficult to define each SBU and measure accurately it's market share and growth. Second, this process can be expensive and time consuming. And finally, it's focus on current businesses, neglecting future planning.
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