Conceptual models in strategic management: The Boston Consulting Group growth / share matrix

Résumé du document

Nowadays, in a stronger context of globalisation, companies have to face more and more complex challenges such as a higher international competition, emerging markets, many economic changes or new technological progresses etc. Strategic management decisions have to be completely successful in this context, otherwise the consequences of any failure or mistake can be dramatic for companies in terms of profits or reputation. Senior executives actually have to use several conceptual models to be efficient particularly in their decision making. First of all, we will determine why conceptual models are so commonly used in strategic management. Then, we will describe and explain the BCG Growth / Share Matrix and finally, we will evaluate the different strengths and weaknesses of this conceptual model by analyzing and synthesizing the views of several authors.

Extraits

[...] In addition to that, it is to say that managers must find answers to lots of important business issues as whether to focus on a wide range of consumers, or to focus on a specific market niche, for example. To resume, managers actually have to find efficient ways to get a stronger business position and vitality over time. To make their strategic choices or to take up their challenges, managers often use conceptual models such as the BCG Growth / Share Matrix, the SWOT Analysis, the PEST model or the Porter's five forces Analysis for example. [...]

[...] U.K.: Prentice Hall Europe. Jonathan Sutherland, Diane Canwell (2004) Key concepts in strategic management. U.S.A.: Palgrave. Clive Sutton (1998) Strategic Concepts. U.K.: Macmillan Press Ltd. Tim Hannagan (2005) Management Concepts & Practices. 4th ed. U.K.: Prentice Hall. Arthur A. Thompson, Jr., A. J. Strickland III (2001) Strategic Management, Concepts and Cases. [...]

[...] However, a company, if needed, can invest more to maintain market shares. - DOGS (or PETS): This category represents business units with low market shares and low market growth rates. We can have a “modest positive” or even negative cash flow. The number of DOGS actually has to be minimized by the company. It is not really advised to invest in expensive marketing plans for example as the product ages (declining or static market). They may be a cash drain but DOGS, it is sometimes though, should be sold off. [...]

[...] Canwell, Key concepts in strategic management, p 88). Managers also commonly use many others analytical tools, such as business portfolio-planning models (the BCG Growth / Share Matrix or the McKinsey Matrix for example). To sum up, we can say that conceptual models generally represent useful analytical tools for managers. It obviously helps them to make sense of strategic challenges. They can also focus their attention on a specific part of a business (internal and external environment, portfolio-planning and so on). [...]

[...] In addition, the BCG concept is only about two dimensions (market growth and relative market share). This can be dangerous for a company as the management team may stop investments prematurely or focus too much on a specific business unit. Furthermore, a high market share does not lead to profitability all the time. Indeed, business units with low market shares can sometimes be profitable for the company. Another problem commonly expressed is that when elaborating the matrix, the company only focuses on the biggest competitors. [...]