BCG Matrix and the Product Life Cycle Essay

IntroductionThe BCG Matrix and the Product Life Cycle ar cardinal important tools that relate to antithetic aspects of a results exerciseThe BCG looks at martplace share and merchandise outdevelopment and how they impact on cash usage and generation.The PLC looks at sales/ tax incomes over time and levels of profitability.capital of Massachusetts Consulting Group (BCG) MatrixBusinesses must keep their fruit offerings relevant and economic to stay in operation. The Boston Consulting Group developed a tool, c all in alled the BCG matrix, for categorizing a firms ingatherings in relation to the overall increase spiritedness beat. Product sprightliness cycle is based on the observation that products develop, akin to animals, through distinct phases of maturity that differ in amount of resources needful and dod. The BCG matrix places each product a comp both offers according to the egression esteem of the business and the relative trade place share the product control s. Identifying which quadrant of the BCG matrix a product offering falls into give ups valuable direction to management about the future of that product StarsProducts that enjoy a graduate(prenominal) relative position in terms of market share in a growing market are referred to as geniuss. They implore braggy investments to maintain the market share, but often produce enough revenue to cover their expenses. Firms should make it a top priority to maintain the market share of products in the star quadrant of the BCG matrix to increase sales. As the product enters maturity, and appendage rates decline be menial 10 percent, maintaining market share lead require less investment, yet produce connatural revenue, and become cash overawe. Cash CowsCash cows produce substantial profits for their companies because they require little investment to maintain their gamy share of the market. Managers should divert profits from cash cows to help typify market share of star products, d evelop brisk products for emerging markets, or turn struggling products around. While cash cows often provide the largest profit margin in a comp each portfolio, firms interested in maintaining long-term profitability must invest in defending and creating star products that will become cash cows Low market-share products that show low growth are referred to asdogs. Managers should minimize the number of dogs in the product portfolio. While many managers seek the challenge of trying to turn a dog product around, additional scrutiny should be given to any investment in dog products. Firms should decide whether to find a quoin in the products market to control or rifle from the product entirely to free up resources for much profitable ventures. headspring MarksThe most troubling quadrant on the BCG matrix is fill with products in high-growth markets that control relatively weak positions within their markets. These products, called question marks, require large investments to devel op. Even with substantial funding, a question mark product is at a disadvantage due to the fierce competition in high-growth markets. Managers should consider the likelihood and means of increasing market share, such as specializing in a niche market, before allocating additional resources to question marks. If a question mark is unlikely to capture a niche market or stand out against the better established competition, the firm should pillage to increase its overall profitabilitySome limitations of the BCG matrix pretence implicateThe first problem sewer be how we define market and how we bring on data about market shareA high market share does not necessarily lead to profitability at all timesThe model employs further cardinal dimensions market share and product or service growth rateLow share or niche businesses can be profitable too (some Dogs can be more(prenominal) profitable than cash Cows)The model does not reflect growth rates of the overall marketThe model neglect s the effects of synergy amongst business unitsMarket growth is not the only indicator for magnet of a market There are probably even more aspects that need to be considered in a point use of the BCG model Product Life Cycle (plc)The product life cycle has 4 very clearly defined items, each with its own characteristics that mean different things for business that are trying to manage the life cycle of their particular products. Introduction Stage This fix up of the cycle could be the most dear(predicate) for a company casting a new product. The size of the market for the product is small, which meanssales are low, although they will be increasing. On the other hand, the cost of things like research and development, consumer testing, and the marketing needed to launch the product can be very high, especially if its a competitive sector. Growth Stage The growth stage is typically characterized by a strong growth in sales and profits, and because the company can start to bene fit from economies of scale in production, the profit margins, as come up as the overall amount of profit, will increase.This makes it possible for businesses to invest more money in the promotional activity to maximize the potential of this growth stage. Maturity Stage During the maturity stage, the product is established and the aim for the producer is now to maintain the market share they have built up. This is probably the most competitive time for most products and businesses need to invest sagely in any marketing they undertake. They also need to consider any product modifications or improvements to the production process which might give them a competitive advantage. Decline Stage Eventually, the market for a product will start to shrink, and this is whats known as the decline stage. This shrinkage could be due to the market becoming saturated (i.e. all the customers who will acquire the product have already purchased it), or because the consumers are switching to a dif ferent type of product. While this decline whitethorn be inevitable, it may still be possible for companies to make some profit by switching to less-expensive production methods and cheaper marketsThe relationship between the BCG Matrix and the product life cycle The horizontal axis of rotation of the BCG Matrix represents market Shareand the vertical axis indicates anticipated market growth. The incarnate business is dissever into four categoriesthey are cash cows, stars, question marks, dogs. The product life cycle is a new product progresses through a sequence of stages from introduction to grow, maturity, and decline. The four categories of corporate business correspond to the four stages of the product life cycle (1) school principal marks businesses correspond to the introduction stage of the product life cycle. fountainhead marks businesses are in an attractive industry but hire a small market share percentage. In the introduction stage the firm seeks to build market sha re rapidly build product awareness and develop a market for the product. (2) Starts businesses correspond to the growthstage of the product life cycle. Start businesses are in a invasive market, and hold a dominant share of that market.Their contribution to cash guide depends on their need for resources. In the growth stage, the firm seeks to build give away preference and increase market share. Market share tends to stabilize. (3) Cash cows businesses correspond to the maturity stage of the product life cycle. Cash cows businesses in this generate large amounts of cash but their prospects for future growth are limited In the maturity stage, the market reaches saturation. The primary documental is to defend market share while maximizing profit. (4) Dogs businesses in this folk do not producer consumer much cash. However they hold no promise for improved performance. In decline stage there is a downturn in the market as sales decline block up the product liquidating remaining i nventory or sell off.The difference between the BCG Matrix and the product life cycleThe corporate business is divided into four categories from two aspects of market share and anticipated growth rate however the product life cycle is divided into four stages from two aspects of sales and time.The BCG Matrix can roughly judge enterprises overall operating conditions but the product life cycle only reflects the market performance of a single product.The BCG matrix in the main studies the parceling and use of corporate resources, but the product life cycle mainly studies the use of the product marketing strategy. The BCG matrix can reflects corporate a variety of different business conditions, but the product life cycle can not reflects all businesses and product in the curve