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STRATEGIC ANALYSIS (BOSTON MATRIX (4 sectors created by the matrix : (Low…

- - - - Internal factors about the business that can be looked upon as real advantages
      - This could be used a basis for developing competitive advantage [ E.g experienced management, product patents, loyal workforce & good product range]
      - Often undertaken by specialist management consultants who analyses the effectiveness of the business & the effectiveness of each departments and major product ranges
    - - Internal factors about a business that can be seen as negative factors
      - Includes : [E.g poorly trained workforce, limited production capacity and aging equipment
    - - These are potential areas for expansion of the business and future profits
      - Identified by external audit of the market firm operated in and it's major competitors
      - E.g new technologies, export markets expanding faster than domestic markets & lower rates of interest consumer demand
    - - Also external factors gained from external audit
      - This analyses the business and economic environment, market conditions and the strength of competitors
      - E.g new competitors, globalization driving down prices, changes in law regarding the sale of firms products & changes in government policy
- - - - What do we do?
      - For whom do we do it?
      - What is the benefit?
- - - - This type of product creates a high positive cash flow & is profitable
      - Sales are high relative to the market and promotional costs are likely to be low ; due to consumer awareness
      - The cash from this product can be reinvested and injected into some other products in the portfolio
      - The business will want to maintain cash cows as long as possible
    - - This is a successful product as it is performing well in an expanding market
      - The business will be keen to maintain market position of this product in what may be a fast-changing market ; high promotion costs will help differentiate the product and reinforce its brand image.
      - Despite such costs ; likely to generate high amounts of income
    - - This product consumes resources but generates little return.
      - For newly launched product, heavy promotion cost is needed to help become established in which the finance may come from 'cash cow' - but future of product is uncertain.
      - Quick decisions must be made to improve sales such as revised design, relaunch or even withdrawal from the market
      - This product does have potential as it is selling in a market sector that is growing fast.
    - - This product seems to offer little to the business either in terms of existing sales and cash flow or future prospects ; due to market not growing.
      - May needed to be replaced shortly, or firm could decide to withdraw this market sector altogether and position itself into fast-growing sectors.
  - - - Analyses the performance & current position of existing product portfolios.
      - Planning action to be taken with existing products.
      - Planning the introduction of new products
- - - - Economies of scale are low in the industry.
      - The technology needed to enter the industry is relatively cheap
      - Distribution channels are easy to access
      - No legal or patent restrictions on entry
      - The importance of product differentiation is low, so extensive advertising may not be required to get established.
    - - There are many undifferentiated small supplying firms
      - The cost of switching suppliers is low
      - Buyers can be realistically and easily buy from other suppliers
    - - The cost of switching is high
      - When the brand being sold is very powerful and well-known
      - Suppier could realistically threaten to open their own forward integration operations
      - Customer have little bargaining power as they are small firms and fragmented
    - - New technology makes other options available
      - Price competition forces customers to consider alternatives
      - Any significant new product leads to consumer spending that results in less being spent on other goods
    - - Cheap & easy for new firms to enter an industry.
      - There is a threat form substitute products.
      - Suppliers have much power
      - Buyers have much power
  - - - Product differentiation.
      - Buying out some competitors.
      - Focus on different segments that might be less competitive.
      - Communicate & collude with rivals to reduce competition.
- - - - CORE PRODUCT - Product based on a business's core competencies, but not necessarily for final consumer or end user.