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Zong Entry into Pakistan & Price War between Pakistani GSM Service Providers

Posted by 22 January, 2009 (1) Comment

In 1993, Mobilink started GSM service in Pakistan (yes, Mobilink is the pioneer) but later on with the passage of time and development in IT industry, we now have 5 GSM service providers namely Mobilink, Ufone, Warid, Telenor, and Zong.


There was a time when users had to pay charges for even incoming calls and now we see a bigger change. Users can call for free to some selected numbers and also a new package is introduced, ‘Happy Hour’,  that gives you facility to call on some numbers for free in day time.

There is intense competition between all providers and it leads them to a price war. Everyday low prices brought users to companies but on the other hand we see a little compromise on quality in shape of hidden charges, weak customer support service etc.

Zong entry into Pakistan was a big challenge for that time existing companies and Zong entered and Rocked. They targeted the 60-70% of the population and they succeeded. There advertisement campaigns are simple yet professional and attractive. They didn’t endorsed any celebrity in their advertisement may be to save the “Celebrity Cost” or it may be a part of their strategy not to use a celebrity in start as they succeeded in creating customers without it and they can use it at a later stage to better position their brand.

The prices are now a down as the limit set by the Pakistan Telecommunication Authority (PTA), now GSM service providers have to pay attention on their customer and value added services. In a competition where price war starts, either some companies succeed or becomes the casualities of that era.

Categories : Telecom Tags : , ,


Celebrity Endorsement in Pakistan

Posted by 15 January, 2009 (4) Comment


While working on a project on ‘Impact of Celebrity Endorsement of Consumer Behavior and Overall Brand Value’, I came to know that in Pakistan, very little number of peoples’ behavior is influenced because of the factor that a particular brand’s advertisement has a celebrity in it.

But when a sample is asked about the last recall advertisement 8 out 10 were of celebrity endorsed advertisements. Recall rate is high when someone sees a celebrity in an advertisement whether its a Print Ad or Television Commercial.

Please follow the link below to find out the results of our project. Hope that helps. Suggestions, comments are appreciated on the Topic ‘Celebrity Endorsement in Pakistan’

Download Link: Celebrity Endorsement in Pakistan

Categories : Marketing Tags : , ,


Online Shopping Stores in Pakistan – Failure Dilemma

Posted by 6 December, 2008 (7) Comment

Most of you must have visited the Pakistani Online Stores and to be honest, in my opinion they are not what they meant to be. This is because;

  • The product range is not sufficient,
  • the prices are way to much,
  • stores websites are not well maintained/up-dated,
  • limited payment option,
  • slow order processing.

To some extent the owners of these stores are right in saying that they have more expenses which they have to incurr to get a process completed but I believe that if proper procedure is adopted, there is no reason an online store could go down. We have some big examples with us like

Some of the owners of Pakistani stores do not have there own off-line stores so, they have to bring the product from somewhere else and provide it to customer. If Online business is taken seriously, it could generate a lot of profit.  Advent of new technolgoy always bring challenge for organizations but those who adopt the changes at the right time with right methodolog succeed

Categories : Marketing Tags : ,


Finding the Right Strategy for Your Business

Posted by 23 September, 2008 Comments Off on Finding the Right Strategy for Your Business


In the beginning of this lesson we mentioned Henry Mintzberg’s important book, The Rise and Fall of Strategic Planning. He reaches an interesting conclusion on page 397 of it, one we want to reproduce here in case you don’t make it to the end of his book any time soon: “Organizations differ, just as do animals; it makes no more sense to prescribe one kind of planning for all organizations than it does to describe one kind of housing for all animals.” Dozens of planning methods and approaches have flashed before your eyes as you read this lesson. And believe us, there are many, many more should you care to pursue the planning literature in greater depth! Which, if any, are appropriate to your ways of thinking and the needs of your orga­nization? Possibly, none. At most, one or two in any given situation. It is a terrible (though common) mistake to think that one can “do” planning just by force-fitting a handful of famous methodologies to one’s business. Sure, it helps to know what they are and how they work. But in the end, it is up to you and your fellow planners and marketers to sniff the wind and chose your own path. Perhaps-as is more often the case than we so-called experts like to believe-that path will be largely of your own design, not ours.
In our client work, we’ve noticed that many of the best strategies arise when people trust their instincts and create their own planning processes. Formal situation analysis and planning can provide helpful inputs to this more natural, organic ap­proach to planning-but they are not substitutes for it. Mintzberg seems to be de­scribing the same phenomenon when he writes (of the case studies conducted from McGill) that:

We found strategy making to be a complex, interactive, and evolutionary process, best descrihed as one of adaptive learning…. The process was often significantly emer­gent. . . . Indeed, strategies appeared in all kinds of strange ways in the organizations studied. Many of the most important seemed to grow up from the “grass roots” (much as weeds that might appear in a garden are later found to bear useful fruit), rather than all having to be imposed from the top down, in “hothouse” style.
Strategies as weeds. What an interesting metaphor! And how many of us, espe­cially in the context of established business organizations, are willing and able to give weeds room to grow? All too few, which is one reason why many of the best new strategies in any industry are executed by entrepreneurs, working outside the bound­aries of the established market leaders. Listen to another expert on strategy, Dineh Mohajer, founder of Hard Candy-although she might laugh at our describing her as a strategy expert. But actions speak louder than words (or laughs), and this successful executive founded a nail polish company in her teens and grew it from zero to $10 million is sales in just two years by providing new, fun colors that were not available in the product lines of the giants of her industry. Here is how she and her young part­ners develop their home-run marketing strategies:

We do whatever we like. We don’t do marketing research or anything like that. I’m not even sure what that is-that’s how much we don’t do it. We just go with our gut be­cause that’s what brought us here.
Had she taken her ideas to a market leader, they would probably have been treated like weeds. But now the market leaders are scrambling to imitate this successful strategy.
The question is, can you recognize the next big idea in your market and nurture its growth? We opened the lesson with the search for the new king of strategy and the unsettling news that no heir apparent is in sight. We close on the same thought, with the added insight that it is perhaps best this way. Rather than propose our own candidate, we urge you to find your own. If it is different from everybody else’s, so much the better. Maybe your strategy will be unique, too.
The king is dead. Thank goodness! Now maybe we can create a democratic model of strategic planning.

Categories : Marketing Tags :


The Learning Organization and the Learning Manager

Posted by 23 September, 2008 Comments Off on The Learning Organization and the Learning Manager



In the days when strategsc planning meant plotting a bunch of growth-share matrices, it was widely assumed that organizational learning occurred in lockstep with the number of units produced. As more units were produced by a firm, it became more proficient at producing them and costs dropped correspondingly. This was one reason why BCG plotted relative market share on its matrix. The firm that held the largest share had presumably produced more units, and therefore had learned how to lower costs the farthest. Now that the Japanese have demonstrated both that a low-share competitor can learn faster and that learning can improve quality as well as reduce cost, U.S. managers are forced to rethink their whole notion of learning. In the emerging view, the kind of changes made by both GE and Xerox are successful be­cause they greatly increase the rate of organizational learning.
Ray Stata of Analog Devises has argued that an organization’s rate of learning is the key to its competitiveness. Specifically, he argues that “At Analog Devises, and many other U.S. companies, product and process innovation are not the primary bot­tleneck to progress. The bottleneck is management innovation.” After deciding to tackle the issue of management innovation at Analog Devises, Stata discovered that organizational learning drove management innovation, “I see organizational learning as the principal process by which management innovation occurs. In fact, I would argue that the rate at which individuals and organizations learn may become the only sustainable competitive advantage.” This conclusion focused his attention on how to use the strategic planning process and a total quality program to increase the rate of learning in his company. Incidentally, how he arrived at his conclusions is an example of the new approaches managers are beginning to take in their quest for organiza­tional learning. Stata joined a group of managers working with two MIT professors to develop and exchange ideas in this field. For example, Stata’s recognition of the key role played by organizational learning can be traced to the influence of fellow group member Arie deGeus, director of group planning at Shell International.
A learning organization is an adaptive organization. It is able to rethink its structure and function and redefine itself in response to market challenges and cus­tomer needs. The need for faster and smarter change is obvious: Many managers be­lieve adaptability is the key to success, and are making it the cornerstone of their strategy. This requires pushing both authority and initiative down into the organiza­tion, encouraging people to think harder and learn quicker-and giving them the freedom to do so. But as Stata also observes, “Organizations can learn only as fast as the slowest link learns,” and, in many cases, the slowest link is management.


In 1983, around the time Xerox began its total quality drive, Professor Elliot Carlisle of University of Massachusetts at Amherst wrote a story-a parable actually-about a harried manager who bumps into a successful mentor-like manager on an airplane and learns from him a new way of thinking about management. Here is what the men­tor had to say about thinking:

“You know,” he mused, “when you get right down to it, it’s almost impossible to get any real thinking done at work. Not just because of interruptions, but almost more impor­tantly, the whole psychological and physical environment in which managers work tends to discourage contemplation and encourage activity. The higher the level in an organization, the more critical is the role of reflection and the less important that of activity, but so often we’ve become conditioned on the way up through the ranks. How many bosses would give a word of encouragement to a subordinate if they were to come upon him sitting at his desk, chair tipped back, foot resting on an open drawer, and staring into space with an abstract expression on bis face? They’d be far more likely to ask him what the hell he’s doing, and if the unfortunate replied, ‘Thinking,’ he’d prob­ably be advised to stop thinking and get back to work.”
Although there is now widespread recognition of the need to think harder- and, on the other side of the coin, to learn and adapt more quickly-managers still suffer from that conditioning referred to in the quote. In fact, this conditioning is stronger the higher up you go in the organization. According to Harvard Business School professor Chris Argyris:

Any company that aspires to succeed in the tougher business environment of the 1990s must first resolve a basic dilemma: success in the marketplace increasingly depends on learning, yet most people don’t know how to learn. What’s more, those members of the organization that many assume to be the best at learning are, in fact, not very good at it. I am talking about the well-educated, high-powered, high-commitment profession­als who occupy key leadership positions in the modern corporation.
In this view, it is senior management that stands in the way of organizational learning and adaptability, and thus in the way of success in the marketplace. The problem, according to Argyris, is that people habitually reason defensively, uncon­sciously protecting themselves, maintaining their control, and suppressing conflict and negative views. Their behavior blinds them and their organizations to challenges and opportunities that truly open-minded, productive reasoning and learning would reveal. Thus effective, lasting change in any organization must start at the top with self-examination and behavioral change by the leaders.
The effects of the new strategic planning and the market challenges that drive it put this issue front and center. As Rosaheth Moss Kanter, another Harvard Business School professor, sees it, “Competitive pressures are forcing corporations to adopt new flexible strategies and structures.” And this is forcing changes in the nature of man­agement’s work:

The old bases of managerial authority are eroding, and new tools of leadership are tak­ing their place. Managers whose power derived from hierarchy and who were accus­tomed to a limited area of personal control are learning to shift their perspectives and widen their horizons. The new managerial work consists of looking outside a defined area of responsibility to sense opportunities and of forming project teams drawn from any relevant sphere to address them. It involves communication and collaboration across functions, across divisions, and across companies. .. . Thus rank, title, or official charter will be less important factors in success at the managerial work than having the knowl­edge, skills, and sensitivity to mobilize people and motivate them to do their best.

An example of this concept in action is provided by Raymond Gilmartin, CEO of medical equipment maker Becton-Dickinson, “We’re creating a hierarchy of ideas. You say, ‘This is the right thing to do here,’ not ‘We’re going to do this be­cause I’m boss.”‘ This means the vision still comes from the top, but strategies well up from Becton-Dickinson’s 15 divisions, and Gilmartin must be content to sit back and let this more informal approach to strategy work.
When GE pushed down planning to the line managers, this was not simply the outcome of a struggle for authority between corporate staff and operating divisions (as many saw it at the time). It was the beginning of the transformation of managerial work that Kanter speaks of. And when, in words that proved prophetic, Michael Naylor of GE declared in 1984 that line managers had to be catalysts of change through their planning, he was anticipating the new strategic role of the manager. This role requires flexibility and rapid learning, and it requires that managers teach these traits to oth­ers, for these are the traits that a company needs today to identify and implement suc­cessful strategies.
Xerox’s benchmarking is an example of adaptable, accelerated learning, in that it casts a broad net in the effort to learn how to do something better. The fact is that Xerox can learn from L.L. Bean, and vice versa-insight can and must come from all available sources. The truly interesting thing about the new strategies is the way they are pushing (in some cases, dragging) management along this path. As the new strate­gic planning unfolds in the 1990s, two things are bound to become clear. First, it is management (starting at the top) that is the greatest obstacle to change, and that can become the greatest catalyst. (Stata’s quest led Analog Devises to superior perfor­mance, logging an incredible 50 percent improvement in product failure rates every three to six months, for example.) Second, the entire thrust of the many new strategic directions and organizational changes is toward the marketing concept. Managerial companies are struggling to learn and adapt in order to serve customers better-bet­ter than they did before, better than their customers expect, and better than their competitors do.
This implies a never-ending process, and never-ending change. It is a frightening thought-this notion of chasing a moving finish line-and it takes strategy well be­yond the bounds of yesterday’s comfortable matrices. Yesterday’s solutions become today’s problems. Take Xerox’s benchmarking against L.L. Bean to speed up delivery of products. It was an exciting innovation in the copier business last year, but this year Xerox is already looking beyond it. Although Xerox learned to deliver products faster than its competitors, studies showed that customer satisfaction was still suhoptimal- only 70 percent. The problem was that customers wanted to know exactly when their copiers would arrive. Speed was fine, but uncertainty remained a problem. A new team was convened, with people from distribution, accounting, sales, and so forth, and a new solution developed. Xerox now tracks the progress of every copier through the distribution process so that salespeople can tell customers exactly when they will re­ceive their products, thus providing speed and predictability. Now customer satisfac­tion with product delivery measures at 90 percent instead of 70 percent.
But satisfaction still is short of 100 percent, and if it ever reaches 100 percent, competitors may innovate and push it down-satisfaction is, after all, a relative con­cept. So Xerox cannot stop now-it must search for and explore the next frontier. This is the nature of the new strategic planning. As PepsiCo’s CEO, Wayne Cal­loway, explains.,” The worst rule of management is ‘If it ain’t broke, don’t fix it.In today’s economy, if it ain’t broke, you might as well break it yourself, because it soon will be.”

Categories : Marketing Tags :


Planning to Be the Best

Posted by 22 September, 2008 Comments Off on Planning to Be the Best


In the old strategic planning, goals often reflected desired financial returns or con­ventional wisdom about what was reasonable in the circumstances. But the Japanese competitors did not play by the same rules. They saw nothing wrong with tilting at en­trenched leaders in photocopiers or autos, for example, even though entering the U.S. markets for these products meant violating the prescriptions of the BCG and GE portfolio models. And GE’s circuit breaker business went way beyond conventional ex­pectations, making such radical improvements that it was able to grow profits, quality, and share despite a no-growth market. Where do goals such as these come from, and how can they be implemented when the more modest goals of the old strategic plan­ning were so often missed? The case of Xerox will help answer these critical questions.
In 1983, when Xerox CEO David Kearns decided to stem the flood of competi­tion, he announced the beginning of a total quality campaign. To the uninitiated, total quality sounds like tougher quality control, more inspections. It is not. Total quality programs eliminate quality inspection and focus on doing it right the first time. (“It” may be fitness to standard, fitness to need, or fitness to latent need, as discussed in lesson 1.) This means every person must do his or her job right, or stop the process if he or she does something wrong. Total quality involves suppliers and distributors as well. (MeAlpin Industries, a Xerox supplier, now sends its managers to a Xerox quality course, designs its parts with a Xerox team, and endures Xerox auditors on its factory floor.) Total quality touches every process in the company, from manufacturing processes to sales and customer service processes. To accomplish total quality, Xerox puts in charge those people who know each process best: the front-line workers.
This type of program involves a big change for most companies-a change in corporate culture. Employee initiative must be encouraged, and employees can no longer be punished for mistakes. They will not report them otherwise. Employees must be trained in the statistical methods needed to monitor and improve the quality of their own work. And they must learn to work together in teams to solve problems or think of ways to work better.
The first move Kearns made to kick off Xerox’s quality program was an appeal to the company’s 100,000 workers-the task of championing customer needs would fall to them.39 And they have proven more than able to meet such challenges. For ex­ample, in 1990, a team of people from sales, distribution, and accounting determined how to save Xerox $200 million in inventory costs.
Perhaps the hardest part of changing the corporate culture is admitting openly what is wrong with the old one. Whatever is wrong, however, is at the root of any problems and must be grubbed out. The old culture becomes a conservative force, preventing employees and managers from focusing on customer needs and limiting the rate of organizational learning and change. At Fuji Xerox, the company’s total quality program began by admitting that there were some rather serious problems, and that they were systemic rather than the fault of any one manager or group. Hideki Kaihatsu, one of Fuji Xerox’s directors, explains:

The first step was to understand the problems facing the company and why these prob­lems occurred. This soul-searching analysis revealed many surprising facts:

T Our leadership had become fragmented and inconsistent.

T Our managers had become complacent, arrogant, and
had lost their sense of urgency.

T We did not pay close enough attention to
customer requirements.

T We found our product development process
particularly sloppy and not acceptable.

T  We depended too much upon U.S. design capability.

T  The product development process was slow and
there was little cross-functional co­operation.

T We did not recognize the value of maintaining strong
bonds with our suppliers.
In the days of the old strategic planning, a manager’s career could have been ruined for coming forward with even one of these criticisms. In fact, that’s one rea­son consulting firms flourished: When one knew the messenger would be killed, one was eager to hire someone else to deliver the message, regardless of price! But Xerox’s disastrous performance forced its managers to put these games behind them and take an honest look at their company. The result was an almost incredible list of major problems.
Solving them was not as simple, however, as setting the solutions as strategic goals. How could change be accomplished, and how much change was a reasonable goal? How could the goals be broken down into smaller, more attainable tasks? The answers could not be found within Xerox; the needed changes were too radical. But surely they could be found somewhere; there were undoubtedly companies that could provide role models, companies that were the best at each of the individual processes Xerox had to rebuild. With this realization in mind, Xerox created one of the most im­portant of the new planning techniques: benchmarking.
Case Study: Benchmarking at Xerox


Benchmarking began at Xerox in 1979 as a way to analyze compet­ing products. According to Robert Camp of U.S. Marketing for Xerox’s Business Services, “Selected product comparisons were made; operating capabilities and features of competing copying ma­chines were compared; mechanical components were taken apart and scrutinized. “42 This reverse engineering of competing products was a natural response to the inroads made by Japanese competi­tors. But with Xerox’s quality program. benchmarking was extended beyond product comparisons, to include process comparisons and companies from other industries.
For example, Xerox used L.L. Bean for benchmarking. Camp tells the story:

When Iwel first informed our management that we were going to assess ourselves against L.L. Bean. There was disbelief. But we had much to learn from them. The L.L. Bean statistics that dealt with their warehouse order picking . . . showed that they were able to do it almost three times faster than Xerox.

This meant that L.L. Bean could fill customer orders faster than Xerox. When Xerox adopted a computerized system like L.L. Bean used, one that “made a conscious effort to sort the orders and minimize the picker’s travel distance” according to Camp, Xerox also was able to fill orders faster. This is an example of what Xerox now calls “func­tional benchmarking.” The following are the definitions of the four benchmarking methods Xerox uses:

1.       Internal benchmarking compares a company’s operations with an internal exemplar, for example, a plant that has innovated suc­cessfully in certain areas.

2.   Competitive benchmarking makes comparisons with individual competitors; reverse engineering of a competing product is one example.

3.    Functional benchmarking is when “we compare function against function across wide sections of different industry types,” as in the L.L. Bean comparison.

4.    Generic benchmarking looks at fundamental business processes that tend to be the same in every industry, such as taking orders. servicing customers, and developing strategies. For these generic practices, Xerox “looks at a wide cross-section” from different in­dustries “to make sure that we have in fact identified those in­dustry best practices,” again according to Camp.
The benchmarking process in its various forms gives Xerox a practical way to set radical goals-the company simply finds some other company that is the best in a certain (often narrow) area, and studies how the company became best. CEO Kearns of Xerox defines it succinctly as “the continuous process of measuring products, ser­vices and practices against the toughest competitors or those com­panies recognized as industry leaders. ” It must be a continuous process, according to Kearns, because “we realize we are in a race without a finish line. As we improve, so does our competition.” Xerox cannot afford to become complacent, and the new planning tools give the company the ability to compete effectively in the cur­rent environment. Kearns adds that “Five years ago, we would have found this disheartening. Today we find it invigorating.”

Categories : Marketing Tags :


Strategic Planning and Process Redesign

Posted by 22 September, 2008 Comments Off on Strategic Planning and Process Redesign


So what does GE do now? Its circuit breaker business provides a good example. This stagnant SBU in a mature industry would have flunked all the screening tests, but with a billion in yearly revenues, it hardly seemed appropriate to divest it and leave the market to competitors Seimens and Westinghouse. Besides, if any lesson had come out of the old planning models, it was that profits did not necessarily come from high-share, high-growth SBUs. (As Stephen Hardis, Eaton Corpora­tion’s vice president of planning, put it, “It’s great to say, ‘Why don’t we all go into growth businesses?’ But those are not all highly profitable. If there’s a hell for plan­ners, over the portal will be carved the term cash cow.”)33 Instead of divesting, GE consolidated operations-from six circuit breaker plants to only one (in Salisbury, North Carolina).34 Solving this problem in just one location seemed like enough of a challenge.
Then management assessed the problem, but not in the conventional way, by asking planning staff and consultants for a report. Instead they formed an interdisci­plinary team with specialists from manufacturing, marketing, and design, and asked them to figure out how to make the manufacturing process profitable. The group de­cided to compete on the basis of speed, and adopted the goal of reducing manufac­turing time from three weeks to three days.
This radical change could not be accomplished given the existing process, in which GE engineers designed a unique box for each customer using a selection from GE’s 28,000 parts, then factory workers assembled the boxes by hand. So the team re­designed the product line, paring parts to 1,275 while still allowing customers the ability to customize their boxes. Next the team developed an expert computer system that could automatically convert customer requirements into instructions for the fac­tory machines. This eliminated the engineers and the delay needed for custom design­ing. The team also added more machines, increasing the automation of the production process.
Finally, the team tackled personnel problems on the factory floor. The key issue was delays associated with decision making. According to a Fortune reporter:

The solution was to get rid of all line supervisors and quality inspectors, reducing the organizational layers between worker and plant manager from three to one. Everything those middle managers used to handle-vacation scheduling, quality, work rules-be­came the responsibility of the 129 workers on the floor, who are divided into teams of 15 to 20. And what do you know: The more responsibility GE gave its workers, the faster problems got solved and decisions made.
Because of these changes at GE, costs dropped, quality improved, and cus­tomers believed they had more features from which to choose. Delivery was made in three days, as hoped; the backlog shrunk from two months to two days; employee morale was up; and market share was growing despite the flat market. The 1989 sta­tistics, for example, were quite amazing: Productivity was up 20 percent, and ROI was above 20 percent. But it was not easy to turn this dog into a star; the project began in 1985, four eventful years before the stunning results we report. Everything had to change, from product line through production process to corporate structure and cul­ture. Not every line manager is capable of leading such a transformation, but it defi­nitely takes a line manager to do it. No central planning staff would undertake such goals, or succeed if it did. Still, the new planning approaches are tougher on manage­ment. Managers must champion change; they must be willing to push authority down into the organization; and they must learn to use, and work in, teams. As GE’s Roger Schipke puts it, “Now it’s a question of ‘Can they develop a strategy for their busi­ness?’ Some will make that cut, some won’t.” When he took over the major appliance group, only one of the four top managers reporting to him made that cut. The others were fired.
Success with the new planning approach also requires reducing the barriers be­tween company and customer-touching customers and listening in the proactive sense described in lesson 1. For example, GE now promotes an answer center in TV ads and on product packaging. Staffed 24 hours a day, the center may be reached via a toll-free call. Several million calls are logged annually. Frank Sonenberg of Ernst & Young’s Consulting Group says that, “By making information easily available to con­sumers f General Electric] builds brand loyalty in a tough competitive field.”

Categories : Marketing Tags :


The General Electric Screen

Posted by 22 September, 2008 Comments Off on The General Electric Screen


GE developed a more flexible, multidimensional matrix on the theory that the portfo­lio approach should not be limited to relative market share and market growth. Too great an emphasis on these two variables may mask many other factors that make a business or brand attractive and indicate its strengths. Also, relative share is of great­est importance where economies of scale and “experience curve” effects give the largest producer a significant cost advantage. (An experience curve reflects a decline in unit costs as more units are produced; it is the result of learning or “experience” in contrast to straight economies of scale.) Yet the experience curve does not always apply. As a result of such insights, many strategic planners have gone beyond the BCG approach to other approaches that rely on multiple measures of a firm’s ability to com­pete successfully. One of the first and best known of these alternative approaches is the investment opportunity chart or business screen developed by GE.

In the business screen approach, a strategic business unit (SBU) is classified ac­cording to how well it rates on certain success measures, referred to as its business strength. The industries in which SBUs operate are classified on the basis of measures of opportunity, referred to as industry attractiveness. Among the measures of business strength are the SBU’s product quality, price sensitivity, knowledge of the market, technological capability, image, and so on, whereas industry attractiveness is mea­sured by factors such as intensity of competition, seasonality of sales, legal con­straints, importance of technological change, and the like (Exhibit 2.5). Not all these factors can be measured as objectively and precisely as market growth, relative mar­ket share, and cash flow. On the other hand, the GE method offers much greater flex­ibility and comprehensiveness than the BCG approach.

The business screen is used in the following way: The nine cells shown in the il­lustration are placed in three zones. GE colored these zones green, yellow, and red; hence, this is often called the stoplight approach. The three zones at the upper left in­dicate industries that are attractive and match the SBUs’ strengths. They have a green light” for investment. The three cells along

(if you are having trouble viewing the image, click the below thumbnail to view the actual and clear image)



the diagonal indicate industries of medium interest. They have a “yellow light” to denote caution; usually these SBUs warrant a strategy geared toward maintaining their present market share. The three cells at the lower right show weak SBUs for which a harvesting or divesting strategy may be the best option. The circles A through G represent the SBUs; their size is in proportion to the size of the industries in which they compete. The pie slices repre­sent each SBU’s market share within its industry.
The GE business screen’s history is representative of the history of strategic planning. Developed in the 1970s by William Rothschild at GE with Mike Allen of the consulting firm McKinsey & Company, the tool was carefully-and laboriously- applied in annual planning and forecasting by GE’s large central planning staff. Now, however, according to GE spokesman Bruce Bunch, the business screen “takes too much time” and is not used at GE any more.29 In fact, neither GE nor McKinsey will claim ownership of it today (in response to inquiries concerning permission to repro­duce it for publication). Once the heir apparent of the strategy throne, this method is a homeless orphan! (It remains a standard in the business school curriculum and im­portant for the concepts it represents, even though it is no longer in widespread use.)
What happened? The SBUs of GE and many other firms that were identified as winners according to the business screen were not necessarily better than other SBUs. They ought to have been-nobody could dispute that these represented great business opportunities. However, GE line managers did not necessarily know how to pursue the opportunities, and someone else-perhaps someone from Europe or Japan-might have pursued an opportunity more effectively. The model leaves out the focus-focus-focus factor after all.
As a result of problems in implementing strategies produced with such matri­ces, bigger companies, GE included, pushed planning back to the line managers and cut central staff. For example, in 1984, Michael Naylor, General Motor’s director of strategic planning, declared that “planning is the responsibility of every line man­ager,” and added that “the role of the planner is to be a catalyst for change-not to do the planning for each business unit.”
The case of GE’s Major Appliance Business Group is instructive. The group’s central planning staff numbered in the 50s at the beginning of the 1950s. Although some of the planners’ calls were right-for example, they identified the Japanese threat back in the 1970s-operating managers resisted the growing authority of plan­ning staff and tended to ignore them. They insisted on ignoring Japan and treating Sears as their major competitor, for example. In other cases, planners were dead wrong-their focus on numbers blinded them to realities of implementation. As GE’s Roger Schipke concluded when he took over the major appliance group (and booted out planners) in 1982, “An awful lot of conclusions were drawn by that group some­what in isolation. We had a lot of bad assumptions leading to some bad strategies.”

Business Week performed an interesting study in 1984, tracking a random sample of 33 planning strategies described in the magazine in 1979 and 1980. The tally: 19 clear failures and only 14 clear successes.32 A lot of planners lost their jobs that year!

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Competitive Position Matrix

Posted by 22 September, 2008 Comments Off on Competitive Position Matrix

The matrix can be modified to analyze the position of products relative to their com­petitors. In Exhibit 2.3, the top ten beer brands are plotted using 1990 data. The mar­ket growth rate is not used, because it is the same for every brand in this market (total 1990 U.S. beer sales grew 3.1 percent over 1989, but were flat for the three previous years). Instead, the growth in each brand’s sales is used to show which grew faster. Sometimes, as in this illustration, each brand’s growth is made relative to the growth of the market to show whether its share is growing or shrinking. (To do this, divide a brand’s annual revenue growth or unit growth by the market’s annual growth, or by dividing current market share by last year’s market share to find the percentage of change in market share, as in Exhibit 2.3.)

Exhibit 2.4 shows the data we used to create a competitive position matrix for the U.S. beer market. This kind of analysis can show the market in a new light. The leader in sales, Budweiser, had a strong relative market share, but was weak on the growth dimension of the matrix-its share was slipping. The hot brands were Coors Light and Miller Genuine Draft, which gained a significant share in 1990. The cash flow implications of the BCG matrix do not necessarily apply, however, because com­peting brands may be owned by different companies. This analysis can be taken a step farther by identifying each brand’s brewer and comparing the company portfo­lios, or by plotting companies instead of brands. One could learn, for example, that Anheuser-Buseb had the largest share, 43.4 percent, and that its sales grew 7 percent, more than twice as fast as the total market. Also, one would find that brewer’s share is closely related to performance. The top three-Anheuser-Buseb, Miller, and Coors-were responsible for all the market growth in 1990. (Of course, you would need to update these statistics to the latest available before making any “real world” decisions about how to market a brand of beer, or any other product!)


1990 Share
of Shipments

1989 Share
of Shipments

% Change
in Share

Relative Market
Share, 1990






Miller Life





Coors Light





Bud Light










Milwaukee’ Best





Old Milwaukee





Miller High Life





Miller Genuine Draft










25.2/25.9 = 0.97; 0.97 – .1 = 0.027 x 100 = – 2.7%
25.2/10.5 = 2.4
One might also plot a matrix that compares light and regular beers, which would indicate that, of the top 25 brands, the only light beer to lose share in this sample pe­riod was Old Milwaukee Light. Altogether, light beers in 1990 had about a 30 percent market share and annual growth of 12.5 percent. And some background reading on the beer industry would reveal that Old Milwaukee Light’s sliding share reflected the fi­nancial problems of its parent brewer, Stroh, which cut Old Milwaukee’s advertising and other marketing expenses in 1989 in an effort to harvest profits from its brands and thus lost 12 percent of its volume. This analysis would indicate that light beers are currently the high performers of the beer market.
This example illustrates a fundamental principle of the new strategic planning:

The firm must use available techniques and information creatively to gain new in­sights into its position and opportunities. It is not enough to crank out the same old matrices that were used last year, even if they are as venerable as the BCG matrix. It is important to ask intelligent questions (“Are light beers fueling the growth in the beer industry?” “Is the leading brand losing share?”), and to take a creative approach to analysis to answer such questions clearly. The firm that asks an intelligent question before its competitors do may be able to seize an opportunity first.26
It is fair to say that nobody uses the BCG matrix as the cornerstone of plan­ning any more. It exists only in the textbooks littering the nation’s business schools. And yet there is a fundamental wisdom to this planning model that should not be ig­nored. Perhaps it even makes sense to bring the tool back again-at least in modi­fied form.
The strongest argument for the BCG matrix is that market growth rates and market shares are still good indicators of strategic potential. After all, which do you think will do better, all else being equal: A brand with low share in a mature, slow-growth market, or one with high share in a dynamic, fast-growth market? You see- there is something worth saving about it after all!
The continued relevance of the BCG approach is underscored by a recent “breakthrough” contribution to the strategy literature from two top people at Bain & Company, which bills itself as an international strategy-consulting firm. The authors of the Bain study examine the conventional wisdom which “holds that market share drives profitability” by examining profitability and other variables in a wide selection of consumer products. Their finding? Surprise! “Instead, a brand’s profitability is driven by both market share and the nature of the category, or product market, in which the brand competes.” Specifically, “A brand’s relative market share has a dif­ferent impact on profitability depending on whether the overall category is domi­nated by premium brands or by value brands to begin with.”27 To put this finding in the context of the BCG matrix, it turns out that in the competitive consumer prod­ucts markets of the United States in the 1990s:

T Relative market share is still an important predictor of ROI,
T But it is still mediated by the attractiveness of the market,
T However, market growth rate seems less important than whether the
market is brand or price oriented.
Note the qualifier here-that the attractiveness of the market, while still a key to returns, is not well represented by market growth rate. This may reflect the sad re­ality that most of the brands in the study are in similarly mature, slow-growth mar­kets. But whatever the reason, the point is that a matrix approach to predicting future success would work today, as long as you modified the matrix by substituting a premium brands-versus-discount brands variable for the slow-versus-high growth variable of the original matrix. Otherwise, the portfolio approach’s reliance on a market share variable and a market attractiveness variable is still sound.
We want to expose you more deeply to this school of strategic planning by show­ing you variants on the BCG model that permit the user greater control over the vari­ables, thus making it easy to adapt the model to changing market conditions.

Categories : Marketing Tags : ,


Portfolio Analysis: is It Ready for a Rebirth?

Posted by 22 September, 2008 Comments Off on Portfolio Analysis: is It Ready for a Rebirth?


Perhaps no company has contributed more to the “old” strategic market planning than General Electric (GE). In the 1970s, GE reorganized its forty-eight divisions and nine product lines into strategic business units (SBUs). Each SBU consists of one or more products, brands, company divisions, or market segments that have some­thing in common, such as the same distribution system, similar customers, or the same basic technology. At the same time, each SBU has its own mission, its own dis­tinct set of competitors, and its own strategic plan. About 20 percent of the largest manufacturing firms in the United States have adopted the SBU system. Recently, for example, Campbell’s Soup Company established eight SBUs: soups, beverages, pet foods, frozen foods, fresh produce, main meals, grocery, and food service. The SBU structure’s great merit is that it defines the company according to the markets it serves-one SBU per market. Smaller companies are often focused on a single mar­ket, but larger ones easily lose their marketing orientation without the SBU structure to force it.

The Boston Consulting Group (BCG) suggested in the 1970s that SBUs should be managed as a portfolio the way financial investments are managed (Exhibit 2.2a). Differ­ent SBUs may have different missions, but all work together to achieve the organization’s overall objectives. Top

Optimum Cash Flow

management decides which business units or brands to build up, maintain, phase down, or eliminate. In short, the organization is continually attempting to improve its portfolio of SBUs by divesting itself of units that do not perform well and, at the same time, acquiring promising new ones (Exhibit 2.2b).
The BCG approach focuses on three factors: market growth, the SBU’s relative market share, and cash flow. An SBU’s relative market share is determined by dividing its market share by that of its largest competitor. Thus, if Gillette’s razors-and-blades SBU has a 65 percent share of that market while Schick, its largest competitor, has 16 percent and BIC has 11 percent, their relative market shares are:

Gillette 4.1 (65%/16%)
Schick 0.3 (16%/65%)
BIC 0.2 (11%/65%)

The dividing line between high and low relative market share is set at 1. Only the market leader can lie to the left of this point. The more dominant the leader’s share, the stronger its position in the marketplace.
SBUs are categorized by the amount of cash they generate, resulting in the fol­lowing four categories:

1. Stars-These SBUs are in industries with high sales growth rates, and they have a high relative market share. The stars are the leaders in their markets. They need continual inputs of cash to maintain their high growth rates. Even­tually that growth will slow and they will become cash cows.

2. Cash cows-Cash cows are SBUs with a higher market share than competi­tors in a low-growth market. They have high sales volume and low costs. Thus, they generate more cash than they need; the excess cash can be used to support other SBUs. At Gillette, the razors-and-blades SBU generated 32 per­cent of the company’s 1989 sales revenues, but 64 percent of its profits. Profit margins on this SBU were a whopping 34.7 percent, compared with 15.2 percent for stationary products and 6.9 percent for toiletries.25 Domestic beer is a cash cow for Anheuser-Busch, supporting the new product lines discussed earlier.

3. Question marks-These high-growth, low-market-share SBUs are problems for management because their future direction is uncertain. They require a lot of cash simply to maintain their position, let alone increase their market share. Management must decide whether to pour in enough cash to make them into leaders; if not, these SBUs probably will be phased out of the portfolio.

4. Dogs-Dogs are low-growth, low-market-share SBUs. They may provide enough cash to support themselves, but they are not a substantial source of funds. Such SBUs often are in the process of entering a particular market or phasing out of it. Either way, their position is below average.
The distribution of an organization’s SBUs in the different categories provides a profile of the firm’s health. But such an analysis also needs to consider the direction in which each SBU is moving. Organizations prefer to turn question marks into stars and, as growth slows, into cash cows that can be used to fund other question marks. This is precisely the sequence that occurred at Gillette, where the excess cash from the razor blade business was funneled into disposable lighters. Eventually Gillette’s Cricket lighter became a star.
The portfolio approach aids in the setting of marketing strategies. The follow­ing basic strategies are closely related to this approach:

· Build-This strategy is appropriate for question marks if they are to grow into stars. The firm invests heavily to improve product quality, develop promo­tional campaigns, or subsidize price reductions-all in an effort to beat the competition.

· Hold-This strategy is used to protect cash cows and stars that are strongly en­trenched. The market leader simply defends its market share and maintains cus­tomer loyalty.

· Harvest-When the future looks dim for a weak cash cow, a dog, or even a question mark, the best strategy may be to harvest as much profit from it as possible before letting it go. Marketing (especially promotion) and research and development expenditures are curtailed; economies of production are empha­sized; and customer services are reduced. In short, all costs are lowered as the SBU is “milked” of its cash-generating potential.

· Divest-When a dog or question mark has no future, it is sold off or dropped from the portfolio because the cash needed to fund it can be used better else­where.

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