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.

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