Bcg Matrix Critique

Marketing Critique: BCG Matrix Your Name Here Table of Contents Introduction3 Concept Overview3 Functional Critique5 Intellectual Critique6 Ethical Critique7 Political Critique8 Conclusion8 Bibliography9 Introduction This paper will attempt to provide a broad critique of the Boston Consulting Group Matrix in light of the ideas of Hackley (2009). In his book Marketing:A Critical Introduction, Hackley presents a framework for analysing marketing models.He suggests that well established marketing concepts should be re-evaluated from time to time, to determine if the marketing studies for that area are applicable to current practice, and revisit the functional, intellectual, ethical, and political relevance of the said concept. I opted to evaluate the Boston Consulting Group model, which is an established tool of the strategic management field, used frequently in marketing circles to optimize product mix.Where alternative versions of the matrix have come up in recent studies, the traditi onal BCG Matrix continues to be popular and this paper intends to evaluate whether the support for the model is justified or needs to be rectified. Concept Overview The Boston Consulting Group (BCG) Matrix was initially designed in the works of a leading management consulting firm, the Boston Consulting Group. Henderson (1970) first presented the concept of the Product Portfolio Matrix, the framework of which categorized products within a company's portfolio as â€Å"stars†, â€Å"cash cows†, â€Å"dogs†, or â€Å"question marks†.Also called the Growth-Share Matrix, the model presented by Henderson (1970), organized the products as per their respective growth rate, market share, and positive or negative cash flow. The Matrix was said to create further growth opportunities for the firm if more resources were invested in those products which generated positive cash flows. The model described â€Å"Stars† as those which enjoy a large market share in a rapidly growing industry. Where these stars generate cash, the nature of the market mandates the business to invest cash in order to maintain the product’s market share.The model suggests that continued investment in these â€Å"stars† will eventually lead to these products in becoming â€Å"cash cows† â€Å"Cash Cows† are products which have a large market share in a mature industry. Cash cows are therefore well established, and do not require much investment (marketing expenditures) to continue to generate cash flow. As these products generate cash flow, they are highly guarded. Over time, however, these cows may lose appeal in the market and may have to be retrenched. â€Å"Question Marks† are products which have a low market share in a high growth industry.These products require significant cash investments to generate any kind of boost in sales. Strategies in the case of question marks may either lean towards expansion or retrenchment, depend ing on the market share growth enjoyed by the product. Lastly, there are the â€Å"dogs† which are product lines with low market share in low-growth markets. The nature of the market usually results in these products being produced at a cost disadvantage, and as a result, the cash flow generated from these products is negligible. Businesses usually seek to divest these products, unless they serve an alternate strategic aim.Functional Critique The BCG Matrix presents a strong framework as to how products can be managed from a strategic marketing perspective. At the core of it, the functionality of the BCG Matrix is focused around maximizing returns on investment and how best to deploy organizational resources (Cooper, Edgett, Kleinschmidt, 1999). However, there have been several critiques of its applicability (Stalk and Stern, 1998). In particular, the model has been criticized for its polarities with respect to how the market growth and market shares have been presented.In th e real world, products do not have a high or low share, and are often stuck somewhere in the middle (Hambrick, MacMillan, and Day, 1982). The matrix presents no ideas as to what kind of strategies are to be implemented for the product in this case. Further, market growth rate has been cited as an important driver of product development. Contrary to the advice of the BCG Matrix, market growth rate is viable only till the point of saturation, after which point it would be counterintuitive for the firm to be investing in a product that does not enjoy majority stake (Stalk and Stern, 1998).The critical view of the BCG Growth-Share Matrix was also shared by Morrison and Wensley (1991), who claimed that the model was â€Å"myopic† as it prescribed a set of strategic solutions, rather than encourage marketing executives to think creatively with respect to their product lines. On the contrary, Cooper, Edgett and Kleinschmidt (1999) found in their study that firms which centered strat egy on the product portfolio model were not only more financially viable, but marginally outperformed other firms.Therefore, it is safe to conclude that where the applicability of the BCG model may be challenging, the results it produces are enough for strategists to continue using the model. Intellectual Critique Morrison and Wensley (1991) found that the BCG Matrix set a standard for strategic models, and that a plethora of similar matrix style models came about in the years after the BCG Matrix was introduced (Wind, Mahajan, and Swire, 1983). However, this is where the intellectual contribution of the BCG Matrix ends, they argue.They claim that the Matrix oversimplified the nature of marketing strategies, and streamlined product arrangements in a way that was confirmatory rather than innovative, a view shared by Marren (2004). Other researchers tend to believe that the introduction of the BCG matrix brought forth the importance of financial management in marketing. In particular Schoeffler, Buzzell, ; Heany (1974), Wind, Mahajan ; Swire (1983), and Dirkinderen ; Crum (1984) found that the model recalibrated organizations to focus their strategies more around portfolio management and enhancement.The simplicity of the matrix meant that it could be applied to other areas of marketing management, such as product life cycle model (Barksdale ; Harris, 1982), sales force management (Strahle ; Spiro, 1986). Despite the fact that the model faced significant critique from the academia when it was first launched, it is ironic that the BCG Matrix continues to be an inevitable curriculum component in almost every Marketing and Business Management program around the world.In their study, Morrison and Wensley (1991) found that a majority of instructors continued to espouse the benefits of the matrix to their students, despite having some reservations about its applicability. Perhaps the best appraisal of the intellectual value of the BCG Matrix was provided by Henderson, the creator of the model: â€Å"a milestone on the search for insight into business system dynamics, but certainly not the end of the road† (Moore, 2001). Ethical Critique As per Hackley (2009), marketing studies need to examine the ethical and social values which surround marketing practice and theory.In the case of the Boston Consulting Group Matrix, the model is an internal strategic tool which shapes product assortment which is to be deployed to the market. The nature of the model is such that it advocates products with high market share in strong market growth. The ethical quandary posed here is whether the organization should retrench a product line which has low market share, in an industry of low market growth, but the product serves a purpose that is beneficial to society (such as pharmaceuticals).In a similar vein, is it ethical for a company to invest more resources into promoting a product in a growing market, even when the company is aware of the adverse effects of the product (such as cigarettes). In other words, should an organizations product assortment be negligent of social benefits, and be determined solely on market dynamics alone (McDonald ; Leppard, 1992), in a time when businesses are advocating principles of corporate social responsibility?It is also pertinent to note that the BCG matrix encourages organizations to continue investing in profitable ventures (â€Å"cash cows†), whereas it suggests retrenching investment to those products (â€Å"dogs†) which are not responding to market stimulation initiatives. Considering the large research and development expenditures that go into creating and launching a product, it is not clear from the BCG model about how long the company should wait before removing the product from markets altogether (Seeger, 1984).Therefore, users of this model may want to base decisions in the context of net social benefit to continue driving the long term sustainability of the company and soci ety at large. Political Critique As Hackley (2009) indicated, when analysing any marketing tool, it is important to analyse where the concept originated and what institutional forces stood to advantage from its evolution. In the case of the BCG Matrix, as described earlier, the model was originated in the work of Henderson (1970).The matrix was an integral component of the Boston Consulting Group and was used by several influential benchmark companies at the time of its launch. The matrix also enjoyed coverage in the press, despite strong criticism by academia (Morrison and Wensley, 1991). It is clear that the hype around the model stood to benefit the Boston Consulting Group the most, a fact that is confirmed by the fact that the company propagates its use to this very day, despite being aware of its shortcomings.It has also been found that aside from promoting and capitalizing on the â€Å"success† of their models, consultancies go great lengths to ensure that they attract the highest profiled organizations to employ their services, so that they can charge higher consulting fees citing the quality of their past work (O'Shea & Madigan, 1998). Conclusion In conclusion, it is clear that the Boston Consulting Group Matrix is flawed in many respects, but continues to enjoy support in academic circles for its implications of strategy.It also serves to purpose that the model has inspired the creation of numerous other matrices to assist organizations in strategizing better. However, as with any marketing tool, it is important to keep in mind the ethical implications of the decision-making advised by these strategic models. Bibliography Cooper, R. G. , Edgett, S. J. , & Kleinschmidt, E. J. (1999). New product portfolio management: practices and performance. Journal of product innovation management, 16(4), 333-351. Hackley, C. (2009). Marketing: A critical introduction. Sage Publications Limited. Derkinderen, F. G. & Crum, R. L. (1984). Pitfalls in using portf olio techniques—Assessing risk and potential. Long Range Planning, 17(2), 129-136. O'Shea, J. , ; Madigan, C. (1998). Dangerous company: Management consultants and the businesses they save and ruin. Penguin USA. Henderson, B. (1970). The product portfolio. BCG Perspectives series (The Boston Consulting Group, 1970). Hambrick, D. C. , MacMillan, I. C. , ; Day, D. L. (1982). Strategic Attributes and Performance in the BCG Matrix–A PIMS-Based Analysis of Industrial Product Businesses. Academy of Management Journal, 25(3), 510-531.Barksdale, H. C. , ; Harris Jr, C. E. (1982). Portfolio analysis and the product life cycle. Long Range Planning, 15(6), 74-83. Marren, P. (2004). The matrix revisited. Journal of Business Strategy, 25(4). McDonald, M. , ; Leppard, J. W. (1992). Marketing by matrix: 100 practical ways to improve your strategic and tactical marketing. Butterworth-Heinemann. Morrison, A. , ; Wensley, R. (1991). Boxing up or boxed in? : A short history of the Boston Consulting Group share/growth matrix. Journal of Marketing Management, 7(2), 105-129. Schoeffler, S. , Buzzell, R.D. , ; Heany, D. F. (1974). Impact of strategic planning on profit performance (pp. 137-145). Graduate School of Business Administration, Harvard University. Seeger, J. A. (1984). Research note and communication. Reversing the images of BCG's growth/share matrix. Strategic Management Journal, 5(1), 93-97. Stalk, G. , & Stern, C. W. (Eds. ). (1998). Perspectives on Strategy: From the Boston Consulting Group. J. Wiley. Wind, Y. , Mahajan, V. , & Swire, D. J. (1983). An empirical comparison of standardized portfolio models. The Journal of Marketing, 89-99.