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Tactics
Tactics are actions! They are the actual steps which will be used in order to achieve the
overall objectives and in turn, achieve the overall strategy. A strategy will often involve
complex planning and decisions. There may be several different sets of tactics to
implement within an overall strategic plan.
BCG Matrix
The BCG Strategic Portfolio Model is a method of approaching and analyzing business
marketing and growth developed by the Boston Consulting Group. The primary guiding
principle of the BCG group's strategy is that experience in a market share leads to
reduced costs and higher profits. This model uses the BCG marketing matrix, a system
to classify business enterprises based on their potential for profits and growth. The
model also applies mathematical formulas to business enterprises or products to
calculate potential growth and earnings.
Stars: The business units or products that have the best market share and generate
the most cash are considered stars. Monopolies and first-to-market products are
frequently termed stars. However, because of their high growth rate, stars also consume
large amounts of cash. This generally results in the same amount of money coming in
that is going out. Stars can eventually become cash cows if they sustain their success
until a time when the market growth rate declines. Companies are advised to invest in
stars.
Cash cows: Cash cows are the leaders in the marketplace and generate more
cash than they consume. These are business units or products that have a high market
share, but low growth prospects. cash cows provide the cash required to turn question
marks into market leaders, to cover the administrative costs of the company, to fund
research and development, to service the corporate debt, and to pay dividends to
shareholders. Companies are advised to invest in cash cows to maintain the current
level of productivity, or to "milk" the gains passively.
Dogs: Also known as pets, dogs are units or products that have both a low market
share and a low growth rate. They frequently break even, neither earning nor
consuming a great deal of cash. Dogs are generally considered cash traps because
businesses have money tied up in them, even though they are bringing back basically
nothing in return. These business units are prime candidates for divestiture.
Question marks: These parts of a business have high growth prospects but a
low market share. They are consuming a lot of cash but are bringing little in return. In
the end, question marks, also known as problem children, lose money. However, since
these business units are growing rapidly, they do have the potential to turn into stars.
Companies are advised to invest in question marks if the product has potential for
growth, or to sell if it does not.
Ansoffs Matrix
Ansoffs matrix suggests four alternative marketing strategies which hinge on whether
products are new or existing. They also focus on whether a market is new or existing.
Within each strategy there is a differing level of risk. The four strategies are:
1. Market penetration This involves increasing market share within existing market
segments. This can be achieved by selling more products/services to established
customers or by finding new customers within existing markets.
2. Product development This involves developing new products for existing
markets. Product development involves thinking about how new products can meet
customer needs more closely and outperform the products of competitors.
3. Market development This strategy entails finding new markets for existing
products. Market research and further segmentation of markets helps to identify new
groups of customers.
4. Diversification This involves moving new products into new markets at the same
time. It is the most risky strategy. The more an organisation moves away from what it
has done in the past the more uncertainties are created. However, if existing
activities are threatened, diversification helps to spread risk.
Segmentation
Market segmentation is the practice of dividing customers
into groups of potential buyers that have similar
preferences and buying habits.