PRESENTED TO PROF. RAFANA KAZI FROM: PRATIK THAKKAR (MMM-14) ALLANA INSTITUTE OF MANAGEMENT STUDIES BCG MATRIX & PRODUCT LIFE CYCLE OF MAHINDRA & MAHINDRA
Jan 13, 2015
PRESENTED TO PROF. RAFANA KAZI
FROM: PRATIK THAKKAR (MMM-14)
ALLANA INSTITUTE OF MANAGEMENT STUDIES
BCG MATRIX & PRODUCT LIFE CYCLE OF MAHINDRA & MAHINDRA
BOSTON CONSULTING GROUP (BCG) MATRIX is developed by BRUCE HENDERSON of the BOSTON CONSULTING GROUP IN THE EARLY 1970’s.
According to this technique, businesses or products are classified as low or high performers depending upon their market growth rate and relative market share.
It is a portfolio planning model which is based on the observation that a company’s business units can be classified in to four categories:
Stars Question marks Cash cows DogsIt is based on the combination of market
growth and market share relative to the next best competitor.
The Boston Matrix The Boston Matrix:
◦ A means of analysing the product portfolio and informing decision making about possible marketing strategies
◦ Developed by the Boston Consulting Group – a business strategy and marketing consultancy in 1968
◦ Links growth rate, market share and cash flow
The Boston Matrix
Classifies Products into four simple categories:
Stars – products in markets experiencing high growth rates with a high or increasing
share of the market- Potential for high revenue growth
The Boston Matrix Cash Cows:
◦ High market share◦ Low growth
markets – maturity stage of PLC
◦ Low cost support◦ High cash revenue
– positive cash flows
Dogs:◦ Products in a low
growth market ◦ Have low or declining
market share (decline stage of PLC)
◦ Associated with negative cash flow
◦ May require large sums of money to support
The Boston Matrix
Is your product starting to embarrass your company?
Problem Child:- Products having a
low market share in a high growth market
- Need money spent to develop them
- May produce negative cash flow
- Potential for the future?
The Boston Matrix
Problem children – worth spending good money on?
Mahindra Group is one of the largest corporate groups of India. It is a US $6.3 billion conglomerate with employee strength of over 50,000.
It is ranked amongst Forbes Top 200 list of the World's Most Reputable Companies and in the Top 10 list of Most Reputable Indian companies.
The origin of Mahindra group can be traced back to Oct 2, 1945, when Mahindra brothers J.C. Mahindra & K.C. Mahindra joined hand with Ghulam Mohammad, there after Mahindra & Mohammad was set up as a franchise of assembling JEEPS from WILLYS, USA.After independence of India in 1947 , Mahindra & Mohammad changed its name to Mahindra & Mahindra.
Automobiles Farm equipment Trade & finance Infrastructure IT Other specialty business
Mahindra Automobiles have a strong and growing presence in international markets◦ Yugoslavia, ◦ Bangladesh◦ Sri Lanka ◦ Australia◦ Uruguay◦ South Africa in 2004 (Mahindra South Africa)◦ Europe in 2005 (Mahindra Europe)
Tractors
Two Wheelers
Utility Vehicles
AMGR of Tractor industry = 18% Market share of M&M = 29% (Market
Leader) 2nd largest player is Tafe group (messy
tractor) Market share of Tafe group = 23% RMS of M&M Tractor = 1.26x
10%
12%
14%
16%
18%
20%
8%
6%
4%
2%
0%
0.1
x0.2
x
1x
0.5
x 0.4
x 0.3
x10x
4x 2x
Busi
ness
gro
wth
Rat
e
Relative Market share
HIGH
LOW
LOWHIGH
TRAD
ITIO
NAL
BCG
MAT
RIX
AMGR of two wheelers industry = 12% Market Share of M&M two Wheelers = 1% Market Share of Hero Honda = 52% RMS of M&M two wheelers = 0.02x
10%
12%
14%
16%
18%
20%
8%
6%
4%
2%
0%
0.1
x0.2
x
1x
0.5
x 0.4
x 0.3
x10x
4x 2x
Busi
ness
gro
wth
Rat
e
Relative Market share
HIGH
LOW
LOWHIGH
TRAD
ITIO
NAL
BCG
MAT
RIX
AMGR of Utility vehicle industry = 8.7% Market Share of M&M Utility Vehicle = 42%
(Market Leader) Market Share of Tata Motors in UV = 21% RMS of M&M Utility Vehicle = 2x
10%
12%
14%
16%
18%
20%
8%
6%
4%
2%
0%
0.1
x0.2
x
1x
0.5
x 0.4
x 0.3
x10x
4x 2x
Busi
ness
gro
wth
Rat
e
Relative Market share
HIGH
LOW
LOWHIGH
TRAD
ITIO
NAL
BCG
MAT
RIX
SBUSBU AMGRAMGR M&M M&M mkt mkt
Share Share (a)(a)
Largest Largest CompetiCompetitor Mkt. tor Mkt. share share
(b)(b)
X = a/bX = a/b
TRACTORSTRACTORS 18%18% 29%29% 23% 23% (TAFE)(TAFE)
1.261.26
TWO TWO WHEELERSWHEELERS
12%12% 1%1% 52% 52% (HERO (HERO
HONDA)HONDA)
0.020.02
UTILITY UTILITY VEHICLESVEHICLES
8.7%8.7% 42%42% 21% 21% (TATA (TATA
MOTORS)MOTORS)
2.002.00
Conclusion
10%
12%
14%
16%
18%
20%
8%
6%
4%
2%
0%
0.1
x0.2
x
1x
0.5
x 0.4
x 0.3
x10x
4x 2x
Busi
ness
gro
wth
Rat
e
Relative Market share
HIGH
LOW
LOW
HIGH
TRAD
ITIO
NAL
BCG
MAT
RIX
Product Life Cycle
Product Life Cycle – shows the stages that products go through from development to withdrawal from the market
Product Portfolio – the range of products a company has in development or available for consumers at any one time
Managing product portfolio is important for cash flow
Product Life Cycles
Product Life Cycle (PLC):◦ Each product may have a different life cycle◦ PLC determines revenue earned◦ Contributes to strategic marketing planning◦ May help the firm to identify when
a product needs support, redesign, reinvigorating, withdrawal, etc.
◦ May help in new product development planning◦ May help in forecasting and managing cash flow
Product Life Cycles
The Stages of the Product Life Cycle:◦ Development◦ Introduction/Launch◦ Growth◦ Maturity◦ Saturation◦ Decline◦ Withdrawal
Product Life Cycles
The Development Stage: Initial Ideas – possibly large number May come from any of the following –
◦ Market research – identifies gaps in the market◦ Monitoring competitors◦ Planned research and development (R&D)◦ Luck or intuition – stumble across ideas?◦ Creative thinking – inventions, hunches?◦ Futures thinking – what will people be
using/wanting/needing 5,10,20 years hence?
Product Life Cycles
Product Development: Stages◦ New ideas/possible inventions◦ Market analysis – is it wanted? Can it be produced
at a profit? Who is it likely to be aimed at?
◦ Product Development and refinement◦ Test Marketing – possibly local/regional◦ Analysis of test marketing results and amendment
of product/production process◦ Preparations for launch – publicity, marketing
campaign
Product Life Cycles
Growth:◦ Increased consumer awareness◦ Sales rise◦ Revenues increase◦ Costs - fixed costs/variable costs, profits may be
made◦ Monitor market – competitors reaction?
Product Life Cycles
Maturity:◦ Sales reach peak◦ Cost of supporting the product declines◦ Ratio of revenue to cost high◦ Sales growth likely to be low◦ Market share may be high◦ Competition likely to be greater◦ Price elasticity of demand?◦ Monitor market – changes/amendments/new
strategies?
Product Life Cycles Saturation: New entrants likely to mean market is ‘flooded’ Necessity to develop new strategies becomes more
pressing:◦ Searching out new markets:
Linking to changing fashions Seeking new or exploiting market segments Linking to joint ventures – media/music, etc.
◦ Developing new uses◦ Focus on adapting the product◦ Re-packaging or format◦ Improving the standard or quality◦ Developing the product range
Product Life Cycles
Decline and Withdrawal:◦ Product outlives/outgrows its usefulness/value◦ Fashions change◦ Technology changes◦ Sales decline◦ Cost of supporting starts to rise too far◦ Decision to withdraw may be dependent on
availability of new products and whether fashions/trends will come around again?
Product Life Cycles
SALES
Development Introduction Growth Maturity Saturation Decline
Product Life Cycles
SALES
Effects of ExtensionStrategies
Product Life Cycles
Sales/Profits
Time
PLC and Profits
Losses
Break Even
Profits
The Product Life Cycle and the Boston Matrix SALES
Time
AB
C
D
The product portfolio – four products in the portfolio
(1)
(1) ‘A’ is at maturity stage – cash cow. Generates funds for the development of ‘D’
(2)
(2) Cash from ‘B’ used to support ‘C’ through growth stage and to launch ‘D’. ‘A’ now possibly a dog?
(3)
(3) Cash from ‘C’ used to support growth of ‘D’ and possibly to finance extension strategy for ‘B’?
Importance of maintaining a balance of products in the portfolio at different stages of the PLC – Boston Matrix helps with the analysis
APPROPRIATE APPROPRIATE STRATEGIESSTRATEGIES
TRACTORS (WEEK STAR) HOLD STRATEGY (Invest to protect)
Build capacity expansion Increase investment Increase advertisement and promotion Increase market reach
TWO WHEELERS (WEEK ?) Exceptional case (Money hogger) Product is in early stage Try to build it and turn in to STAR Invest intensively
FINDINGSFINDINGS
• UTILITY VEHICLES (STRONG CASH COW) HOLD STRATEGY (INVEST TO PROTECT)
Increase advertisement and promotion
Increase market reach Increase Investment
SUGGESTIONSSUGGESTIONS