Q.1 Explain BCG Matrix.The BCG Matrix method is the most well-know portfolio management tool. It is

based on product life cycle theory. It was developed in the early 70s by the Boston

consulting group. The BCG Matrix can be used to determine what priorities should be

given in the product portfolio of a business unit. To ensure long-term value creation, a

company should have a portfolio of products that contains both high-growth products in

need of cash inputs and low-growth products that generate a lot of cash the Boston

consulting group matrix has 2 dimensions. Market share and market growth. The basic

idea behind it is. If a product has a bigger market share and market growth. The basic

idea behind it is: if a product has a bigger market share, or if the product’s market grows

faster, it is better for the company.

The four segments of the BCG Matrix

Placing products in the BCG matrix provides 4 categories in a portfolio of

company:

Stars (high growth, high market share)

Stars are using large amounts of cash. Stars are leaders in the business. Therefore

they should also generate large amounts of cash.

Stars are frequently roughly in balance on net cash flow. However if needed any

attempt should be made to hold your market share in Stars, because the rewards will be

cash cows if market chare is kept

Cash Cows (low growth, high market share)

Profits and cash generation should be high. Because of the low growth,

investments which are needed should be low.

Cash Cows are often the stars of yesterday and they are the foundation of a

company.

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Dogs (low growth, low market share)

Avoid and minimizes the number of dogs in a company.

Watch out for expensive ‘rescue plans’.

Dogs must deliver cash, otherwise they must be liquidated.

Question Marks (high growth, low market share)

Question marks have the worst cash characteristics of all, because they have high cash

demands and generate low returns, because of their low market share.

If the market share remains unchanged, question marks will simply absorb great amount

of cash.

Either invests heavily, or sell off, or invest nothing and generate any cash that you can.

Increase market share or deliver cash.

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The BCG Matrix and One size fit all strategies

The BCG matrix method can help to understand a frequently made strategy mistake:

having alone size fits all strategy approach, such as a generic growth target or a generic

return on capital of say 9.5% for an entire corporation.

In such a scenario:

Cash cows business units will reach their profit target easily. Their management have an

easy job. The executives are often praised anyhow. Even worse, they are often allowed to

reinvest substantial cash amounts in their mature businesses.

Dog’s business units are fighting an impossible battle and, even worse, now and then

investments are made. These are hopeless attempts to “turn the business around”

As a result all question marks and stars receive only mediocre investment funds. In this

way they can ever become Cash Cows. These inadequate invested sums of money are a

waste of money. Either these SBUs should receive enough investment funds to enable

them to achieve a real market dominance and become Cash Cows (or Stars), or other wise

companies are advised to disinvest. They can then try to get any possible cash from the

Question marks that were not selected.

Other uses and benefits of the BCG Matrix

If a company is able to use the experience curve to its advantage, it should be able to

manufacture and sell new products at a price that is low enough to get early market share

leadership. Once it becomes a star, it is destined to be profitable.

BCG model is helpful for managers to evaluate balance in the firms’ current portfolio of

Stars, Cash Cows, Question Marks and Dogs.

BCG method is applicable to large companies that seek volume and experience effects.

The model is simple and easy to understand.

It provides a base of management to decide and prepare for future actions.

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Q.2 Describe the marketing mix for Pepsi.

PepsiCo is one of the world's largest food and beverage companies, with 2007

annual revenues of more than $39 billion. The company employs approximately 185,000

people worldwide, and its products are sold in approximately 200 countries through four

P's of the Marketing Mix which are following.

1. Product

2. Promotion

3. Place

4. Price

Quality

Pepsi follows one quality standard across the globe. Pepsi has a long-standing

commitment to protecting the consumers whose trust and confidence in its products is the

bedrock of its success. In order to ensure that consumers stay informed about the global

quality of all Pepsi products sold in World, Pepsi products carry a quality assurance seal

on them.

The One Quality Worldwide‟ assurance seal appears on the entire range of

Pepsi’s beverages. Composition of a Sugar-containing Soft Drink

Water: 86-90%

Sugar: 10-13%

CO2: 0.3-0.7%

Concentrate: 0.2-0.4%

Water accounts for the bulk of all beverages including colas. In other words, the

water used in PepsiCo soft drinks must be as safe as possible for human consumption.

Every water source used for PepsiCo beverages must first be analytically qualified, which

includes using accredited laboratories to test for at least 100 parameters. At every plant,

Pepsi require the incoming water to be purified even further, using a variety of processes.

At a minimum, every plant in world employs a dual back-to-back carbon filter.

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Pepsi Promotion

Promotion is a key element of marketing program and is concerned with

effectively and efficiently communicating the decisions of marketing strategy, to

favorably influence target customers’ perceptions to facilitate exchange between the

marketer and the customer that may satisfy the objective of both customer and the

company. A company’s promotional efforts are the only controllable means to create

awareness among publics about itself, the products and services it offers, their features

and influence their attitudes favorably.

Advertising

Advertising is any paid form of non-personal mass communication through

various media to present and promote product, services and ideas etc. by an identified

sponsor. PepsiCo has advertised its products through many different ways and media.

Through TV we have seen different advertisements of its products such as Pepsi or Dew.

PepsiCo also advertise its products by targeting those favorable television programs, like

sports, series and also PepsiCo uses some events like “Pepsify Karogey” to promote its

products. Through newspapers like Jung and Dawn, PepsiCo has advertised a wide range

of products it offers to its customers. And also through Posters a message has been sent to

a lot of people to be aware of the products which PepsiCo offers.

Pepsi Place

Decisions with respect to distribution channel focus on making the product

available in adequate quantities at places where customers are normally expected to shop

for them to satisfy their needs. Depending on the nature of the product, marketing

management decides to put into place an exclusive, selective or intensive network of

distribution, while selecting the appropriate dealers or wholesalers.

Direct distribution:

Delivery of post mix cylinders & handling of key accounts: The key accounts are

different wholesalers, restaurants and hotels like Pizza Hut, KFC, Metro which serve as a

place for key sale. These are known as national key accounts and are very important in

terms of competition.

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Indirect distribution:

Through Base market distributors

Through Outstation distributors before delivering the product some certain

guiding principles are followed for the assessment of distributor’s capability:

Applicant must have 20 to 25 vehicles (depending on the area).

Applicant must have 20,000 cases of empty bottles.

Applicant must deposit Rs.1, 000,000 as a security. This is usually done through

taking over key revenue areas. If the distributor does not achieve its sales target, the

distribution is taken back and an addition of new distributor is done. Therefore Pepsi’s

supply is low supply uncertainty. Some of its supply source capabilities are:

- Less breakdowns

- High quality

- Flexible supply capacity

- Mature production process

- Pepsi Price

Pricing decisions are almost always made in consultation with marketing

management. Price is the only marketing mix variable that can be altered quickly. Price

variables such as dealer price, retail price, discounts, allowances, credit terms etc.

influence the development of marketing strategy, as price is a major factor that influences

the assessment of value obtained by customers. Customers directly relate price to

quality, particularly in case of products that are ego intensive of technology based. Pepsi

being a company which emphasizes product quality, it tends to sell its products with price

range from moderately

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3. Choose any well-known company and study the micro environment and macro

environment for the same.

Micro Environment of Pepsi

The Company

PepsiCo

Supplier

Haidiri Beverages Private Limited, Pakistan

Marketing Intermediaries

The Haidiri Beverages Group was set up in 1979 and is Pepsi's sole selling agent

for District Rawalpindi and Islamabad. It is based in the CDA Industrial Triangle, Kahuta

Road, Islamabad. It manages the supply for several wholesalers, retailers, restaurants,

hotels and other such food outlets. In order to achieve the projected sales targets

effectively, the organization ensures a comprehensive strategic alignment with the overall

Pepsi Cola’s business strategy.

Customers

Pepsi customers are mostly young group between the ages of 14 to 30.

Competitors

Coca Cola

RC Cola

Red Bull

Nestle Water

Publics

There are a lots of public are included. Such as channels, investment houses, radio

stations, newspapers, minority groups, general public etc and also internal publics include

workers, board of directors, managers and so on.

GEO, ARY, STAR ONE etc.

Sunday Magazine, Fashion Magazine, Newsletters etc.

Radio and Newspapers.

PepsiCo organizing Meetings, Seminars, Exhibitions for the awareness of the

local public

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Macro Environment of Pepsi

Demographic Forces Age:

The potential customers of Pepsi would be of age group of 14 - 30 years.

Income:

As for the income levels, Pepsi targets the middle class to the upper class.

Economical Forces

When the economy of the consumer is low and the expenses becomes high so that

consumers move towards another product which is lower in price than the PepsiCo

product.

Natural Forces

Due to any disaster, earthquake and some shortage by the marketers or suppliers

so it’s affected their product and market.

Technology Forces

There is huge investment from the government to develop the infrastructure,

opportunities and the creation of new products such as new advanced formulas, new

technological factors changed so that it is very much effected by their product.

Political and Legal

Pakistan is a politically stable economy; as a result foreign investors are attracted

to Pakistan as diversification strategies. The Pakistani government is on a regular effort

improving business relations with trade and investment partners in US and Asia.

Cultural Forces

Due to Islamic Cultural values people prefer to use products made from Halal

ingredients.

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4. Write a short note on consumer buying behavior.

Buying Behavior is the decision processes and acts of people involved in buying

and using products. Consumer Buying Behavior refers to the buying behavior of the

ultimate consumer. Buyer’s reactions to a firms marketing strategy has a great impact on

the firm’s success.

The marketing concept stresses that a firm should create a Marketing Mix that

satisfies customers, therefore need to analyze the what, where, when and how consumers

buy. Marketers can better predict how consumers will respond to marketing strategies.

There are five characteristics under the consumer buying process. These are:

Cultural factor, Social factors and Personal factors.

1. Cultural Factors.

Culture is the main combination of costumer, beliefs and value of consumers

in a particular nation. We can found different demand of the goods around the

world according to the nation. This main effect is cultural norms and

assumption. Ex. Most of the Indian people like vegetarian food so there is

more demand of vegetarian goods in the India. But Chinese are different are

different in this case Chinese people mostly demand heavy, spicy and non

vegetarian food. So it is the main feature of the consumer buying process.

2. Social factor

Human beings are social animal. They live and interact with other people.

Therefore there is a chance of influence by other on their opinion. Marketers

like to identity such influential persons or groups of consumer. Generally such

groups are classified in to two major groups namely reference groups and

family.

Reference groups are used in order to evaluate and determine the nature of a

given individual or other group’s characterize and sociological attributes.

Reference groups provide the benchmark and contrast needed for comparison

and evaluation of groups and personal characteristics. Reference groups act as

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a frame of reference to which people always refer to evaluate their

achievement, their role performance, aspirations and ambitions.

Family culture refers to the familiar’s norms and tradition. Indian culture

gives utmost important to the family. People discuss with their family before

purchasing the valuable things. Wife, parents and kids influence the decision

of the family. Therefore many companies use either whole family or kids in

their promotional Godrej introduce memory back up auto washing machine.

They have shown the family in the advertisement Dabur chyavanprash uses

kids in their advertisement. The target costumers are used costumers are used

with celebrity to provide necessary image and convey the attributes of the

product.

3. Personal factors.

Personal factors refer to the quit personal interest, personality and habit of the

person. Individual factors like age, occupation, lifestyle and personality

influence the consumer buying decision making process. So the personal

factors are a main feature of the consumer buying behavior.

4. Psychological factor.

Physical is quite individual factor of the person. Abraham Maslow’s need

hierarchy theory explain the physical need. So the costumers used to make

decision according to their need. So the physical factors are another important

feature of the consumer buying behavior.

Then next we can say that, the person perception also influence to the

consumer buying behavior. How the person’s perception that plays important

role to make decision of the consumers.

So how to make consumers buying decision. There are different steps

to take decision Process. These are as follows:

Need recognition is the first step of the consumer buying decision. What is the

actual need than after costumers? After finding the actual need costumer used

to take decisions in their buying process.

In the second stage when the consumers find out the actual need than they

start to find out information related good which they want to buy. They can

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collect information from different sources. So the information research is

another important stage of consumers buying process.

Than another one is alternative evaluation. When the costumers make decision

for the good purchase. They used to look for alternative good in the market

which one is better to purchase. Which alternative they concern to best they

will make immediately decision to purchase goods. There are so many things

come to evaluation like price features availability quality and durability e.t.c.

So it is also another stage of the consumers buying process.

After need recognition, information search and alternative evaluation

costumers used to take decision for purchase goods. Than the last stage is post

purchase behavior. It becomes after use of the purchasing. Costumers how to

react regarding the purchasing goods. How much consumers get satisfied

what is the experience of the consumers such kinds of thing used to come in

this stage. This stage is important for the goods production to market

promotion. If consumers can get satisfied from the purchasing goods he will

purchase again and again and he will introduce with his relatives other wise he

can’t satisfied from the good he won’t purchase again.

So especially consumers buying behavior is depends up on the so many things. I already

explain about the feature of consumer buying behavior and how to reach consumers to decide the

purchase goods. Consumers are human beings they are social animals they can’t live without

society. They have their own perception, interest, cultural and tradition to live in the society.

Their value and norms belongs from their familiar culture. They use to sustain in the society on

their own respect. So we can say that, consumers buying behavior depends upon the different

kinds of interest, hobbies, personality, capacity of the costumers, perception of the costumers and

different value and norms of the costumer.

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5. Company A has homogeneous consumer preferences in the market; Company B

sells different variants of soaps, while Company C is a small firm with constrained

resources. What do you think is the most suitable market coverage strategy for the

all the three companies.

One of the most important decisions that a company makes is what market

coverage strategy to use for a brand. In analyzing any one product, the first thing to

consider is the market. In case of company A, market is too broad to segment effectively

(since it homogeneous consumer preferences), so it makes sense to narrow the market to

what can be called a focus market, in this case the consumer preferences for market. In a

sense, the focus market rules out products that are not substitutes. For example, a

marketing analysis for Gatorade (which has about a 90% market share) should not

exclude water since that is a substitute for a sports drink and a possible source of new

sales. Otherwise the analysis would be stuck with a market definition of sports drinks and

thus virtually no practical way of increasing sales.

Consumer segmentation variables include demographics (e.g., age, gender and

family life cycle), psychographics (e.g., self concept and lifestyle), usage rate (e.g., heavy

and light users) and benefits sought. In this case benefits sought may be batteries for

normal vs. high-drain devices.

Company “A” has three basic choices for market coverage strategy:

Undifferentiated—ignore segmentation variables and go after the whole market

with one brand.

Differentiated—operate in all or several segments of the market and design

separate brands for each.

Concentrated—operate in one or only a few segments of the larger market

following a niche strategy with one brand.

A way of telling what market coverage strategy a company is using is the number

of separately-branded products that it offers in any one market. Gap could have regional

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variation in product assortments (say for different climates), but if there was only one

Gap name, the market coverage strategy would be undifferentiated.

Once a company chooses a market coverage strategy for a brand it knows its

target market. A concentrated market coverage strategy leads to one target market as does

an undifferentiated market coverage strategy. A differentiated market coverage strategy

leads to as many target markets as there are brands.

A company must be sure to avoid the trap of defining a target market by who is in

that market before analyzing the needs and wants of the target market. That's why we say

that what the market is comes first, and then the choice of a market coverage strategy.

For company B, which sells different variant of soap, the growth is not as high as

there is expansion in the market for soaps. The cash cows for HLL include Lifebouy,

Lux, Liril, Rexona and Breeze. The company's premium soap include Dove, Pears. The

company has come up with a new product offering i.e. Fair & Lovely soap. The strategy

for 2006-07 would be to increase the market share from existing 63% to 70%. The

strategic changes taking 4 P's into consideration would be:

Product:

I would continue with the existing portfolio of the products and would

concentrate on coming with new fragrances on different soaps than launching new soaps.

I would position Dove and Lux International soap very urban rich women who are extra

conscious for their complexion. Pears, Lux International would be positioned for the

urban and rural rich. For the consuming urban class, Liril, Rexona, Pears and Lifebouy

International would be positioned. I would also come up with 40gm packaging for

different products. I will also be thinking of extending popular brands of cosmetics in the

soap segment by that decision would be based on the popularity and acceptance of that

particular brand (Brand Extension).

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Price:

I would be try to customize the packaging of various products on the basis of

price points. e.g. I will come up with the pricing of Rs 5, Rs 10 and Rs 15 for different

products. I would try to experiment it with the products positioned for consuming class.

Promotion:

For promotion, apart from continuing the existing strategy of concentrating on

T.V. channels, I would try to focus on the promotional campaign in rural sector. I would

also concentrate on promoting through radio and sponsoring the programs e.g. 'Krishi

Darshan' and 'Aap ka Swasthaya' programs that have greater number of audience. The

advertising for them would have a pastoral and cultural looks.

Place:

As the marketing channels of the company are already established I would try to

increase the penetration in the rural sector to the extreme remote areas which are not

touched till now. I would try to reduce the delivery time of the products by choosing and

increasing the strategic locations of warehouses.

In case of company ‘C’, which is small firm, which constrained resources, It is

often argued that governments should promote SMEs because of their greater economic

benefits compared to large firms-in terms of job creation, efficiency, and growth.

Share of Firms and Employment. In most developing countries, microenterprises

and small-scale enterprises account for the majority of firms and a large share of

employment. In Ecuador, for exarnple, firms with fewer than 50 employees accounted for

99 percent of firms and 55 percent of employment in 1980; in Bangladesh, enterprises

with fewer than 100 workers accounted for 99 percent of enterprises and 58 percent of

employment in 1986.

Labor Intensity. Small firms employ a large share of the labor force in many

developing countries, but are they more labor demanding than large firms (for a given

scale of production)? Many analysts argue that, within industries, SMEs are more labor

intensive than large firms. However, the evidence suggests that enterprise scale is an

unreliable guide to labor intensity: many small firms are in fact more capital-intensive

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than larger firms in the same industry.! Labor intensity exhibits more variation across

industries than among firm-size groups within industries-leading some authors to suggest

that efforts to make economic growth more labor-demanding should focus on altering the

pattern of demands in favor of labor-intensive industries rather than on supply-side

efforts to change the size distribution of firms.

Job Creation. Apart from labor intensity, it is often argued that SMEs are

important for employment growth, i.e., job creation. Here again, the evidence does not

support the conventional wisdom. While gross job creation rates are substantially higher

for small firms, so are gross destruction rates. This is because small firms exhibit high

birthrates and high death rates, and many small firms fail to grow. In developed

countries, net job creation rates i(gross job creation less gross job destruction) do not

exhibit a systematic relationship to firm size.3 For example, in the United States between

1973 and 1988, despite a widespread belief to the contrary, small manufacturing firms

did not consistently create more jobs on a net basis (after allowing for jobs eliminated

and 4 firms that went out of business) than large firms. There is some evidence that the

same conclusion holds for developing economies. Efficiency. Measures of enterprise

efficiency (e.g., labor productivity or total factor productivity) vary greatly 'both within

and across industries. Firm size may be associated with some other factors that are

correlated with efficiency, such as management skill and technology, and the effects of

the policy environment. Wages and Benefits. While there are many exceptions to the

basic pattern, the weight of evidence suggests that larger employers offer better jobs in

terms of wages, fringe benefits, working conditions, and opportunities for skills

enhancement, as well as. Social, Political, and Equity Justifications. SMEs are often said

to contribute to a more equal distribution of income or wealth. To the extent that SME

owners and workers are in the lower half of the income distribution, promoting the

growth of SMEs may lead to a more equitable distribution of income. It is often argued

that SME promotion is justified on grounds of the job-creating prowess of SMEs or of

their greater efficiency and growth. Attempts are often made to draw a causal link

between SMEs and poverty alleviation so as to justify policies and subsidies in favor of

SMEs. But the empirical evidence supporting many of these claims is very mixed,

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making it difficult to justify SME promotion on the basis of inherent economic benefits

of smallness.

6. Describe various bases for positioning the product with example.

Three bases of positioning can be distinguished

Functional (solve problem, provide benefits to customers)

Symbolic (Self-image enhancement, ego identification, belongingness and social

meaningfulness, affective fulfillment)

Experiential (provide sensory stimulation; provide cognitive stimulation)

Steps in product positioning process

Identify competing products

Identify the attributes, also called dimensions that define the product ‘space’

Collect information from a sample of customers about their perceptions of each

product on the relevant attributes

Collect information from a sample of customers about their perceptions of each

product on the relevant attributes

Determine the share of mind of each product

Determine the current location of each product in the product space

Determine the target market’s preferred combination of attributes. These are

called: an ideal vector.

Examine the fit between: the positions of competing products, the position of your

product and the position of the ideal vector

Select the optimum position

Three positioning strategies

Reverse Positioning: This method removes ‘sacred product attributes. Simultaneously

nes attributes are added that would typically be found only in highly augmented product.

For example IKEA is not delivering to your home the products which you have bought,

and it offers no sales consultancy.

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Breakaway positioning: This method associates the product with a radically different

category. By manipulating the cues of consumers of how they perceive and categorize a

product, a firm can change how they perceive and categorize a product; a firm can change

how consumers frame a product.

Stealth Positioning: This variant gradually interests consumers for a new offering, by

hiding the products true nature. For example Sony’s AIBO robot was positioned as a

lovable pet. This shifted consumer’s attention away from its major limitations as a

household aide. It apparently even turned elderly people into early technology adopters.

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