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