Since many decades the corporate world has experienced significant changes. In order to remain competitive, companies must adapt themselves to the new changes. Strategic management is one of key success for competitiveness. To achieve the company's goals, strategic management models have been created. In the 1960s, strategic management models had started to become popular within US companies. Lot of economists and analysts have contributed to the popularity of certain models. Indeed, models are good tools to encourage managers to evaluate the situation of their businesses. They are also a good way for communicating with business partners because they encourage dialogue. Anybody from different a department of a company is able to plot information into models as they are simple to use. So, everyone can bring new ideas and solutions that can help the final decision-maker in his decision-making process. However, managers cannot make decisions only from an analysis based on one or several models. As models are not perfect, they need to be combined with other models because they focus their analysis on a few specific features. For instance, the PESTEL analysis enables to structure and study the different features of the business environment. This model can be matched with a SWOT analysis and also with other models like the Ansoff Matrix or Portfolio analysis which do not take into account the external analysis of a company.
[...] This model oversimplifies the four business units by relying upon only two dimensions. Consequently, the manager can be attempted to put prematurely a product in a box and he can underestimate the potential a specific product. For example, a manager can drop a product too quickly or overestimate a product by investing too much into it. The website 12.manage.com highlights can have a shortfall if the company retreats too rapidly one of its products. To fill the failure of the BCG matrix, McKinsey improved it latter by analysing the General Electric Company portfolio. [...]
[...] So, it should be used with other strategic management tools. Equally important, it is the context the BCG matrix has emerged from. It has been created at the beginning of the 1970's that was a stable economic growth time. Over this period, managers based their strategic decisions on the evolution of the demand, on economic growth and did not hesitate to opt for diversification strategies in order to reduce the level of risk. So, this model was perfectly fitted those possibilities. [...]
[...] To sum up, the models are a great help for managers because they are simple to use and easy to understand as they consider a limited numbers of characteristics at the same time. However, the limited number of analysed features does not allow manager to consider all interactions with non- analysed features; so various models match together can lead to better and deeper analysis. Finally, it is not advised for a manager to rely his decision on simplified strategic management models. Consequently, managers must use their experiences, their capacity of analysis, their ability to forecast the future and obviously their critical mind to make appropriate decisions. [...]
[...] In fact, it represents the market share of the company in comparison to its main competitor. This dimension assesses the competitive place of the firm. From these two previous axes, the BCG Matrix identifies four different activities in a product portfolio of a company, sometimes called Strategic Business Units (SBU). These activities correspond to different strategies that a company can adopted to get the most efficient and profitable products portfolio. The “Stars” are the combination of a high market growth and a high market share. [...]
[...] Again, the BCG matrix considers two main financial options: investment or divestiture. The “Question Marks” perfectly illustrate the financial dilemma that companies face to. Remember that those products have low market share and operate in high growth market. Is it interesting to invest in the “Questions Mark” products in order they become “Stars” or should the manager divest to drop them. In addition, the BCG matrix does not agree the fact that investment of the company is based on its previous results or the fact that managers are rewarded for old results. [...]
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