Market analysis and strategies (02)

Question 1

SUMMARY

Answer 1

In summary, the following are covered in this topic:
1. Two market analysis tools are the Boston Consulting Group (BCG) Matrix and the
Ansoff Matrix.
2. The BCG Matrix is a method of analysing the product portfolio of a business in
terms of market share and market growth.
3. The four sectors created by the BCG Matrix are Cash Cow, Star, Problem Child and
Dog.
4. The Ansoff Matrix is a model used to show the degree of risk associated with the
four growth strategies of market penetration, market development, product
development and diversification.

Question 2

Limitations of BCG matrix

Answer 2

 The BCG Matrix is only a planning tool and critics have pointed out that it is
simplifying a complex set of factors that determine the success of a product.
 When used in isolation, the BCG Matrix is unable to inform the management on
what will happen to the product. Although detailed and continuous market
research is helpful, the management must be aware that external environmental
factors such as technological advancements and changing economic conditions,
as well as decisions made by competitors could affect the success and failure of a
product.
 An assumption is made that high profits are directly co-related to high market
share. This is not necessarily true as a business could achieve high sales by
reducing prices.

Question 3

Limitations of Ansoff matrix

Answer 3

One limitation is that the Ansoff Matrix
considers only two main factors; product(s) and market(s). Other factors such as the
external environment (PESTLE) would need to be considered as well, in order to paint
a more complete picture.

The Ansoff Matrix also does not provide or suggest actual detailed marketing
strategies or options.

For example, if a business decides to adopt market
development, the Ansoff Matrix does not inform which market or country the
business should venture into, and which of the existing products produced by the
business to use.