The BCG Matrix and the Product Life-Cycle PLC

The analysis focuses on techniques helpful for analyzing the business under the same corporate umbrella and is defined as the corporate level strategy analysis. In this article, you will know the corporate level strategy and its analysis. To put it simply, question marks and stars are products that have the potential to grow and demand marketing investment. Cash cows are close to going obsolete and you must not invest money in them.

If a particular product fails to pass minimum standards on the above factors, it should undergo further analyses based on some other factors. The committee of product review should consist of executives from marketing, production, purchasing, control, personnel, and research and development departments. These increased expenditures further reduce the profits of the firms. This situation compels weaker firms to withdraw themselves from the market, and as a result, only the competent ones survive.

The history of the BCG matrix

In smaller companies, managers know of the declining products, and hence a formal review procedure need not be followed. However, careful management can extend a declining product’s life for some time to come. There are many ways a company can rejuvenate its products, and the method it chooses will depend on the reason or reasons for the product’s initial decline.

Launching a new product is generally more difficult than innovating on an old product, which is why many new products fail at the introductory stage. Although, with a great idea and proper execution, you can confidently launch a new product. Product development starts with refining the concept, product testing, and designing a launch strategy. Product concept testing at this stage can help you know the consumer’s reaction to the product and gain first-hand feedback. Every time a product enters the market, it has a lifecycle that carries it from young and useful to old and retired. Most products eventually go obsolete but no one wants that for their product.

Marketing Strategies in the Maturity Stage

It will alert the company to the need for positive action at the so-called ‘threshold point,’ where some change to strategy will be essential if the product is to continue. But beyond this, the marketing mix will be different for every life cycle stage. Forecasting product life cycles and when a product is about to move into a new stage is not easy.

At this stage, profits begin to fall sharply, often because of the excess capacity of the firm. Marketing is about selecting strategies that are either designed to counteract threats or to take advantage of opportunities in the marketplace. Although market leaders generally have the resources to expand their offerings, gaining market share is difficult and expensive. cash cow correspond which stage of product life cycle Companies focus on the high-income group at the introductory stage to buy their products because products are priced higher at this stage. New technology or a new social trend may cause the product to turn downward in sales sharply. When this happens, marketers consider removing items from the product line to eliminate those not yielding a profit.

Final Words: Product Life Cycle How Products and Markets Operate

To combat competition, marketing costs increase substantially, resulting in a reduction in profits. Now that you understand what a BCG matrix is and some of its pros and cons, let’s look at how you can set up your own matrix. To analyze your company, you’ll need data on your products or services’ relative market share and growth rate. A BCG matrix is a model used to analyze a business’s products to aid with long-term strategic planning. The matrix helps companies identify new growth opportunities and decide how they should invest for the future. Since the growth rate is high here, with the right strategies and investments, they can become cash cows and ultimately stars.

• Although market leaders generally have the resources to expand their offerings, gaining market share is difficult and expensive.
• However, since these business units are growing rapidly, they have the potential to turn into Stars in a high-growth market.
• It says that the firm that produces more enjoys higher economies of scale, so the experience curve is higher for them.
• (2) Starts businesses correspond to the growth stage of the product life cycle.

In almost all of the products, there will be a time when sales growth will slow down. This is the stage that we term the maturity stage of a product’s life cycle. During the growth stage, sales rise rapidly; profits reach a peak and then start to decline. The growth stage of the product life cycle is characterized by several new factors.