3.1 Product strategies with the regard to BCG-Model and the Ansoff-Matrix This section of the report deals with the product strategy and aims to assess the application of the BCG-Model and the Ansoff-Matrix to the Red Bull Company in the provided case study.
In the first part of the section we will briefly touch upon the product strategy to highlight its critical importance as it is a key marketing decision area, being one of the elements of the marketing mix. Another significant matter that will be covered in this section is the product portfolio management which gives understanding of how to assess the company’s current product portfolio and to make decisions on the optimal strategy to achieve the best market share and the greater customer loyalty.
In the second part of the section the theoretic background will be applied to the Red Bull Company case.
From the very beginning, it is necessary to define the term of the product strategy. Marian B.Wood, a marketing practitioner and the author of the marketing planning books, suggests that “the product strategy covers the development and management of the company’s tangible goods and intangible services to meet the needs of customers in the targeted markets”1. While developing a product strategy, it is essential to consider the value that a product provides to both – the customer and the company. From the customer perspective, three levels of the product, as identified by Philip Kotler, should be highlighted: 1.
Core product – the problem that a product is to solve for the customer; Actual product – the benefits that a product is to provide in terms of: • quality
• packaging and labeling
3. Augmented product – the additional benefits that are not a part of the product, such as for example:
• after-sale services;2
In order to assess the current standing of the product and to make strategic decisions on the product management, the company should curry out a product portfolio analysis. The most popular analysis, that have been for a long time presented in the literature, would be the Boston Consulting Group Model, the McKinsey/GE model, the A.D Little business profile matrix and the Ansoff-Matrix.3 From the above mentioned list, the BCG Model and 1
Wood, Marian Burk (2002, p.77)
Kotler, Philip; Armstrong, Gary (2005, p.43)
Wind, Yoram (1982, p.108-145)
the Ansoff-Matrix, being the most widely accepted frameworks applicable to all products of all companies, will be shortly introduced.
The BCG model is based on the dimensions of market share and growth rate. It assumes that the cash flow is an indicator of success. The model distinguishes between 4 different fields dogs, cash cows, question marks, and stars and is plotted in a 2x2 matrix as shown on the Table 1 below:
Relative market share
Table 1. Boston Consulting Group Model.4
The stars refer to products with a high market share and hight market growth. They generate a substantial amount of cash, but this cash is used to maintain its market position. It is advisable to invest in these products since at a certain point the stars should turn into the cash cows. The cash cows are products with high market share, but slow market growth. They don’t require any capital investment, but on the contrary the cash cows are the main source of cash and earnings of the company. Products with low share and high market growth are defined as question marks. Requiring a lot of cash, they have a chance of success since a lot of question marks can eventually move to the stars category, but there is a significant amount of risk because there could be a shift toward a lower market share position – dogs. This type of products is characterised by low market share and low growth, so this dogs should only be kept in the portfolio if...
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