Strategic Management ◾ 249
e Total Available Market
(8 slices)
Figure 12.7 The whole pizza pie—Your total available market.
4 slices
Your technology could possibly address 4 slices
(Your served market)
Your Served Market
Figure 12.8 Technology reach—Your technology is only capable of addressing
“4 slices” or Served Market.
Your Target Market (1 slice)
1 slice is your most realistic
market size expectation
Your total potential market
share is 1/8 = 13%
Figure 12.9 Your target market—Upon examination, your realistic market is the
Target Market (1 slice).
250 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
12.7 Strategic Marketing Goals by MI
“We made too many wrong mistakes.” —Yogi Berra
Most entrepreneurial rms are moving away from “mass” marketing to “tar-
get” marketing. Mass marketing is the production approach of identifying
what most consumers want, and assumes actions of all consumers are equal,
based on mass production (low-cost, effective, easy).
Entrepreneurial rms increasingly focus on target marketing, where
the consumer needs set the product characteristics and production efforts
change to meet needs of targeted groups of consumers. Strategic marketing
goals lead to premium pricing and low production volumes because you
offer what others cannot.
According to Seperich,
10
one way to study the market and marketing goals
is to look at the chances or possibilities for market growth and projected
market share, and clearly identify the best products a rm is offering.
11
This
is shown in Figure12.10.
As shown in Figure12.10 according to the Boston Consulting Group
(BCG) growth-share matrix, business could be classied as high or low
according to their industry growth rate and relative market share. The analy-
sis requires that both measures be calculated for each Strategic Business
Determination of Strategic Marketing Goals
Goal = blend of “stars” and “cash cows”
20
0
10 0.11
10
Market Dominance (market share)
Annual Market Growth Rate (%)
Stars
Cash cows
Question marks
Dogs
Figure 12.10 Determination of strategic—The famous BCG “growth-share matrix.”
Strategic Management ◾ 251
Unit (SBU). The dimension of business strength—relative market share—will
measure comparative advantage indicated by market dominance. The key
theory underlying this is existence of an experience curve and that market
share is achieved due to overall cost leadership.
The BCG matrix has four cells, with the horizontal axis representing rela-
tive market share and the vertical axis denoting market growth rate. The
mid-point of relative market share is set at 1.0. If all the SBUs are in the
same industry, the average growth rate of the industry is used. However, if
all the SBUs are located in different industries, then the mid-point is set at
the growth rate for the economy.
Resources are allocated to the business units according to their situation
on the grid. The four cells of this matrix have been called stars, cash cows,
question marks, and dogs. Each of these cells represents a particular type of
business, as described here:
12
1. Stars: Stars represent business units having large market share in a fast
growing industry. They may generate cash but because of fast grow-
ing market, stars require huge investments to maintain their lead. Net
cash ow is usually modest. SBUs located in this cell are attractive as
they are located in a robust industry and these business units are highly
competitive in the industry. If successful, a star will become a cash cow
when the industry matures.
2. Cash Cows: Cash cows represent business units having a large mar-
ket share in a mature, slow growing industry. Cash cows require little
investment and generate cash that can be utilized for investment in
other business units. These SBUs are the corporation’s key source of
cash, and are specically the core business. They are the base of an
organization. These businesses usually follow stability strategies. When
cash cows lose their appeal and move toward deterioration, then a
retrenchment policy may be pursued.
3. Question Marks: Question marks represent business units having low
relative market share and are located in a high-growth industry. They
require huge amounts of cash to maintain or gain market share. They
require attention to determine if the venture can be viable. Question
marks are generally new goods and services that have a good commer-
cial prospective. No specic strategy can be adopted. If the rm thinks
it has dominant market share, then it can adopt expansion strategy, or
else retrenchment strategy can be adopted. Most businesses start as
question marks as the company tries to enter a high-growth market in
252 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
which there is already a market share. If ignored, then question marks
may become dogs, while if huge investment is made, they have the
potential of becoming stars.
4. Dogs: Dogs represent businesses having weak market shares in low-
growth markets. They neither generate cash nor require huge amounts
of cash. Due to low market share, these business units face cost disad-
vantages. Generally, retrenchment strategies are adopted because these
rms can gain market share only at the expense of competitor or rival
rms. These business rms have weak market share because of high
costs, poor quality, ineffective marketing, etc. Unless a dog has some
other strategic aim, it should be liquidated if there are fewer prospects
for it to gain market share. The number of dogs should be avoided and
minimized in an organization.
The BCG matrix produces a framework for allocating resources among
different business units and makes it possible to compare many business
units at a glance. However, the BCG matrix is not free from limitations, such
as the following:
1. BCG matrix classies businesses as low and high, but generally, busi-
nesses can be medium as well. Thus, the true nature of business may
not be accurately reected.
2. Market is not clearly dened in this model.
3. High market share does not always lead to high prots. There are high
costs involved with high market share.
4. Growth rate and relative market share are not the only indicators of
protability. This model ignores and overlooks other important indica-
tors of protability.
5. At times, dogs may help other businesses in gaining competitive advan-
tage. They can earn even more than cash cows sometimes.
6. This four-celled approach is considered too simplistic.
References
1. Porter, M.E. How competitive forces shape strategy. Harvard Business Review,
March/April 1979.
2. Porter, M.E. Competitive Advantage. New York: Free Press, 1985.
3. http://en.wikipedia.org/wiki/Strategic_planning
Strategic Management ◾ 253
4. Collins, J.C., & Lazier, W.C. Beyond Entrepreneurship. Englewood Cliffs, NJ:
Prentice Hall, 1982.
5. http://www.jnjnz.co.nz/mission-statement
6. Best practices in managing a CI function, http://units.sla.org/division/dpht/
meetings/annual2007/2007best-overview.ppt.
7. Kahaner, L. Competitive Intelligence. New York: A Touchstone Book, 1996.
8. http://en.wikipedia.org/wiki/Market_intelligence
9. Crowley, E. A market intelligence primer. http://www.pragmaticmarketing.
com/resources/a-market-intelligence-primer.
10. Seperich, G.J., Woolverton, M.W., & Beierlein, J. Introduction to Agribusiness
Marketing. Englewood Cliffs, NJ: Prentice Hall, 1994.
11. Boston Consulting Group growth-share matrix.
12. Easy matrix diagrams. http://www.managementstudyguide.com/bcg-matrix.
htm.
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