Implementation of BCG Matrix in Malaysia Company

Marketing Individual AssignmentBCG Matrix

Table of Contents1.0Introduction of BCG Matrix1

1.1Understanding the Tools1

1.1.1Relative Market Share1

1.1.2Market Growth Rate2

1.2BCG Matrix Diagrams2

1.2.1Quadrants of BCG Matrix3

1.3Advantages and Disadvantages of BCG Matrix4

1.4Steps to Perform BCG Matrix5 6

2.0Case Study BCG Matrix Implementation in Telecommunication Industry7

2.1 Telecommunication Industry7

2.1.1Maxis Company profile7

2.1.2Celcom Company profile7

2.1.3 Digi Company Profile8

2.2Implementation of BCG Matrix in Telecommunication Companies Statistics8

2.2.1Calculating the Relative Market Share and Market Growth9

2.2.2Plotting the Relative Market Share and Market Growth 9

2.2.3Review BCG Matrix after Plotting10 11

3.0Case Study BCG Matrix Implementation in Institut Profesional Baitulmal12

3.1Institut Profesional Baitulmal Company Profile12

3.2Implementation of BCG Matrix in Institut Profesional Baitulmal12



3.2.3Review BCG Matrix after Plotting14 16

4.0Case Study BCG Matrix in Alfa Gemilang Sdn Bhd17

4.1Alfa Gemilang Sdn. Bhd. Company Profile17

4.2Implementation of BCG Matrix in Alfa Gemilang Sdn. Bhd.17



4.2.3Review BCG Matrix after Plotting19

5.0Reference20

1.0 Introduction of BCG Matrix

The BCG model is the first portfolio model; develop by Bruce Henderson of Boston Consulting Group, in late 1960s. While InvestorWords, defined as a business model which compares each other business unit of a company against its main competitor in terms of market growth and market share. Knowing also as a corporate planning tool, which is used to portray firms brand portfolio or SBUs on a quadrant along relative market share axis (horizontal axis) and speed of market growth (vertical axis).

According to this technique, business or products are classified as low or high performance depending upon their market growth rate and relative market share.

1.1 Understanding the Tools

BCG matrix is a framework created by Boston Consulting Group to evaluate the strategic position of the business brand portfolio and its potential. It classifies business portfolio into four categories based on industry attractiveness (growth rate of that industry) andcompetitive position(relative market share). These two dimensions reveal likely profitability of the business portfolio in terms of cash needed to support that unit and cash generated by it. Thegeneral purposeof the analysis is to help understand, which brands the firm should invest inand which onesshould be divested.

1.1.1 Relative Market Share

One of the dimensions used to evaluate business portfolio is relative market share. Higher corporates market share results in higher cash returns. This is because a firm that produces more, benefits from higher economies of scale and experience curve, which results in higher profits. Nonetheless, it is worth to note that some firms may experience the same benefits with lower production outputs and lower market share.

Below are formula for calculating Relative Market Share or known as RMS:

Business Units/Sales this Year Relative Market Share = _____________________________________________ Leading Rival Unit/Sles

1.1.2 Market Growth Rate

High market growth rate means higher earnings and sometimes profits but it also consumes lots of cash, which is used as investment to stimulate further growth. Therefore, business units that operate in rapid growth industries are cash users and are worth investing in only when they are expected to grow or maintain market share in the future.

Below are the formulas for calculating Market Growth Rate:

Current Sales Last Year Sales Market Growth Rate =________________________________________________Last Year Sales

1.2 BCG Matrix Diagrams

1.2.1 Quadrants of BCG MatrixThere are four quadrants into which firms brands or industry can classify:

DogsDogs hold low market share compared to competitors and operate in a slowly growing market. In general, they are not worth investing in because they generate low or negative cash returns. But this is not always the truth. Some dogs may be profitable for long period of time, they may provide synergies for other brands or SBUs or simple act as a defence to counter competitors moves. Therefore, it is always important to perform deeper analysis of each brand or SBU to make sure they are not worth investing in or have to be divested. Strategic choices: Retrenchment, divestiture, liquidation.

Cash cowsCash cows are the most profitable brands and should be milked to provide as much cash as possible. The cash gained from cows should be invested into stars to support their further growth. According to growth-share matrix, corporates should not invest into cash cows to induce growth but only to support them so they can maintain their current market share. Again, this is not always the truth. Cash cows are usually large corporations or SBUs that are capable of innovating new products or processes, which may become new stars. If there would be no support for cash cows, they would not be capable of such innovations. Strategic choices: Product development, diversification, divestiture, retrenchment.

StarsStars operate in high growth industries and maintain high market share. Stars are both cash generators and cash users. They are the primary units in which the company should invest its money, because stars are expected to become cash cows and generate positive cash flows. Yet, not all stars become cash flows. This is especially true in rapidly changing industries, where new innovative products can soon be outcompeted by new technological advancements, so a star instead of becoming a cash cow, becomes a dog. Strategic choices: Vertical integration, horizontal integration, market penetration, market development, product development.Question marksQuestion marks are the brands that require much closer consideration. They hold low market share in fast growing markets consuming large amount of cash and incurring losses. It has potential to gain market share and become a star, which would later become cash cow. Question marks do not always succeed and even after large amount of investments they struggle to gain market share and eventually become dogs. Therefore, they require very close consideration to decide if they are worth investing in or not. Strategic choices: Market penetration, market development, product development, divestiture.

BCG matrix quadrants are simplified versions of the reality and cannot be applied blindly. They can help as general investment guidelines but should not change strategic thinking. Business should rely on management judgment, business unit strengths and weaknesses and external environment factors to make more reasonable investment decisions.

1.3 Advantages and Disadvantages of BCG MatrixAdvantages of BCG Matrix Easy to perform and analyse Catchy name, easy to remember Helps to understand the strategic positions of business portfolio It is a good starting point for further more thorough analysisDisadvantages of BCG Matrix Business can only be classified to four quadrants. It can be confusing to classify an SBU that falls right in the middle. It does not define what market is. Businesses can be classified as cash cows, while they are actually dogs, or vice versa. Does not include other external factors that may change the situation completely. Market share and industry growth are not the only factors of profitability. Besides, high market share does not necessarily mean high profits. It denies that synergies between different units exist. Dogs can be as important as cash cows to businesses if it helps to achieve competitive advantage for the rest of the company.1.4 Steps to Perform BCG MatrixAlthough BCG analysis has lost its importance due to many limitations, it can still be a useful tool if performed by following these steps:

Step 1: Choose the unitBCG matrix can be used to analyse SBUs, separate brands, products or a firm as a unit itself. Which unit will be chosen will have an impact on the whole analysis. Therefore, it is essential to define the unit for which you will do the analysis.

Step 2: Define the marketDefining the market is one of the most important things to do in this analysis. This is because incorrectly defined market may lead to poor classification. For example, if we would do the analysis for the Daimlers Mercedes-Benz car brand in the passenger vehicle market it would end up as a dog (it holds less than 20% relative market share), but it would be a cash cow in the luxury car market. It is important to clearly define the market to better understand firms portfolio position.

Step 3: Calculate relative market shareRelative market share can be calculated in terms of revenues or market share. It is calculated by dividing your own brands market share (revenues) by the market share (or revenues) of your largest competitor in that industry. For example, if your competitors market share in refrigerators industry was 25% and your firms brand market share was 10% in the same year, your relative market share would be only 0.4. Relative market share is given on x-axis. It is top left corner is set at 1, midpoint at 0.5 and top right corner at 0 (see the example below for this).

Step 4: Find out market growth rateThe industry growth rate can be found in industry reports, which are usually available online for free. It can also be calculated by looking at average revenue growth of the leading industry firms. Market growth rate is measured in percentage terms. The midpoint of the y-axis is usually set at 10% growth rate, but this can vary. Some industries grow for years but at average rate of 1 or 2% per year. Therefore, when doing the analysis you should find out what growth rate is seen as significant (midpoint) to separate cash cows from stars and question marks from dogs.Step 5: Draw the circles on a matrix or plotting in the quadrantsAfter calculating all the measures, you should be able to map your brands on the matrix. You should do this by drawing a circle for each brand. The size of the circle should correspond to the proportion of business revenue generated by that brand or by subscribers or any indicator that company used to calculate their performance.

Examples

Corporate A BCG matrix

BrandsRevenues% of corporate revenuesLargest competitors market shareYour brands market shareRelative Market ShareMarket Growth Rate

1$500,00054%25%25%13%

2$350,00038%30%5%0.1712%

3$50,0006%45%30%0.6713%

4$20,0002%10%1%0.115%

2.0 Case Study BCG Matrix Implementation in Telecommunication Industry

2.1 Telecommunication Industry During this few years telecommunication industry has expanded and the growth are expanding more than few years backs. It is because demand from consumers and nations increase. In Malaysia Telecommunication Industry has been considering as prominent as the growth of subscribers from years to years keep increasing.

In Forest Interactive website we can see that numbers of subscribers from years 2008 to 2013 are increasing from 27.1 million to 42.9 million which make the growth rate nearly reach 60% in the past 5 years. Telecommunication Industry in Malaysia is under Ministry of Energy and been monitor by MTD (Malaysia Telecommunication Department). Below are some of the company profiles of top rank company under telecommunication Industry.

2.1.1 Maxis Company Profile Maxis are the leading communications service provider in Malaysia, which rank as No. 1 among others telecommunication providers. Maxis founder is Mr. Ananda Krishan enabling both individual and business customers to connect and Maxis operation started in 1995. Been rank No. 1 in Forest Interactive website as numbers of was nearly 14.1 million in year of 2013. Here are some marketing strategy that been used by Maxis, Maxis used high profile celebrities such as Siti Nurhaliza, Akademi Fantasia artists and at the same time try to come out with new plan.

2.1.2 Celcom Company Profile Celcom Axiata Berhad, DBA Celcom, is the oldest mobile telecommunications company in Malaysia. Celcom started as STM Cellular Communication in 1988. Celcom is one of a member of the Axiata group of companies and being one of the very few companies in Malaysia to originally obtain a cellular phone license. Celcom also rank 2nd in telecommunication Industry with the total subscriber is 12.03 million in 2013. Celcom marketing strategy is by using famous artist as their services ambassador, some of the famous artist such as Maya Karin and Fahrin Ahmad.2.1.3 Digi Company Profile DiGi Telecommunications Sdn. Bhd., DBA DiGi, is a mobile service provider in Malaysia. It is owned in majority by Telenor ASA of Norway with 49%. On 24 May 1995 DiGi became the first telecommunication in Malaysia to launch and operate a fully digital cellular network. Digi was in 3rd rank between telecommunication service provider and this survey is done by Forest Interactive.

In 2013, the total number of subscribers is 10.3 million. As other telecommunication provider DiGi also has their own marketing strategy, rather than using famous and well known artist DiGi are known for their Yellow Mascot, lower price service provider among others two top rank providers and at the same time DiGi use to make catchy advertisement to attract the customers such as I will follow you advertisement and songs.

2.2 Implementation of BCG Matrix in Telecommunication Companies StatisticsTelco20132012

Subscribers (000s)Subscribers (000s)

Maxis14,10014,114

Celcom12,03011,330

DiGi10,3009,300

TuneTalk2,1002,000

U-Mobile3,000500

XOX COM395391

P1527305

RedTone200150

Merchantrade300100

Sources: Forest Interactive

2.2.1 Calculating Relative Market Share and Growth RateTelcoMarket Share(%)Relative Market ShareMarket Growth(%)

Maxis32.83 1.17- 0.10

Celcom28.000.856.18

DiGi24.000.7310.75

TuneTalk4.900.155

U-Mobile6.980.21500

XOX COM0.920.031.02

P11.220.0472.79

RedTone0.470.0133.34

Merchantrade0.690.02200

2.2.2 Plotting the Relative Market Share and Growth Rate into Quadrant0.51Relative Market Share

501000Market Growth

0

2.2.3 Review BCG Matrix after PlottingAs from the BCG Marix, under Star there is no telecommunication providers fall under it. It might be because even some of the telecommunication service providers high in market share but still the growth is declined and slower as the already achieved their high level getting the customer or subscribers. Let review other three quadrants that have telecommunication providers been plotting under it.

Question MarksUnder Question Marks quadrants there are three telecommunication services providers been plotting under it, such as U-Mobile, P1 and Merchantrade. Question marks are the products or company that require much closer consideration. They hold low market share in fast growing markets consuming large amount of cash and incurring losses.

It has potential to gain market share and become a star, which would later become cash cow. Question marks do not always succeed and even after large amount of investments they struggle to gain market share and eventually become dogs. Therefore, they require very close consideration to decide if they are worth investing in or not. Even the three companies have lower market share but still market growth are higher. What U-Mobile, P1 and Merchantrade needed is to invest on advertisement to make the brands or company well known at the same time increase the market share. Some strategic choices that U-Mobile, P1 and Merchantrade can use are market penetration, market development, product development and divestiture.

Cash CowsCash cows are the most profitable brands or company that should be milked or harvest to provide as much cash as possible. Even under this quadrant the company might have low growth market but they still high in the market share because they are located in an industry that is mature which are not growing or declining. The cash gained from cows should be invested into stars to support their further growth. According to growth-share matrix, corporates should not invest into cash cows to induce growth but only to support them so they can maintain their current market share. Again, this is not always the truth.

Cash cows are usually large corporations or SBUs that are capable of innovating new products or processes, which may become new stars. This show in the Cash Cows quadrants where the three company (Maxis, Celcom and DiGi) that plotting under this quadrants are the highest top rank of Telecommunication service providers. If there would be no support for cash cows, they would not be capable of such innovations. Under this quadrants company such Maxis, Celcom and DiGi can use strategic choices such as product development, diversification, divestiture, retrenchment. For maintain the position, some of companies might try to extract as much profits that they able by using as little cash as possible.

DogsDogs hold low market share compared to the other competitors and operate in a slowly growing market. In this case study three company does fall under the dog quadrants, RedTone, TuneTalk and XOX COM which this company does hold the low market share and at the same time have low market growth. In general, they are not worth investing in because they generate low or negative cash returns.

But this is not always the truth. Some dogs may be profitable for long period of time, they may provide synergies for other brands or SBUs or simple act as a defence to counter competitors moves. Therefore, it is always important to perform deeper analysis of each brand or SBU to make sure they are not worth investing in or have to be divested. As if the analyses are done well if strategies are not fit well, the company might turn bankrupt. Here are some strategic choices available for RedTone, TuneTalk and XOX COM such as retrenchment, divestiture and liquidation.

3.0 Case Study BCG Matrix Implementation in Institut Profesional Baitulmal Sdn Bhd

3.1 Institut Profesional Baitulmal Company ProfileInstitut Profesional Baitulmal started its operations in April 1992. It is located at Jalan Perkasa, Off Jalan Kg. Pandan, Kuala Lumpur. Its been subsidiaries by Majlis Agama Islam Wilayah Persekutuab (MAIWP) and also Yayasan Wilayah Persekutuan (YWP). Currently Institut Profesional Baitulmal or known as IPB has three main Diploma and Professional Certificate Courses, from UiTM, CAT and LCCI IQ. IPB target is to make muslims being a professional in the industry. So, they help muslims and asnaf to further their study.

Some of marketing strategies that IPB currently use is by using website, education booth, join and education event, brochure and others.

3.2 Implementation of BCG Matrix in Telecommunication Companies StatisticsCourses20132012

No. of StudentsNo. of Students

UiTM BM111853740

UiTM AC110493460

UiTM CS1102829

UiTM AC1205748

UiTM AC120168175

LCCI IQ598468

CAT181179

Sources: Unit Kemasukkan Rekod dan Pelajar, IPB


UiTM BM11135.871.4315.30

UiTM AC11020.730.587.17

UiTM CS1101.220.03- 3.45

UiTM AC1202.400.0718.75

UiTM AC1207.060.20- 4

LCCI IQ25.150.7027.80

CAT7.610.211.12


030Market Growth

15

0

3.2.3 Review BCG Matrix after PlottingInstitut Profesional Baitulmal is under Education Industry, now take a look which courses fall under which quadrants and try to evaluate strategies that might be useful for IPB to use to keep further in the Industry.

StarStars operate in high growth industries and maintain high market share and known as the leader in the business or industry. Stars are both cash generators and cash users. BM111 and LCCI IQ falls under Star quadrants and they are the primary courses in which the company should invest its money, because stars are expected to become cash cows and generate positive cash flows. Yet, not all stars become cash flows. This is especially true in rapidly changing industries, where new innovative products can soon be outcompeted by new technological advancements, so a star instead of becoming a cash cow, becomes a dog.

So, to maintain the Star position or else to Cash Cow, IPB need to choose any of these strategic choices such as vertical integration, horizontal integration, market penetration, market development, product development.

Question MarksUnder Question Marks quadrants AC120 were plotting under. Question marks are the products or company that require much closer consideration. They hold low market share in fast growing markets consuming large amount of cash and incurring losses.

It has potential to gain market share and become a star, which would later become cash cow. Question marks do not always succeed and even after large amount of investments they struggle to gain market share and eventually become dogs. Therefore, they require very close consideration to decide if they are worth investing in or not. Even the three companies have lower market share but still market growth are higher. IPB need to invest on advertisement for AC120 as AC120 is computerized accounting course that might have high numbers of students want to enrol in it, as computerized and software nowadays is a must in the industry. Some strategic choices that IPB can use for AC120 are market penetration, market development, product development and divestiture.

Cash CowsCash cows are the most profitable brands or company and in IPB form is actually most numbers of students even in low market growth position. AC110 should be milked or harvest to provide as much cash as possible. Even under this quadrant the company might have low growth market but they still high in the market share because they are located in an industry that is mature which are not growing or declining.

The cash gained from cows should be invested into stars to support their further growth. According to growth-share matrix, corporates should not invest into cash cows to induce growth but only to support them so they can maintain their current market share. Again, this is not always the truth. Here are some strategic choices that IPB should use to maintain or turn AC110 into Star such as product development, diversification, divestiture, retrenchment. For maintain the position, some of companies might try to extract as much profits that they able by using as little cash as possible. This is by using minimum amount of money/investment and get high return.

DogsUnder dogs quadrants they are three courses that fall under this which is PD003, CS110 and CAT. Normally under the dog quadrants, the courses are holding low market share compared to the other courses that available in IPB and operate in a slowly growing market. This means the three courses PD003, CS110 and CAT are the courses does hold the low market share and at the same time have low market growth. In general, they are not worth investing in because they generate low or negative cash returns.

Not investing is not always the truth decisions to make. As some dogs may be profitable for long period of time, as some courses are can be profitable also and can simple act as a defence to counter competitors moves. Therefore, it is always important to perform deeper analysis of each brand or SBU to make sure they are not worth investing in or have to be divested. As if the analyses are done well if strategies are not fit well, the company might turn bankrupt. Here are some strategic choices available for courses that fall under dog quadrants such as retrenchment, divestiture and liquidation.

But in my opinion courses such as CS110 should be just been cut out from the courses that available in IPB as the numbers of students always low and it is the numbers of students might not cover the expenses for opening that courses to students. While for CAT and PD003, I can still see the future of the courses as PD003 is a new course available and at the same time this courses actually giving students a second chances to prove that they still worth it and can still continue their study even their SPM results are not really good. CAT course is actually a starter for any students that wants to do ACCA in future, the length to finish CAT is 1 and half year and at the same time if the students completed CAT paper they got 3 papers to be exempted in ACCA. So, if IPB invested well in this 2 courses might be these 2 courses can turn from dog to Cash Cows or Question Marks in future.

4.0 Case Study BCG Matrix Implementation in Alfa Gemilang Sdn Bhd

4.1 Alfa Gemilang Company ProfileThe Percetakan Alfa Gemilang Sdn Bhd is a dynamic Malaysia printing company located in Batu Caves, Malaysia. The Percetakan Alfa Gemilang started up in 26 October 2009, focusing primarily on printing mostly for customers from government, private and walk-in customers. The Percetakan Alfa Gemilang Sdn Bhd line of products also include papers, stationaries, printing of books, magazine, newspaper reports, file, business card, greeting card, labels, posters and stickers, electronic media and printing media. Not only has that Percetakan Alfa Gemilang Sdn. Bhd. also offered design services to customers.

The owners of Percetakan Alga Gemilang, Mr. Adam Bin Asmuni establish the company with paid-up capital of RM 99,998 and when they first operated the numbers of worker are only 5 including the owner himself. Now after several years of operated the company can be proud of having more than 20 workers and several big machine that help the company growth and sales. Marketing technique that the company use is flyers, brochures, internet or online marketing such as facebook and website.

4.2 Implementation of BCG Matrix in Percetakan Alfa Gemilang StatisticsProducts/Services20132012

Sales ($)Sales ($)

Printing140,00078,000

Stationeries4,5005,000

Paper Supply32,50034,000

Design Services8,00010,000

Sources: Account Department, Alfa Gemilang Sdn. Bhd.


Printing76%4.3179.49

Stationeries2%0.03- 10.00

Paper Supply18%0.23- 4.41

Design Services4%0.06- 20.00


500100Market Growth

0

4.2.3 Review BCG Matrix after PlottingIn Alfa Gemilang Sdn Bhd, there is only two quadrants the company products does fall under it, first is under Star and second is under Dog quadrants. Now let see what kind of strategies is suitable for Alfa Gemilang to use for each of the products that falls under these two quadrants.

StarStars operate in high growth industries and maintain high market share and known as the leader products in the business. Stars are both cash generators and cash users. Printing services falls under Star quadrants and they are the primary activities that Alfa Gemilang Company should invest its money, because stars are expected to become cash cows and generate positive cash flows. So, to maintain the Star position or else to Cash Cow, Alfa Gemilang need to choose any of these strategic choices such as vertical integration, horizontal integration, market penetration, market development, product development.

DogsUnder dogs quadrants they are three products and services that fall under it which is stationeries, paper supply and design services. Normally under the dog quadrants, the products and services are holding low market share compared to the primary product and its operate in a slowly growing market. In general it can be conclude as these three products and services are not worth investing in because they generate low or negative cash returns.

Not investing is not always the truth decisions to make, as some dogs may be profitable for long period of time. Therefore, it is always important to perform deeper analysis of SBU to make sure they are not worth investing in or have to be divested. Here are some strategic choices available for courses that fall under dog quadrants such as retrenchment, divestiture and liquidation. From my point of view, we know that Alfa Gemilang primary business is to do printing, but they added the other three products and services to variety their services and products at the same time try to do other sales rather than focus on printing only. So, I guess for Alfa Gemilang they should maintain these three products and services but do promotion as much as possible to make the services and products are known by the customers.5.0 ReferencesForest Interactive. (2014). Mobile Statistics 2013. Retrieved fromhttp://www.forest-interactive.com/malaysia-statistics-2013/

Forest Interactive. (2014). Mobile Statistics 2012. Retrieved fromhttp://www.forest-interactive.com/malaysia-2/

KGMOORE. (2013). Using the BCG Matrix to Plan Your Product Investments. Retrieved fromhttp://www.kgmoore.co.uk/using-the-bcg-matrix-to-plan-your-product-investments/#.U2raiIGSxI4

Norida Mohammad, Personal communication, May, 2014

Wikipedia. (2014). Celcom. Retrieved fromhttp://en.wikipedia.org/wiki/Celcom

Wikipedia. (2014). Digi Telecommunications. Retrieved fromhttp://en.wikipedia.org/wiki/DiGi_Telecommunications

Wikipedia. (2014). Maxis Communications. Retrieved fromhttp://en.wikipedia.org/wiki/Maxis_Communications20

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Implementation of BCG Matrix in Malaysia Company