Strategic planning is referred to an organizational management activity, which is used for setting priorities, defining its strategy, emphasizing upon the energy and available resources; strengthening the operations and ensuring that the common goal of the business practice is being achieved by the stakeholders, to meet the expected outcomes. It is a key component in every business, as it determines the strategic direction of business. Although strategy has several definitions, it usually includes goal setting, identifying the actions for achieving the goal and mobilizing the resources for executing the planned actions. Successful execution of the strategic plans helps the marketer to improve the competitive edge of the business and gain more profit from the business (Wolf and Floyd, 2017). Although the strategy involves the processes of formulating and implementing the processes, the strategic planning helps in coordinating both; nevertheless, the strategic planning is an analytical process, which includes synthesis through strategic thinking. In this context, the role of managers and analysts are inevitable, as they are the key decision makers in regards the strategic direction the business.
The key components of the strategic planning process are “inputs, activities, outputs and outcomes. Strategic thinking is also a crucial component of strategic thinking, which is necessary for guiding the actual strategic formation. The outcomes of the strategic planning is mainly emphasizing upon the formulation of the organizational strategy, which considers the diagnosis of the environment and competitive situation of the organization in that environment, the guiding policy based on which the organization is accomplishing its objectives; and the key action plans for accomplishing the guiding policy (Booth, 2016). Therefore, in order to achieve successful strategic planning, some key strategic analysis tools are used, for analyzing the business situation and identifying the best strategy for accomplishing the organizational objective and make the organization competitive in the industry. In this context, Michael Porter highlighted in 1980 that four key elements should be considered for strategic planning; which include “company strengths and weaknesses, personal values of the key implementers, industry opportunities and threats and broader societal expectations”. In order to consider these elements, some key strategic tools are being used in the organizations. In the following essay, the key focus is to demonstrate the strategic planning through comparing different strategic tools used in strategic planning procedure.
The BCG matrix was proposed by Bruce Henderson in 1970 for helping the Boston Consulting Group in analyzing their business units and their product lines. It helps the organization to allocate the resources in adequate manner. Thus, this tool is used by the marketers in “brand marketing, product management, strategic management, and portfolio analysis”. This is a market analysis tool, which helps the marketer by offering a framework for analyzing the products based on the potential of growth and market share of the business, thereby indicating its importance in the in management of the product portfolio. It helps to identify the type of product or service, which will give the organization the maximum profit, through addressing the organization’s market growth status and its market share. It thereby helps the marketer to compare its status and competitive edge, comparing with the largest or toughest competitor. Therefore, this tool also helps the marketer or the analyst to think about the product’s portfolio in regards to the growth over next financial years (Dibrell et al., 2014). It is mainly represented as a chart or matrix and the analyst plots a scatter graph for ranking the products or services, based on the relative market share and growth status of the business.
Considering these two variables, the graph includes four quadrants, each of which indicates the growth potential and status of the business. These four quadrants have been named as cash cows, dogs, question marks and stars, each of which has unique characteristics in terms of growth potential, considering which the products are developed by the marketer to gain competitive edge; these are demonstrated below:
Cash cows – The organizations or products falling under this quadrant of the BCSG matrix indicate their high market share in the slow-growing industry. These are usually the leading company in the industry. These organizations are generating more cash compared to the amount they consume. Organizations are advised to invest further in the cash cow businesses for maintaining the current level of productivity.
Dogs – The organizations or products falling under this quadrant of the BCG matrix have low growth rate, along with low market share. These types of organizations are neither earning, nor consuming a high amount of cash. These businesses are the key candidates for divestiture (Bryson et al., 2018).
Question marks – The organizations or products falling under this quadrant of the BCG matrix have high growth potential and low market share. Therefore, these type of organizations are consuming a lot of cash, while brining little amount of cash in return. However, it is noteworthy that as the growth is rapid among this organization, these organizations have significant potential to convert into a star, if nourished properly with adequate resource and investment.
Stars – These organizations or products have the highest market share and usually have the ability to generate highest cash, as their name implies. These products or organizations have the high growth rate. However, it consumes a large amount of cash, while returning also a large amount back to the organization as profit. These organizations usually create a balance among the money being invested and gained as profit. Organizations are advised to invest in stars.
Although BCG matrix is a unique tool, useful in developing product portfolio, but it also has some drawbacks. For instance, the growth potential and market shares are measured with no numerical benchmarks, which rises bias in the analysis. Thus, in contrast to use this matrix, thorough secondary market analysis could be used as an alternative tool, which would help the analyst to identify the actual market share and growth status of the product or firm, considering their potential (Rastogi and Trivedi, 2016). For instance, considering the high market share and growth status of Tesco, it can be considered as a Star, but it does not consider the numerical benchmark, for which thorough secondary analysis of its annual reports and market research for analyzing its competitors is necessary.
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