Question

This case is based entirely on hypothetical information –please use only the information in the case and do not use any information about the products/brands through other sources. Ensure that you study Chapter 2 of the textbook for the BCG Growth Share Matrix and Diversification Analysis/Market Product strategies and Matrix. Please do internet based research to understand the concepts of Harvest, Invest, and Divest)

The firm Johnson-Evinrude Inc (or JE, to keep it short) has been in existence for more than two decades. However it is confronted by a changing technological and market environment.

While it is well known for the manufacture and sale of two stroke boat motors that have enjoyed a positive reputation, it is now facing increasing competition from four stroke boat motors. In terms of market growth the highest growth rates are being experienced for four stroke-high horse power motors; Johnson is testing motors of this type but their products seem to have multiple defects. The same type of motors of Japanese brands are flawless. It is true that in traditional two-stroke high horse power motors Johnson has a high market share –almost 65%, but this type of motor has almost no growth in the industry as a whole.

In the low horse power, 2 stroke market Johnsons share is minor and in the industry it is low horse power four stroke motors that have a rapidly growing market. JE do not have any of their own products in this category. Many Chinese manufacturers make these as generic unbranded products and the Chinese products are of low cost and good quality

JE has also been marketing trolling electric motors. The JE design is very well regarded in industry and with fishing gaining popularity as a sport trolling motors is a growth area. However, Johnson’s share is not as high as it could be because of inexpensive Chinese substitutes. While the Chinese products take advantage of lower manufacturing costs they lack the design sophistication of JE products.

Questions: Discuss the above from the perspective of :

1. Product portfolio management (the BCG or Growth Share Matrix approach)-for this classify the different types of motors in terms of the BCG Matrix – Rate of Growth of the Industry and Market Share of the Firm; Cash Cows, Dogs, Stars, Question Marks; make sure that you do this for every type and category of motor.

2. Try to analyze the portfolio/different motor categories  in terms of the diversification or product –market matrix

3. Make suggestions for the overall marketing strategy for JE. You may like to ‘classify’ products (whether current or planned) and then develop your approach for them.

4. Discuss the possible problems that the comp

Answer 1

Solution:

Part 1:

BCG Matrix or the growth share matrix are used by corporates to decide on which product/portfolios the company needs to focus on to generate value over long term.

The matrix uses market share and market growth as two dimensions to determine the category to which the products fall into. The individual categories are Stars, Cash cows, Dogs and Question Mark.

With regard to the motor industry referred here in this case study, the types of motors are as below:

1) 2 stroke high horse power motor

2) 2 stroke low horse power motor

3) 4 stroke high horse power motor

4) 4 stroke low horse power motor

5) Trolling Motor

The classification for the different types of motors in terms of the BCG Matrix – Rate of Growth of the Industry and Market Share of the Firm are shown below in the table;

	Rate of growth( Industry)	Market Share (Firm)
2 stroke high horse power motor	Low growth/no growth	High
2 stroke low horse power motor	Low growth/no growth	Low
4 stroke high horse power motor	High growth / growing	Low
4 stroke low horse power motor	High growth	Low
Trolling Motor	High growth	Low

Part 2

Analysis of the portfolio/different motor categories  in terms of the diversification or product –market matrix are as below:

1. Stars :

The is represented by high growth, high market share

No products represent this category

2. Cash cows:

The is represented by low growth, high market share

2 stroke high horse power motor falls into this category. Industry has less growth, with the company JE having a high market sharte. Even the cash generation is high, due to the low growth in the industry, Investments into this business should remain low.

3. Dogs

The is represented by low growth, low market share

2 stroke low horse power motor falls into this category. The company should avoid this business as this business is a cash trap as it has little potential. The company should divest this business.

4. Question Mark

The is represented by high growth rate, low market share

This products can move into and become a star as company has potential to gain market share; if not it will become a dog.

4 stroke low power motor,4 stroke high power motor and trolling motor falls into this category.

All three has competition from various players.

In the case of 4 stroke motor low horse power, there is a severe competition from Chinese but offering good quality products at low cost. It is anticipated that the market share can go low as the company does not have any products with good designs and this can move into a dog.

Trolling motor, despite having Chinese completion who offer low quality products, but due to design capabilities the product can be accepted by customers and move into cash cow by gaining market share.

Similarly, 4 stroke high horse power , JE does not have a good product but has good completion from Japanese. So in order to gain market share the company needs a good product in place first.

Part 3

JE should adopt a market strategy as below:

Current/Existing product

1. 2 stroke high horse power motor : Company should continue with the product as the cash flow is good; But make less investment

2. 2 stroke low horse power motor : Company should divest from this business and use the cash raised to invest in other business

3. Trailing motor : The company should gain market share by investing in business with good designs

Planned products

4 stroke high horse power motor : Compoany needs to have a good product to compete with the Japanese

4 stroke low horse power motor : Company should try to produce a low cost product in order to compete with quality chineese products

Part 4:

Problems to be faced by the company

1. Severe completion from Chinese for the 4 stroke low horse power

2. Having a good design for the trolling is fine but competitiveness in terms of cost could be a factor

3. Need to have a better product for the 4 stroke high horse power as they are facing multiple defects