Question

Describe BCG growth share matrix, and show its strengths and weaknesses. Use lululemon athletica to illustrate how this model can help an organization craft its strategy. Please elaborate and provide insightful analysis.

Answer 1

BCG matrix was designed by Boston Consulting Group. The BCG matrix also known as growth share matrix – helps in analyzing the business and products and plan appropriate strategies to increase or change the market positions.

In BCG matrix, there are four sections. They are:

• Question mark
• Dogs
• Stars
• Cash Cows

When a product is launched into the market, they are placed in the question mark section, No one knows how the product will be perceived by the customers, how it be accepted by them and impact it can create in the market with regards to competition. No product can stay in area of the matrix for long. Subsequently based on their market performance, the product can move upwards to star section or get redundant to dog section. In the dog section, if the product or service is not accepted well by the customer and is not being used by them at all, all products move here. The products in dog sections do not survive in the industry for long and are either modified and re-enter the market or leave the industry all together. The companies have two options when the product is in dog section. Either invest money into the product, rebrand it and push it again or else stop the funding and stop supply of the same to the market.

If the products do well, they move into star category of the BCG matrix. High promotional activities need to be done in this case to ensure the product is preferred over the competition. The products achieve maximum revenue in this stage. After the product has been in star category, it gradually moves to cash cow. In a cash cow, the product will keep in earing good revenues with little promotional activities.

Few advantages of using BCG matrix are:

• Helps in evaluation of product portfolio
• Model is simple and easy to understand
• Helps in identifying promotional strategies for products

Some limitations of BCG matrix are:

• It neglects the inter business relationships
• It considers only high market share as a success criteria factor
• The products placed in dog category still earn good amount revenues which often get neglected

Lululemon athletic are a Canadian athletic apparel retailer who are focused in providing health focused apparels with high interest in yoga and related activities. Their key competitors include, Nike, Under Armour, New Balance etc. If we apply BCG matrix for this organization we can see that they are falling under the star category. When they launched, they were facing uncertain demand from customers but over time they have managed to gain customer belief and they are being preferred over major rivals in the same segment. In the star category, as shown by the BCG matrix, they are pushing hard with multiple promotion activities to push yoga and its benefits along with the support their products provide. They extensively use social media platforms for their promotions. It also offers promotions of the day to keep the customers interested in the product and the offers they provide. Also they have been putting investments into the new product development which helps in capturing more market. These strategies have helped them to obtain a first recall in the mindset of consumers. Newer consumers are also getting attracted to their products. In order to ensure new customers frequently use their products, they use competitive pricing and help in extensive product support system. They are also encouraging customer to pursue yoga as a health benefit and want to use their specialized products for such fitness initiatives.