Strategic Thought Transformation - The IIPM Think Tank

S T R A T E G I C I S S U E S
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Representation of products on the BCG Matrix
1. Most of the given SBUs are operating
in mature markets and are yielding returns
for SLL.
2. Toothpaste seems to be in the dog’s
quadrant, which can be attributed to a lower
penetration in the market.
Advanced Analysis
Sindustan Lever Limited has focussed its efforts
on creating strong brands that command
a premium in the market and has also gained
a leadership position in most of its segments. It
has focussed on making its core brands as mega
brands, and then started extending the line.
For example, even in the case of the real HLL
corporation, the Fair & Lovely Cream brand
was extended to Fair & Lovely soaps, and other
similar additions.
1. Therefore, for the SBUs of SLL which
operate in mature markets, i.e., Cash Cow
quadrant, the company must:
a. Identify Gaps – Identify any gaps in
existing products in the market and fill in the
space with a viable product offer.
b. Innovate – to develop new products to
tap new segments and expand the market.
2. The Toothpaste business entering the dog
quadrant can be attributed to the fact that the
market has a very low penetration. Therefore,
efforts should be made towards increasing
the penetration and frequency of consumption
and thereby increasing the market size.
Otherwise, the typical strategy suggested by
BCG would be, “Divest!”
In Reality...
Even as Sindustan Lever Limited guns for
focused growth, a concern being voiced
in industry circles could be whether it will
continue to have people to aid the company
The BCG matrix
helps the strategic
planner identify
the competitive
position of various
strategic business
units (SBUs)
in that endeavour. SLL’s growth prospects
depend on three factors – market growth,
competitive issues, and the impact of Sindustan
Lever’s strategy in tackling competitive
strategies. With the overall economy and
businesses booming, of critical interest would
obviously be the revival in rural economy and
– as urban consumer continues on a spending
spree – the movement of urban market
variables.
At the end of the day, even in such embattled
times, Sindustan Lever could still remain
a most valuable company on the share
market. BCG Rankings can change, but market
capitalization is a true indicator of the
investor’s faith on the company. On that score
at least, if the company can ensure shareholders’
wealth maximisation, Lever could stay
among the leaders for time to come, even
if its atta or ice-creams fail to go places as
desired by the company. Critically speaking,
in the same way as the BCG Matrix does not
focus on market capitalisation figures, it also
does not talk about actual SBU profitability
or even cash flows or cost of capital. This puts
a grave question mark on the worth of BCG
Matrix in today’s world that is driven primarily
by the philosophy of shareholders’ wealth
maximisation, and not sales. And there lies
the basic faultline of the BCG Matrix.
So is the matrix really useful Of course
yes, but not at all for developing strategies.
Rather, the matrix is an extremely smart presentation
tool that could be used in corporate
seminars to show the sales positioning of various
SBUs of any corporation with respect to
its competitors. As the BCG Matrix is purely
based on sales analysis, it provides a seatof-the-pants
snapshot image of the relative
corporate positioning of the company within
the industry. And that, dear analysts, is all that
the BCG Matrix should be used for today. So
has the matrix actually contributed to the image
of the consulting firm (Boston Consulting
Group) that founded it Well, the firm is at
least one of the most well known consulting
firms in the world... and significantly because
of the matrix. If you disbelieve, allow us the
temerity to ask you, which one was the last
BCG consulting project that you heard of We
solemnly rest our case...
Manohar G. Lazarus is the Deputy Editor of
4Ps Business & Marketing
24 STRATEGIC INNOVATORS
An IIPM Intelligence Unit Publication