Notes for case study and exam

BCG matrix

Stars: The business units or products that have the best market share and generate the most cash are considered stars. Monopolies and first-to-market products are frequently termed stars. However, because of their high growth rate, stars also consume large amounts of cash. This generally results in the same amount of money coming in that is going out. Stars can eventually become cash cows if they sustain their success until a time when the market growth rate declines. Companies are advised to invest in stars.

Cash cows: Cash cows are the leaders in the marketplace and generate more cash than they consume. These are business units or products that have a high market share, but low growth prospects. Cash cows provide the cash required to turn question marks into market leaders, to cover the administrative costs of the company, to fund research and development, to service the corporate debt, and to pay dividends to shareholders. Companies are advised to invest in cash cows to maintain the current level of productivity, or to "milk" the gains passively.

Dogs: Also known as pets, dogs are units or products that have both a low market share and a low growth rate. They frequently break even, neither earning nor consuming a great deal of cash. Dogs are generally considered cash traps because businesses have money tied up in them, even though they are bringing back basically nothing in return. These business units are prime candidates for divestiture.

Question marks: These parts of a business have high growth prospects but a low market share. They are consuming a lot of cash but are bringing little in return. In the end, question marks, also known as problem children, lose money. However, since these business units are growing rapidly, they do have the potential to turn into stars. Companies are advised to invest in question marks if the product has potential for growth, or to sell if it does not.

Source: Chad Brooks, Business News Daily senior writer.

Value proposition

Value proposition (in marketing) is an innovation, service, or feature intended to make a company or product attractive to customers.

A value proposition is a promise of value to be delivered. It’s the primary reason a customer should buy from you.

In short, value proposition is a clear statement that

• explains how your product solves customers’ problems or improves their situation (relevancy),
• delivers specific benefits (quantified value),
• Tells the ideal customer why they should buy from you and not from the competition (unique differentiation).

You have to present your value proposition as the first thing the visitors see in your offerings.

Sustainable Competitive Advantages

Definition: Sustainable Competitive Advantages. Sustainable competitive advantages are company assets, attributes, or abilities that are difficult to duplicate or exceed; and provide a superior or favourable long term position over competitors.

• What is sustainable advantage?

Can a company attain sustainable advantage?

• By developing the organisation’s culture and/or
• By developing the organisation’s brand
• Explain your reasons.

 

• You need to identify potential extra value propositions for a company as a way of developing sustainable competitive advantage. Apply this to the company in your case study.
• Digital Directions Case Study
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• The Digital Directions case study below applies to Sections One and Two.
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• Case Study 
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• Digital Directions is a social media agency offering services to businesses throughout New Zealand. Digital Directions focuses on companies who want to build their brands on-line using social networks as marketing tools such as; Facebook, Google+, Twitter and LinkedIn.  The main services Digital Directions offers to its clients assist with establishing a profile on the main social media platforms.  In addition the company provides customised training for social media marketing campaigns.  Digital Directions is an agency wholly and exclusively focused on social media.
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• Digital Directions is based in Wellington. Members of staff range from 24 to 35 years in age. They are tertiary educated and have predominantly ITC qualifications and experience.  Whilst they have expert knowledge of social media, they need advice on strategic marketing. Specifically they need advice on the analysis of their competitive environment so that they can ensure continued success for their organisation.  The competition consists mainly of advertising and marketing agencies that have added social media as an offering, rather than specialist social media services.  The main advantage the competition has relates to existing customer relationships with businesses requiring marketing support.  The Marketing Manager at Digital Directions believes that they need to understand the competitive environment and the emerging industry in which they operate.
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• Tasks
• You need to apply Porters analysis to this case study.
• You need to establish the examples of sources for the Competitor analysis systems to this case study.
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• Study the Boston BCG matrix.
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• Research the meaning of sustainable competitive advantage.