PLC vs BCG Matrix

1. PLC: defines product life cycle through different stages and how to adapt different
marketing campaign for each stage.

Stages in Product Life Cycle:

Stages Characteristics

 
1. Market introduction 1.costs are very high
stage
2.slow sales volumes to start
 

3.little or no competition

4.demand has to be created

5.customers have to be prompted to try the product

6.makes no money at this stage

2. Growth stage 1.costs reduced due to economies of scale

 
2.sales volume increases significantly
 
3.profitability begins to rise

4.public awareness increases

5.competition begins to increase with a few new players in establishing

market

6.increased competition leads to price decreases

3. Maturity stage 1.costs are lowered as a result of production volumes increasing and
experience curve effects

2.sales volume peaks and market saturation is reached

3.increase in competitors entering the market

 4.prices tend to drop due to the proliferation of competing products

5.brand differentiation and feature diversification is emphasized to maintain

or increase market share

6.Industrial profits go down

4. Saturation and decline 1.costs become counter-optimal
stage
2.sales volume decline

3.prices, profitability diminish

4.profit becomes more a challenge of production/distribution efficiency than

increased sales

2. BCG: provides a strategy for analyzing products according to growth and relative
market share
Here is a breakdown of each BCG matrix quadrant:

 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 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 a high growth market slows down. A
key tenet of BCG strategy for growth is for companies to invest in stars.

 Cash Cows: A cash cow is a market leader that generates more cash than it
consumes. Cash cows are business units or products that have a high market
share but low growth prospects. Cash cows provide the cash required to turn a
question mark into a market leader, cover the administrative costs of the
company, fund research and development, service the corporate debt, and 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: Dogs, or pets as they are sometimes referred to, 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 consume a lot of cash but bring little in return. In the end,
question marks lose money. However, since these business units are growing
rapidly, they have the potential to turn into stars in a high growth market.
Companies are advised to invest in question marks if the product has the
potential for growth, or to sell if it does not. 

The concept of the product life cycle is fundamental to understanding how product
portfolios will evolve over time through the quadrants of the BCG matrix.
Conceptually, the product life cycle, suggests that most product portfolios will
progress through different stages of rates of growth – from introduction to growth to
maturity and then to eventual decline. Introduction is very early growth, while a
mature market should also have a small level of growth, usually almost in line with
increases in GDP
Stars and question marks only occur in the introduction and growth stages. While cash
cows and dogs exist during times of maturity and decline. Therefore, new product
portfolios categories will start off as either a star or as a question mark and then in the
longer term will progress downwards (to either a cash cow or a dog).
In today’s market, many new products and technology breakthroughs are being adopted
by the market much faster than previously, which then indicates the period of time that a
product portfolio will remain as a star or as a possible question mark is decreasing.

Offensive vs Defensive Strategy

1. Offensive strategy;
 is focused on achieving competitive advantage.
 The need to concentrate the attack.
 The element of surprise (the right time).
 The need to consolidate the attack.
 Head-on attack against the market leader.
 Flanking or market segmentation.
 Occupy totally new territory (i.e. where there is no existing product or service).
 Guerrilla (a rapid sortie to seize a short-term profitable opportunity).


2. Defensive strateg:
 is focused on attacking/responding the competitor in order to take him off
 re used to protect a competitive advantage, but rarely they can establish any competitive
advantage.
 not suited to all businesses.
 Lessen risk of being attacked.
 Soften impact of any attack that happens.
 Drive assailant to aim at other rivals.
 Make stronger firm’s present position.
 Help sustain any competitive advantage held.