Strategic planning directs the organization's actions over time and keeps the team aligned on the objectives to be met, from strategic, tactical, and operational perspectives.
When we talk about the strategic level, we can apply the SWOT matrix as a market analysis resource, comparing our strengths and weaknesses with the competition. This analysis allows for the identification of competency gaps and thus improves overall business performance.
But when it comes to product portfolio, what tool should we use to improve the performance of our solutions mix? That's what we'll cover in this post, with the BCG Matrix. Come with us?
What is the BCG Matrix
The BCG Matrix is a tool for analyzing a portfolio of products or services.
It allows you to find out which products have the largest market share, highest profitability, and relevance to the business, which helps you understand how to compose your product mix to generate higher profitability.
The goal is to identify products that generate higher revenue with lower investment, which becomes more interesting for the company in the long term, as it can scale sales without burdening operations.
The graphical representation of the BCG Matrix shows four possible scenarios:
● Star products (top-left quadrant): are at the peak of sales, but require significant investment due to high competition;
Products in question (upper right quadrant): still have low market share, but are in a rapidly growing scenario;
● Dairy cow products (lower left quadrant): these are products that are well-established in the market, generating frequent and stable revenue;
● Pineapple products (bottom right quadrant): Products that are at the end of their life cycle and should be carefully analyzed to determine when to discontinue them.
These conclusions are drawn from the intersection of two data points: market growth for the analyzed product x the company's product share in that market.
BCG Matrix and Strategic Planning
Up to this point, we have briefly explained how the BCG Matrix works. But how does it influence the organization's strategic planning?
Returning to product classification using the BCG Matrix, we have reached the following conclusions:
The star and questioned products should receive greater investment to generate consistent returns for the company, creating short-term cash flow.
● Dairy cow products should have investments maintained so that they can continue to finance the company as a whole, while the star and questioned products consolidate their market position.
Declining products, like pineapples, should stop receiving as much investment, as they are close to being discontinued.
Having this information readily available allows us to direct the Company budget so that the return on investment (ROI) becomes ever greater, generating profitability for the business.
This knowledge also affects decision-making regarding the company's direction for the coming years: should it remain in the same market, seek to diversify its business, or invest in innovations that can boost results?
The opening or closing of branches is also influenced by market dynamics, which can be better understood if you know the performance of each product or service offered by your company.
When defining marketing and sales campaigns, having the BCG Matrix on hand helps to better direct marketing objectives and thus generate more business for the organization, always thinking about long-term sustainability.
Want to keep learning more about strategic planning? Get to know 3 essential tools when thinking about the future of your organization!
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