The growth-share matrix defines four types of sbus: stars are __________.

The BCG Matrix, also known as the growth-share matrix, gives a strategy for analyzing products and showing what products provide growth for the company. It’s a portfolio-planning method that shows a company’s SBU (strategic business unit), precisely a company’s growth rate and relative market share. There are two axes on the BCG Matrix, vertical and horizontal axis. On the vertical axis, market growth rate shows a measure of market attractiveness. On the horizontal axis, relative market share shows a measure of company strength in the current market. The BCG matrix has four types of SBUs. Stars, cash cows, question marks, and dogs. Stars are high growth; they need massive investments to finance their rapid growth. Eventually, growth will slow down, and in time stars will turn into cash cows. Cash cows are low-growth, high-share businesses, or products. They need fewer investments to hold their market shares. They produce a lot of cash that a company will use to pay its bills and investments. Question marks are low-share business units in a high-growth market. Require a lot of cash to hold their shares, let alone increase. Management decides whether a question mark should turn into a star or be phased out. Dogs are low-growth, low-share businesses, and products. They have some trouble generating cash, but they obtain enough to maintain themselves. But they will not be a large source of cash for a company. BCG Matrix has ten circles that represent the company’s ten current SBUs. Companies will have two stars, two cash cows, three question marks, and three dogs. The BCG is beneficial, but it has its limitations as well. Once SBUs are classified, companies will decide what role each will be in the future. Many SBUs change where they are located and a lot of SBUs start out as question marks and then will be categorized as a star. They can be time consuming, costly, complicated, and management can have a hard time turning question marks into stars. But even with the limitations, companies still use the BCG matrix and plan to become a diverse and successful business. Portfolio planning can be challenging and confusing, but it helps companies grow and create a diverse collection of media and entertainment businesses.

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For companies to compete, they must have growth, a way to satisfy their investors, and a way to obtain top talent. But a company’s growth cannot be its only objective. In the business world, companies usually use four growth strategies to achieve the growth they’re looking for. The four are market penetration, market development, product development, and diversification. Why do companies use market penetration? Companies use this to increase sales growth for their products/services and gain a higher market share. The advantages of using market penetration are discouragement of competition, goodwill, and being efficient. Why do companies use market development? Let’s say that a company is in only one market segment, but they want to make more profit. A company would use market development to branch out to different market segments to get more popular and more customers buying their products; that’s how most companies make more profit. It isn’t always a good idea to stay in one market segment, especially when you want growth and profits. Some advantages of using market development are an increase in revenue, expansion, and popularity. Why do companies use product development? If you want to provide customers with new and reliable products, you must use product development. Imagined if you didn’t develop any more products, you would lose customers and revenue. Customers love yearly new products and will flock to the “next best thing.” Some advantages are a dedicated customer base, more revenue, and a more comprehensive range of products to work with. Finally, why do companies use diversification? Companies use this if they want to achieve their long-range financial goals. Also, diversification will help minimize any risk the company might obtain throughout the years. Companies aim for diversification so they can have different products in different segments and maximize their revenues. Some advantages are exposure to new segments, more revenue, and minimize loss. These four growth strategies are great to use since they most likely will end up in business growth and put the company in a better position than they previously were. I think a company needs to use the strategies to become successful and last in this developing society.

Companies often race to develop new products to stay ahead of the competition. As a result, their product portfolio can extend to several brands, product lines, and multiple variants. However, a large portfolio would require plenty of assessment to ensure there is no redundant or low-quality product. This also helps the company decide whether to invest or disinvest in a product line. Once a product portfolio is determined, marketers can work on marketing growth strategies to bring these products to the consumer and generate income for the company. Marketing growth strategies will be the focus of today's explanation.

Marketing Growth Strategies Definition

Marketing growth strategies are part of marketing planning.

Strategic marketing planning is the process managers use to ensure that the company's goals are aligned with its marketing activities.

For strategic marketing planning to be successful, the company has to define its mission and objectives and understand how it can leverage its capabilities in a changing market. The process of strategic marketing planning is as follows:

1. Define corporate mission and purpose,

2. Define company objectives,

3. Analyze the external and internal environment,

4. Assess the company's portfolio,

5. Set marketing strategies.

Our focus in this explanation will be on steps four and five - the business's portfolio and market strategies.

To learn more about steps one through three, check out our explanation of Marketing Strategy.

We can define marketing growth strategies as follows.

Businesses implement marketing growth strategies to expand their market presence and reach a broader range of customers.

Marketing Growth Strategies in Business

To set marketing growth strategies, a business must first examine its portfolio.

A business portfolio includes all the businesses, brands, and products a company owns.

The business needs to review its portfolio to evaluate strengths and weaknesses and identify opportunities for business growth. This process is known as portfolio analysis. During portfolio analysis, the company decides which brands and products to keep or stop investing in.

The first step of portfolio analysis is determining strategic business units (SBUs). Depending on the company's size and operations, an SBU could be an inter-organizational team working on a product line, a brand, or a single product. After identifying all essential SBUs, the company will determine which product line presents the most opportunities and should receive more investment.

A popular tool for portfolio analysis is the Boston Consulting Group Matrix (BCG Matrix). Figure 1 below shows the main components of a BCG Matrix, which includes rating SBUs based on their market share and growth.

The BCG Matrix divides SBUs into four different categories:

1. Stars: These products/brands have high market growth and market share. Stars present vast growth opportunities for the company and are worth investing in. However, stars also require high levels of investment to finance their growth.
2. Cash cows: These products/brands have a high market share but present lower levels of growth. Due to their established nature in the market, they require less investment from the company and deliver a constant stream of revenues. However, it is unlikely that cash cows will experience high levels of market growth in the future.
3. Dogs: These products/brands present low market growth and market share. Dogs may or may not produce enough revenue to sustain themselves, and the business should avoid further investing in these products.
4. Question marks: These products/brands have low market share but high market growth. Question marks require high levels of investment to maintain or increase market share. However, if the company implements effective marketing strategies, question marks have the potential to turn into stars. Therefore, it is up to the company to decide whether to invest further in them.

Of course, the company might have several SBUs in each category. For example, there are two stars, one cash cow, and five question marks in its portfolio. It is up to the company to decide which strategy to pursue with each SBU. It can use a build strategy to increase market share through investment or a hold strategy to keep the SBU at current levels. It can decide to harvest the SBU to maximize revenues in the short run or to divest it by completely halting production.

It can often be difficult to measure market share and growth accurately. As a result, companies may opt for using various methods for portfolio analysis.

Marketing Growth Strategies Stages

Let's now take a look at the marketing growth strategies stages.

Companies can use various marketing planning tools that help them assess market opportunities. After the business portfolio has been assessed, the development of marketing growth strategies begins. To identify and evaluate growth opportunities, the company can use the Ansoff Matrix. The Ansoff Matrix is also called the product/market expansion grid (see Fig. 2 below).

Marketing growth stage 1: market penetration

As a growth strategy, market penetration can be used by companies that want to increase the market share of one of their existing products in existing markets. This strategy involves the least risk as the business is doing what it already knows best. Rather than developing new products or entering new markets, the company can 'grow' the product through various marketing mix adjustments.

For example, the company could refurbish the product's design or packaging and run a new communications campaign to advertise a product (e.g. by using different messages or media forms).

Marketing growth stage 2: market development

Market development is another type of marketing growth strategy. When using this strategy, the business attempts to find new markets for its existing products. A market development strategy involves higher levels of risk as the company is trying to enter unexplored markets. As a result, marketers must conduct extensive market research when employing this strategy.

Check out our explanation Market Research to find out how businesses research new markets.

For example, a company might have noticed that its product is successful within older demographics but less with younger ones. Therefore, it undertakes extensive market research on Millennial and Gen Z consumers to learn more about their buying behavior in an attempt to appeal to this target segment and grow in the new market.

Marketing growth stage 3: product development

The third option for growth includes product development. When pursuing a product development strategy, the business will develop new products to sell in existing markets.

This strategy presents higher levels of risk as the business must develop a unique product. As you might already know, new product development involves spending on research and development (R&D), new communications campaigns, etc. If the new product fails in the market, there is no way for the business to recover its costs (sunk costs). However, if the product is successful, there is high profit and growth potential.

Marketing growth stage 4: diversification

Finally, the business might consider diversification. The company may develop new products or purchase new businesses to enter new markets. This strategy involves high levels of risk as the company is entering untapped markets and developing products in areas it is not yet familiar with. A diversification strategy may offer high returns; however, the business must consider how it positions its new product or brand.

To learn more about the issues that arise with overextension and positioning, read our explanation Brand Management.

Marketing Growth Strategies Examples

Let's finally look at some marketing growth strategy examples.

The Coca-Cola Company has used various marketing growth strategies during its journey toward becoming one of the largest global brands. In 2022, Coca-Cola was the most valuable food and beverage brand, with an estimated brand value of around $89 billion US dollars.

How did Coca-Cola achieve these figures? The answer is thanks to its development and diversification strategies.

Coca-Cola is known to use market penetration strategies whereby it targets existing markets with its existing products. The company does this by changing product packaging every so often, changing the size of its bottles, and running numerous innovative campaigns.

However, Coca-Cola is also known for using a diversification strategy whereby it acquires businesses in new markets and thereby enters untapped markets. For example, in 2016, Coca-Cola made a 40% equity investment in the Nigerian Chi Ltd. dairy and juice company. This investment allowed the company to diversify its portfolio by expanding and establishing itself in the Nigerian market.

Another example of marketing growth strategies can be observed through the Dutch beer manufacturer Heineken.

In 2018, Heineken entered a long-term partnership with China Resources beer to diversify its operations. By partnering with a local manufacturer, Heineken benefited from its Chinese partner's local market knowledge and capabilities. As a result, Heineken's competitiveness and market share increased significantly in China. Thus, Heineken successfully diversified its portfolio to include the Chinese market.

What are stars in the growth

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