Once a product has reached the maturity phase, the market will stabilise or shrink with it, and money becomes available. In addition, the thought behind the BCG matrix is the belief that if you are market leader, you can make more profit because you can achieve benefits of scale.
The strength of the BCG model is its directional simplicity: you use the money from the cash cows( high market share, low growth) to finance the stars grow( high market share, high growth), you say goodbye to the dogs and keep a close eye on the question marks( both low market share in low growth or high growth markets). This way the cash flow is distributed within the corporation in the most optimal way.
Porter ' s theory dates back to 1980, that of Treacy & Wiersema to 1995. The BCG portfolio matrix was first used in 1969. The fact that these models are still being used proves their strength, but it is the emerging information society that may not have changed some economic laws, but has put them on edge.
Due to the increasing availability of information, it is also easier for smaller innovative businesses to offer their services and to start competing with the large established players. This promotes continued product rationalisation. By a simpler spread of technology, the number of competitors for a product grows quickly and prices drop. A good example of this is given in Figure 9, which concerns two reasonably comparable products: the video recorder and the DVD player. The video recorder was developed during a period when information was exchanged relatively slowly, as a result of which competitors took longer to market a similar product. This was markedly different in the case of the DVD player 9.
Price(€)
1500 Video recorders
1000
500
DVD-players
The accessibility of information and capital
If there is one development that, during the past few years, has been dominant in the way in which consumers and businesses do business, it is the immensely improved accessibility of information. Consumers, purchasing companies and government institutions are now much more aware of what is for sale, and it is becoming increasingly easier for them to compare products and suppliers. It only takes a couple of mouse-clicks and telephone calls with suppliers from all over the world to meet their demands. Online searches and even online auctions are steadily replacing relationship-based sales 8.
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Figure 9. Price development of video recorders and DVD players
These developments force providers of products and services to concentrate on those activities in which they can stand out, and for which they can maintain that distinctiveness for a longer period of time. If a product is relatively easy to copy, such as a DVD player, prices will drop fast and it will be difficult to recoup the investment.
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