The BCG Matrix

Developed by the Boston Consulting Group, the  BCG matrix  is a means of evaluating strategic business units on the basis of (1) their business growth rates and (2) their share of the market. Business growth rate is concerned with how fast the entire industry is increasing. Market share is concerned with the business unit’s share of the market in relation to competitors.

In general, the BCG matrix suggests that an organization will do better in fast-growing markets in which it has a high market share rather than in slow-growing markets in which it has a low market share. These concepts are illustrated below. (See  Figure 6.4 .)

FIGURE 6.4 The BCG matrix

Market growth is divided into two categories, low and high. Market share is also divided into low and high. Thus, in this matrix, “Stars” are business units that are highly desirable (high growth, high market share), compared to “Dogs,” which are not so desirable (low growth, low market share).

Now that you have learned about the tools companies use to create their grand strategies, what type of skills do you think managers need to use these tools? Do you think you possess those skills? If you are curious, then we encourage you to take Self-Assessment 6.2.

SELF-ASSESSMENT 6.2

Core Skills Required for Strategic Planning

This survey is designed to assess the skills needed in strategic planning. Go to connect.mheducation.com and take Self-Assessment 6.2. When you’re done, answer the following questions:

1.   Do you have what it takes? Are you surprised by the results?

2.   Based on the results, what are your top two strengths and deficiencies when it comes to strategic planning?

3.   Assuming you wanted to do strategic planning at some point in your career, what can you do to improve your skills associated with strategic planning? Be specific.

Stage 1 of the strategic-management process was establishing the mission and the vision. Stage 2 was assessing the current reality. Stage 3 was formulating the grand strategy. Now we come to the last two stages—4, strategic implementation, and 5, strategic control.

Implementing the Strategy

Strategy implementation is putting strategic plans into effect. As we said, this means dealing with roadblocks within the organization’s structure and culture and seeing if the right people and control systems are available to execute the plans.

Often implementation means overcoming resistance by people who feel the plans threaten their influence or livelihood. This is particularly the case when the plans must be implemented rapidly, since delay is the easiest kind of resistance there is (all kinds of excuses are usually available to justify delays). Thus, top managers can’t just announce the plans; they have to actively sell them to middle and supervisory managers.

Maintaining Strategic Control

Strategic control consists of monitoring the execution of strategy and taking corrective action, if necessary. To keep a strategic plan on track, suggests Bryan Barry, you need to do the following:84

Engage people. You need to actively engage people in clarifying what your group hopes to accomplish and how you will accomplish it.

Keep it simple. Keep your planning simple, unless there’s a good reason to make it more complex.

Stay focused. Stay focused on the important things.

Keep moving. Keep moving toward your vision of the future, adjusting your plans as you learn what works.

Execution. Occupying a sprawling campus in Cary, North Carolina, software maker SAS has always been ranked in the top three positions on Fortune’s lists of “100 Best Companies to Work For” (No. 1 in 2010 and 2011, No. 2 in 2013 and 2014, and No. 3 in 2012). Its ability to execute effectively has also made it highly profitable and the world’s largest privately owned software company.

Execution: Getting Things Done

In implementing strategy and maintaining strategic control, what we are talking about is effective execution. Larry Bossidy, former CEO of AlliedSignal (later Honeywell), and Ram Charan, a business adviser to senior executives, are authors of Execution: The Discipline of Getting Things Done. 85  Execution,  they say, is not simply tactics, it is a central part of any company’s strategy. It consists of using questioning, analysis, and follow-through to mesh strategy with reality, align people with goals, and achieve results promised.

Page 181How important is execution to organizational success in today’s global economy? A survey of 769 global CEOs from 40 countries revealed that “excellence in execution” was their most important concern—more important than “profit growth,” “customer loyalty,” “stimulating innovation,” and “finding qualified employees.”86

Bossidy and Charan outline how organizations and managers can improve the ability to execute. Effective execution requires managers to build a foundation for execution within three core processes found in any business: people, strategy, and operations.87

The Three Core Processes of Business: People, Strategy, & Operations

A company’s overall ability to execute is a function of effectively executing according to three processes: people, strategy, and operations. Because all work ultimately entails some human interaction, effort, or involvement, Bossidy and Charan believe that the people process is the most important.

The First Core Process—People: “You Need to Consider Who Will Benefit You in the Future” “If you don’t get the people process right,” say Bossidy and Charan, “you will never fulfill the potential of your business.” But today most organizations focus on evaluating the jobs people are doing at present, rather than considering which individuals can handle the jobs of the future. An effective leader tries to evaluate talent by linking people to particular strategic milestones, developing future leaders, dealing with nonperformers, and transforming the mission and operations of the human resource department.

The Second Core Process—Strategy: “You Need to Consider How Success Will Be Accomplished” In most organizations, the strategies developed fail to consider the “how” of execution. According to the authors, a good strategic plan addresses nine questions. (See  Table 6.4 .) In considering whether the organization can execute the strategy, a leader must take a realistic and critical view of its capabilities and competencies. If it does not have the talent in finance, sales, and manufacturing to accomplish the vision, the chances of success are drastically reduced.