The PLC is not the businessman's panacea but it can be useful if used in combination with other models and frameworks and alongside good management judgement. The BCG assumed that market share is a good indicator of cash requirement though in reality, profits and cash flow depended on a lot other things than just market share and growth. Porter who was convinced that the BCG Matrix by itself was not very useful in determining strategy for a particular business and was too simplistic, proposed some analytical tools and techniques in his three core concepts of the Basic Competitive Forces, the Generic Competitive Strategies and the Value Chain.

1. 1
Master in Business Administration
Competitive Analysis
Literature Review of Analytical Frameworks
Ismail Bin Ahmed
July 2006
University of Ballarat
SCHOOL OF BUSINESS

2. 2
Contents
1.0 Product Life Cycle
1.1 What is Product Life Cycle?
1.2 Strategic Emphasis
1.3 Applications of PLC
1.31 Use and Applicability of PLC at the Company Level
1.32 Use and Applicability of PLC at the Industry Level – The Industry Evolution
1.4 Various PLC Patterns
1.5 Value of PLC
1.6 Limitations of PLC
1.7 Concluding Thoughts
2.0 Boston Consulting Group Matrix (BCG Matrix)
2.1 What is BCG Matrix?
2.2 Strategic Emphasis
2.3 Best Use of BCG Matrix
2.4 Limitations of BCG Matrix
2.5 Concluding Thoughts
3.0 Porter's Generic Strategies
3.1 Strategic Emphasis
3.2 Porter's Five Forces
3.3 Model Use and Applicability
3.4 The Generic Competitive Strategies
3.5 Model Weaknesses
3.6 Concluding Thoughts
4.0 Conclusion
5.0 Bibliography
6.0 List of Appendices

3. 3
LITERATURE REVIEW OF ANALYTICAL
FRAMEWORKS
1.0 PRODUCT LIFE CYCLE (PLC)
1.1 What is Product Life Cycle?
Figure 1.1 The standard PLC graph showing the phases of the life cycle and the association between
profits and sales over the cycle
Figure 1.2 This is a more complex view of the PLC, which illustrates the dangers often faced by
product innovators in developing new product ideas only to lose the potential of sales as a result of
the actions of competitors (Adapted from Key Concepts in Strategic Management pg. 221 by
Sutherland, Jonathan & Canwell, Diane, 2004, Palgrave Macmillan).

4. 4
1.2 Strategic Emphasis
The Product Life Cycle (PLC) is a widely accepted model which describes the
stages that a product or service, or indeed a category, passes through from its
introduction until its final removal from the market. The model suggests that the
introduction stage, or the launch of the product, during which the product sells in
small numbers and marketing activities are expensive, is superseded, if successful,
by three other stages. The growth stage is characterized by higher sales, greater
profitability, but crucially, more competition. At the maturity stage, provided a
product has managed to survive, stable sales and a higher level of profitability are
enjoyed. The final stage, known as the decline stage, shows that the product is
finally declining in both demand and associated profits (see Figures 1.1 and 1.2).
Optionally, it is possible to insert a further stage between maturity and
decline, denoting a period of the PLC when competition makes it difficult to sustain
the original product. Indeed, it may be the case that the product is already growing
stale. This saturation period marks a slight downturn, which can be adjusted by a re-
launch or a repackaging of the product; otherwise it will begin its inevitable slip into
decline.
At the decline stage, the business needs to consider its policy towards the
product or service carefully, as it is not merely a question of letting the item fade
away over a period of time (perhaps until stocks are finally exhausted). An
abandonment policy must be put in place which takes into account the ramifications
in terms of the impact on staffing levels, the deployment of human and other
resources, as well as its impact on the market, suppliers and distributors.

5. 5
1.3 Applications of PLC
The PLC can be applied at a number of levels:
• Total industries – such as the motor industry.
• Product classes – such as cars, vans and lorries.
• Product forms – such as people movers, estate cars and sports cars.
• Brands – such as Renault Espace, VW Beetle and Ford Escort.
To fully understand the context in which a brand is developing, it is essential
to distinguish between the various categories of the PLC. The length of each stage
will vary considerably depending on which category we are considering. For
example industry and product classes tend to have the longest PLC. It is often
difficult to judge the nature of the PLC for individual brands. For example, the Persil
brand (washing product) has endured longer than each of the product classes –
washing powder, liquid detergents and now tablets. Product forms tend to conform
to the classic PLC curve to a greater extent than the other categories.
1.31 Use and Applicability of PLC at the Company Level
1. To aid in the reduction and balancing of overall risk for the portfolio of
strategic business units (SBU).
2. May be applied when assigning strategies to each SBU using the generic
strategies.
3. Used when a firm wants to know what the investment potential of the
businesses is likely to be – the industry maturity gives a good indication of
this.

6. 6
4. Particularly useful for high tech industries in which life cycles are relatively
short and therefore if situational strategies are not employed, an SBU unit
may fall short of its goals
5. Can also be used to establish the desired corporate portfolio profile by
formulating specific business strategies for each SBU and close any gap
existing between corporate and SBU level.
6. Can also be used for competitor analysis at both the corporate and SBU
level.
1.32 Use and Applicability of PLC at the Industry Level – The Industry
Evolution
Over time, most industries evolve through a series of stages from growth
through maturity to eventual decline.
The industry life cycle is useful for explaining and predicting trends among
the forces driving industry competition. For example, when an industry is new,
people often buy the product regardless of price if it fulfills a unique need. This is
probably a fragmented industry — no firm has large market share and each firm
serves only a small piece of the total market in competition with others (for example,
Chinese restaurants). As new competitors enter the industry, prices drop.
Companies use the experience curve and economies of scale to reduce
costs faster than the competition. Companies integrate to reduce costs even further
by acquiring their suppliers and distributors. Competitors try to differentiate their
products from one another’s in order to avoid the fierce price competition common
to a maturing industry.

7. 7
By the time an industry enters maturity, products tend to become more like
commodities. This is now a consolidated industry — dominated by a few large
firms, each of which struggles to differentiate its products from the competition. As
buyers become more sophisticated over time, purchasing decisions are based on
better information. Price becomes a dominant concern, given a minimum level of
quality and features. One example of this trend is the videocassette recorder (VCR)
industry. By the 1990s, VCRs had reached the point where there were few major
differences among them. Consumers realised that because slight improvements
cost significantly more money and it made little sense to pay more than the
minimum for a VCR. The same is true of gasoline.
As an industry moves through maturity toward possible decline, its products’
growth rate of sales slows and may even begin to decrease. To the extent that exit
barriers are low, firms will begin converting their facilities to alternate uses or will sell
them to another firm. The industry tends to consolidate around fewer but larger
competitors. An example is the U.S. major home appliance industry which changed
from being a fragmented industry (pure competition) composed of hundreds of
appliance manufacturers in the industry’s early years to a consolidated industry
(mature oligopoly) composed of five companies controlling over 98% of U.S.
appliance sales. A similar consolidation was occurring in European major home
appliances during the 1990s.

8. 8
1.4 Various PLC Patterns
Figure 1.3 PLC patterns (adapted from Rink and Swan, 1979 - Key Concepts in Strategic
Management pg. 222 by Sutherland, Jonathan & Canwell, Diane, 2004, Palgrave Macmillan).
D. Rink and J. Swan (1979) presented PLC patterns (see Figure 1.3), which
afford an opportunity to consider whether a business is able to influence or manage
the shape of the curve. Specifically, the implicit ideas of the various shapes offer the
following conclusions:

9. 9
1. The most critical problem for a multi-product business is to determine how its
limited resources can best be allocated to the various products. In this
respect, the PLC concept is an ideal basis for optimising the allocation of the
resources.
2. The multi-dimensional approach is useful in conceptualising the PLC of future
products.
3. The PLC is useful in planning.
1.5 Value of PLC
The PLC can be a valuable tool for a number of reasons including:
• Product termination – The PLC emphasizes that nothing lasts forever.
There is a danger that marketers will fail to recognise this and become
complacent, not developing new products to replace established ones.
• Growth projections – The PLC warns against the dangers of assuming that
growth will continue indefinitely. This is particularly critical when companies
are facing major investment decisions based on existing products.
• Marketing objectives and strategies change during the PLC – This
emphasises the need to review marketing objectives and strategies as the
product/service moves through the various stages. For example, promotional
objectives may change from raising awareness (initial stages) to reminding
customers (later stages of the cycle).
• Product planning – The PLC emphasizes the need to have a balanced
portfolio of products, i.e. to have new products in the pipeline to replace those
in maturity or decline. Companies should be using the cash generated by

10. 10
mature products to fund new product development. It is essential that this is
managed effectively to avoid cash-flow problems when established products
enter decline and there are no new products to fill the gap.
• Dangers of overpowering – Companies that launch an innovative new
product ahead of competitors have the opportunity to charge a high price.
However, unless they have patent protection, competitors may enter the
market and undercut them.
In addition, the PLC can be used as a control tool in that comparisons can be
made with life-cycles of similar products.
1.6 Limitations of PLC
Despite some of the insights the PLC provides, it has many limitations:
• Fads and classics – Many products do not follow the traditional S-shaped
PLC. For example, there are those products (described as fads) that show a
rapid growth but an equally rapid decline such as Buzz Light Year toys,
cabbage patch dolls and various 'executive toys'. In contrast, products
(known as classics) such as Bisto and Coca Cola seem to defy the PLC
concept and live forever.
• Marketing effects – The PLC is the result of marketing activity, not the
cause, and therefore marketers have to be careful they do not fall into the
self-fulfilling prophecy where they expect a product to decline, withdraw
marketing support and the product declines.

11. 11
• Unpredictability – There is little indication of the timescale of the PLC. The
duration of each stage varies considerably with product and may range from
weeks to years. Therefore the model is of limited use as a forecasting tool.
• Misleading objectives and strategy – The model has been criticized for
being too prescriptive in terms of the objectives and strategies that are
appropriate for each stage. There is little scope for creativity.
There is also an additional problem in that it is often very difficult to identify
where a product is located on the PLC (therefore management decisions may be
based on incorrect assumptions). It is often very difficult to predict the shape and
duration of the PLC due to external factors such as political, social, economic,
technological and competitive activities.
1.7 Concluding Thoughts
Despite some of the insights the PLC provides, it has many limitations:
• Fads and classics – Many products do not follow the traditional S-shaped
PLC. For example, there are those products (described as fads) that show a
rapid growth but an equally rapid decline such as Buzz Light Year toys,
cabbage patch dolls and various 'executive toys'. In contrast, products
(known as classics) such as Bisto and Coca Cola seem to defy the PLC
concept and live forever.
• Marketing effects – The PLC is the result of marketing activity, not the
cause, and therefore marketers have to be careful they do not fall into the

12. 12
self-fulfilling prophecy where they expect a product to decline, withdraw
marketing support and the product declines.
• Unpredictability – There is little indication of the timescale of the PLC. The
duration of each stage varies considerably with product and may range from
weeks to years. Therefore the model is of limited use as a forecasting tool.
• Misleading objectives and strategy – The model has been criticized for
being too prescriptive in terms of the objectives and strategies that are
appropriate for each stage. There is little scope for creativity.
There is also an additional problem in that it is often very difficult to identify
where a product is located on the PLC (therefore management decisions may be
based on incorrect assumptions). It is often very difficult to predict the shape and
duration of the PLC due to external factors such as political, social, economic,
technological and competitive activities.
The PLC is useful in prompting marketers to consider the possible fate of
their products and provides some useful insights into the various stages a product
may pass through and the strategies that may prove useful. However, it is often too
simplistic and generalised to be used in isolation because it is more useful as a
control technique rather than as a forecasting technique and is useful if used in
combination with other models and frameworks and alongside good management
judgement.

13. 13
2.0 BOSTON CONSULTING GROUP MATRIX (BCG
MATRIX)
Boston Consulting Group growthBoston Consulting Group growth--share Matrixshare Matrix
MarketGrowthRate
10x High 1x Low 0.1x
Relative Market Share
(share relative to largest competitor)
?
Cash
cow
Star
Dog
Question
mark
B
C
D
A
20%
High
10%
Low
0%
Figure 2.1 BCG Matrix
2.1 What is BCG Matrix?
It is a 2 x 2 matrix (see Figure 2.1) that allows the portfolio of products/SBU
to be positioned on the matrix according to:
• Market Growth Rate
• Relative Market Share (i.e. relative to the leading competitor).
The theory underlying the Boston matrix is the product life cycle concept,
which states that business opportunities move through lifecycle phases of
introduction, growth, maturity and decline. The Boston classification, or BCG matrix,
is a classification developed by the Boston Consulting Group to analyse products

14. 14
and businesses by market share and market growth (see Figure 2.2). In this, cash
cow refers to a product or business with a high market share and low market
growth, dog refers to one with a low market share and low growth, problem child
(or 'question mark') has a low market share and high growth, and a star has high
growth and a high market share.
(a) Product Life Cycle (b) Boston square
Market share & cash generation
Figure 2.2 Linkage between the product life cycle and the Boston matrix (Adapted from Key
Concepts in Strategic Management pg. 15 by Sutherland, Jonathan & Canwell, Diane, 2004, Palgrave
Macmillan).
These phases are typically represented by an anti-clockwise movement around the
Boston matrix quadrants (see Figure 2.3) in the following order:
• From a market entry position as a 'question mark' product.
• Products are usually launched into high-growth markets, but suffer from a low
market share.

15. 15
• To a 'star' position, as sales and market share are increased. If the
investment necessary to build sales and market share is successfully made,
then the product's position will move towards the 'star' position of high
growth/high market share.
• To a 'cash cow' position as the market growth rate slows and market
leadership is achieved. As the impact of the product life cycle takes effect
and the market growth rate slows, the product will move from the 'star'
position of high growth to the 'cash cow' position of low growth/high share.
• Finally to a 'dog' position as investment is minimized as the product ages and
loses market share.
Figure 2.3 The anti-clockwise movement around the Boston matrix (Adapted from Key Concepts in
Strategic Management pg. 16 by Sutherland, Jonathan & Canwell, Diane, 2004, Palgrave
Macmillan).
At each position within the matrix there are a number of opportunities open to the
business. For example, at the cash cow stage the options are either to invest to
maintain market share, or to minimize investment in the product, maximize the cash
returns, and grow towards market dominance with other products. Appendix 1
outlines the options for each type of product/SBU.

16. 16
2.2 Strategic Emphasis
The BCG matrix is useful to a company in three ways
1. The graphic display gives an effective and efficient illustration of the
product/businesses (SBUs) in the company’s portfolio.
2. It identifies the capacity of the SBUs to generate cash and the requirements
for cash assisting in balancing the company’s cash flow status.
3. The matrix identifies the separate characteristics of each product/SBU and
can suggest the strategic direction for each business.
To be successful, a company should have a portfolio of products/businesses
with different growth rates and different market shares. The portfolio composition is
a function of the balance between cash flows. High growth products require cash
inputs to grow while low growth products should generate cash (as long as they
have a high relative market share)
2.3 Best Use of BCG Matrix
• The BCG matrix is simple and elegant. As a graphic device; it is fun to use
and drives decision-making.
• The principles of portfolio planning are correct and applicable at SBU and
segment level within business units.
• Combining portfolio planning with shareholder value at SBU level.
• Is a useful and quick guide to resource allocation by market or product for a
company or competitors.
• Simplifies a host of business factors by selecting two as the main focus –
growth and market share and shows simply and vividly how to apply them to
develop strategies.

17. 17
2.4 Limitations of BCG Matrix
Though a very simple tool in helping managers to understand their portfolio, there
are a number of limitations:
• Pre-occupation with focusing on market share and market growth rates.
There may be other factors that are of equal importance, such as profitability.
• Too simplistic – treats market share as a proxy for competitive strength and
marketing growth rate as proxy for market attractiveness.
• Unhealthy preoccupation with market share gain.
• Ignores interdependencies between products.
• Many low-growth markets are still attractive.
• Many successful low-share companies.
• How does one define market? Does Mercedes have a low share of the car
market or a high share of the luxury car market?
• Ignores external factors such as competitive activity.
• Lacks precision in identifying products to build/harvest or drop.
• Based on cash flow – perhaps profitability may be a more accurate criterion?
2.5 Concluding Thoughts
The BCG matrix was intended to analyse a portfolio from a corporate
perspective because it is only at that level that cash balance is meaningful. A
business may, however, be segmented further using this diagnostic tool to
understand the positions of its various product lines or market segments. This
portfolio can therefore be made up of products in a multi-product company, divisions
in a multi-divisional company and companies in a conglomerate.

18. 18
Although it has proved to be enormously useful in helping many managers to
think far more strategically about the nature of their portfolio and the decisions that
need to be made, it needs to be recognized that the real value of portfolio analysis is
influenced very firmly not just by the quality of the basic data inputs, many of which
have proved to be difficult to find and measure, but also by the broader environment
within which decisions are made.

19. 19
3.0 PORTER'S GENERIC STRATEGIES
3.1 Strategic Emphasis
One of the major contributors over the past few years to the ways in which
we think about competitive strategy has been Michael E. Porter who has argued that
there are, in essence, only three generic types of strategy:
• Overall cost leadership.
• Focus.
• Differentiation.
Porter suggests that in order to compete effectively, strategists need to select
a particular strategy and then pursue it consistently. In practice, of course, there is
no one 'best' strategy, even within a particular industry. The choice therefore needs
to be made so that the firm maximizes its relative competitive strengths, something
which can only be done against the background of a clear understanding of five
factors as shown in Appendix 2:
3.2 Porter's Five Forces
1. The bargaining power of suppliers (in other words, how strong relative to you
are your suppliers and to what extent are they capable of influencing or
determining your strategy?)
2. The bargaining power of customers (are you, for example, dealing with a
whole series of small customers who individually have little bargaining power,
or are you dealing with a small number of large, powerful and individually
influential customers?)
3. The threat of new entrants to the industry.
4. The threat of substitute products.
5. The rivalry amongst current competitors.

20. 20
The stronger each of these forces, the more limited companies are in their
ability to raise prices and earn greater profits. In the short run, these forces act as
constraints on a company’s activities. In the long run, however, it may be possible
for a company, through its choice of strategy, to change the strength of one or more
of the forces to the company’s advantage.
3.3 Model Use and Applicability
A strategist can analyze any industry by rating each competitive force as
high, medium, or low in strength. For example, the athletic shoe industry could be
currently rated as follows: rivalry is high (Nike, Reebok and Adidas are strong
competitors), threat of potential entrants is low (industry is reaching maturity), threat
of substitutes is low (other shoes don’t provide support for sports activities),
bargaining power of suppliers is medium but rising (suppliers in Asian countries are
increasing in size and ability), bargaining power of buyers is medium to low
(advertising is more important than distribution channels), threat of other
stakeholders is medium to high (government regulations and human rights concerns
are growing). Based on current trends in each of these competitive forces, the
industry appears to be increasing in its level of competitive intensity—meaning profit
margins will likely fall for the industry as a whole.
3.4 The Generic Competitive Strategies
Porter suggests that organisations have two basic decisions to make in order
to establish a competitive advantage: (I) whether to compete on price or on
differentiation (which justifies higher prices); (2) whether to target a narrow or a
broad market. The decision behind these two choices leads to four generic
competitive strategies (although there is a fifth, which Porter does not mention but
shown in Figure 3.1)

21. 21
The Five Generic
Competitive Strategies
MarketTarget
Type of Advantage Sought
Overall Low-Cost
Provider
Strategy
Broad
Differentiation
Strategy
Focused
Low-Cost
Strategy
Focused
Differentiation
Strategy
Best-Cost
Provider
Strategy
Lower Cost Differentiation
Broad
Range of
Buyers
Narrow
Buyer
Segment
or Niche
Figure 3.1 Extended Porter's Generic Competitive Strategies
Overall Price or Cost Leadership
This strategy seeks to appeal to the widest possible market, as products and
services are offered at the lowest price. It requires ongoing efforts to reduce costs
without detrimentally affecting the product or service offered to the consumer. This
is an attractive strategy if the products generally on offer in the industry are much
the same, or if the market is dominated by price competition, or when product
differentiation is difficult and most buyers purchase through the same channels.
Differentiation
This strategy rests on being able to offer differentiating features to consumers, who
are then prepared to pay premium prices, on the basis of quality, prestige, superior
technology or special features. Sustainable differentiations are derived from the
core competences of the organisation which must have unique resources or
capabilities, or some form of better management of value chain activities.
Differentiation tends to take place when there are many ways in which products and

22. 22
services can be differentiated and the needs of the consumers are diverse. It is
useful when competitors are not using this strategy and the market or industry
experiences rapid, technological change or product innovation.
Price or Cost Focus
This is essentially a market niche strategy which aims to sell into a comparatively
narrow segment of the competition, where lower prices are attractive to the
consumer. This form of strategy tends to be used when the business lacks either
resources, or the capabilities to offer their products or services to a wider market. It
is ideal in situations where the consumers' needs are diverse and there are many
niches, or segments, within the market. Major industry leaders will not see the niche
as being critical to their success and will therefore not focus upon it. The strategy
only works if few competitors are targeting the same segment.
Differentiation Focus
This is a variant form of market niche strategy, where instead of highlighting low
prices, the organisation concentrates on creating differentiating features.
Cost Provider
Theoretically at least, this strategy gives consumers a blend of cost and value, as
the organisation is offering them products or services which have relatively high-
value characteristics and quality at a lower cost than most of the competitors. In
essence, this strategy has two elements: low cost and differentiation, and can be
successfully used to target value-conscious buyers. To be successful with this
strategy the business has to have sufficient resources and capabilities and be able
to scale up production and their fulfillment whilst maintaining low costs.

23. 23
3.5 Model Weaknesses
• Other authors and strategists regard Porter's Five Forces Model as lacking
justification as the choice of the five forces appears to be arbitrary and the list
neither exclusive nor exhaustive.
• There is no indication of how to assess the relative power of the forces or to
determine what counteractions can be taken.
• Critics feel that Porter’s work lacks empirical evidence to support his
conclusions and many feel that Porter has a reluctance to interrupt his text
with notes and references and his bibliographies are short, suggesting that it
has not been well researched.
• There has been much criticism regarding his Five Forces but less regarding
his three generic strategies. The concepts of differentiation and focus
(segmentation) have long histories in marketing and can be justified by the
number of articles and publications, which appeared before Porter’s work. It is
felt by some that cost leadership is not a strategy at all since operated alone it
has no value and therefore it cannot be considered simultaneously with the
other two.
• Porter's framework for identifying industry boundaries is an arbitrary process
and does not address the relative proximity of competitive threats.
• The Five Forces model is static and cannot capture what occurs during
periods of rapid change in the environment of an industry and some argue that
there are no periods of equilibrium within an industry.

24. 24
3.6 Concluding Thoughts
The purpose of Porter's detailed analysis was to take the guesswork out of
the future and bring order to the world of business. The basic underpinnings of the
complicated theory were simple. If every company planned diligently, following
Porter's schema, then competition would be stable, with every cost leader,
differentiator, and focused firm in its place. No one would get a nasty surprise.
Turbulence would disappear from the competitive landscape.
Of course, it didn't work because some companies simply refused to play by
Porter's ivy-covered rules. Throughout the 1980s, while Porter continued to refine
his ideas, many Japanese companies and some American upstarts like Wal-Mart
did what Porter had defined as impossible. They were low cost and differentiated at
the same time. They got stuck in Porter's middle; but they not only survived, they
prospered.
Similarly, four major firms in the Malaysian food manufacturing industry i.e.
Ajinomoto, Nestle, Fraser and Neave showed that integrated cost
leadership/differentiation strategy can help firms achieve high levels of performance.
These firms pursued differentiation strategy in sales and marketing, stressed
continuous innovation in their process technology and generating volume to achieve
economies of scale - the basis for cost leadership strategy. In other words, against
the advice of Michael Porter, they successfully applied the "stuck-in-the middle"
strategy to increase their competitiveness.
It became obvious that Porter's theory no longer matched reality.

25. 25
4.0CONCLUSION
As per my analysis, I agree that there are a lot of areas in the three analytical
frameworks studied which deserved critical treatment.
The PLC is a useful model in prompting businesses to consider the possible
fate of their products and provides some useful insights into the various stages a
product may pass through and strategies that may prove useful. However, in reality
it is often too simplistic and generalized to be used in isolation, and it cannot replace
management expertise and judgement. The PLC is not the businessman's panacea
but it can be useful if used in combination with other models and frameworks and
alongside good management judgement.
The BCG Matrix is simple, elegant, quantitative, colourful, and most
importantly, took the guesswork out of strategy but requires users to define the
market properly and needed a great deal of analysis which it does not provide. The
BCG assumed that market share was a good indicator of cash requirement though
in reality, profits and cash flow depended on a lot other things than just market
share and growth.
Porter who was convinced that the BCG Matrix by itself was not very useful in
determining strategy for a particular business and was too simplistic, proposed
some analytical tools and techniques in his three core concepts of the Basic
Competitive Forces, the Generic Competitive Strategies and the Value Chain. The
purpose of Porter's detailed analysis was to take the guesswork out of the future
and bring order to the world of business. Of course, it didn't work because some
companies simply refused to play by his ivy-covered rules and they not only
survived but prospered.

26. 26
5.0BIBLIOGRAPHY
Boyett, Joseph & Boyett, Jimmie, 1998. The Guru Guide – The Best Ideas of the
Top Management Thinkers. John Wiley and Sons Inc.
Drummond, Graeme & Ensor, John, 2000. Strategic Marketing - Planning and
Control, The Chartered Institute of Marketing, Butterworth-Heinemann.
Lancaster, Geoff & Massingham, Lester, 1999. Essentials of Marketing. London:
McGraw Hill.
Meek, Helen; Meek, Richard & Ensor, John, 2000. Strategic Marketing
Management - Planning and Control. Butterworth-Heinemann.
Mohd Nazari et al., Relevance of Michael Porter's Generic Strategies: Evidence
from Malaysian Firms, Malaysian Management Review June 2003, Volume 38 No
1. The Journal of the Malaysian Institute of Management.
Porter, Michael E., 1998. Competitive Advantage: Creating and Sustaining
Superior Performance. New York: The Free Press.
Sutherland, Jonathan & Canwell, Diane, 2004. Key Concepts in Strategic
Management. Palgrave Macmillan.
Websites:
Cipher Systems, eResearch, Strategic Analysis Frameworks: http://www.cipher-
sys.com/analysis%20tutorials.asp
http://www.cipher-sys.com/hofhelp/ad%20little/adlhelp.htm
http://www.cipher-sys.com/hofhelp/bcg/BCGhelpfile.htm
http://www.cipher-sys.com/hofhelp/Porter/porter_diagnostichelpfile.htm
QuickMBA Strategic Management: http://www.quickmba.com/strategy/porter.shtml

27. 27
6.0 LIST OF APPENDICES
APPENDIX 1
BCG Matrix: Options for each type of Product/SBU
(Adapted from Drummond, Graeme & Ensor, John, 2000. Strategic Marketing -
Planning and Control, The Chartered Institute of Marketing, Butterworth-Heinemann,
pg. 75).
0BStars
• Build strategies by increasing sales
or market share
• Invest to maintain leadership status
1BQuestion Marks
• Build selectively
• Identify and focus on niche
markets
• Harvest and divest others
2BCash Cows
• Hold strategies to maintain sales or
market share
• Defend position
• Use cash generated to sustain
stars, invest in NPD and support a
select number of question marks
3BDogs
• Harvest or
• Divest or
• Identify profitable niche markets
and focus on these.

28. 28
APPENDIX 2
Michael Porter’s Five Forces Model
Diagram of Porter's 5 Forces (Adapted from:
http://www.quickmba.com/strategy/porter.shtml)
SUPPLIER POWER
Supplier concentration
Importance of volume to supplier
Differentiation of inputs
Impact of inputs on cost or differentiation
Switching costs of firms in the industry
Presence of substitute inputs
Threat of forward integration
Cost relative to total purchases in
industry
BARRIERS
TO ENTRY
Absolute cost advantages
Proprietary learning curve
Access to inputs
Government policy
Economies of scale
Capital requirements
Brand identity
Switching costs
Access to distribution
Expected retaliation
Proprietary products
THREAT OF
SUBSTITUTES
-Switching costs
-Buyer inclination to
substitute
-Relative price performance
of substitutes
BUYER POWER
Bargaining leverage
Buyer volume
Buyer information
Brand identity
Price sensitivity
Threat of backward integration
Product differentiation
Buyer concentration vs. industry
Substitutes available
Buyers' incentives
DEGREE OF RIVALRY
-Exit barriers
-Industry concentration ratio
-Fixed costs/Value added
-Industry growth
-Intermittent overcapacity
-Product differences
-Switching costs
-Brand identity
-Diversity of rivals
-Corporate stakes