Strategic Management CIA: BCG Matrix Of Das Auto.
Devesh Sharma Rhea Raj 5BBA-B 1411550 & 1411545
To create a BCG matrix, businesses gather market-share and growth-rate data on their business units or products. One large square is drawn and is divided into four equal quadrants. Along the top of the box, a market share or cash generation is written, and a growth rate or cash use is written down the left side. On the top left is high market share, and low market share is on the left. On the left-hand side, high cash use is at the top and low cash use or growth rate is at the bottom. Within the diagram, "stars" go in the upper-left quadrant, and "question marks" are put in the upper-right square. At the bottom, "cash cows" go on the left, and "dogs" are placed on the right. The diagram visually shows that stars have high market share and a high growth rate, while question marks have low market share and a high growth rate. On the bottom, cash cows have a low growth rate but a high market share, and dogs have a low market share and a low growth rate.
The following ideas apply to each quadrant of the matrix:
Ø Stars: The business units or products that have the best market share and generate the most cash are considered stars. Monopolies and first-to-market products are frequently termed stars. However, because of their high growth rate, stars also consume large amounts of cash. This generally results in the same amount of money coming in that is going out. Stars can eventually become cash cows if they sustain their success until a time when the market growth rate declines. Companies are advised to invest in stars.
Ø Cash cows: Cash cows are the leaders in the marketplace and generate more cash than they consume. These are business units or products that have a high market share, but low growth prospects. Cash cows provide the cash required to turn question marks into market leaders, to cover the administrative costs of the company, to fund research and development, to service the corporate debt, and to pay dividends to shareholders. Companies are advised to invest in cash cows to maintain the current level of productivity, or to "milk" the gains passively.
Ø Dogs: Also known as pets, dogs are units or products that have both a low market share and a low growth rate. They frequently break even, neither earning nor consuming a great deal of cash. Dogs are generally considered cash traps because businesses have money tied up in them, even though they are bringing back basically nothing in return. These business units are prime candidates for divestiture.
Ø Question marks: These parts of a business have high growth prospects but a low market share. They are consuming a lot of cash but are bringing little in return. In the end, question marks, also known as problem children, lose money. However, since these business units are growing rapidly, they do have the potential to turn into stars. Companies are advised to invest in question marks if the product has potential for growth, or to sell if it does not.
As BCG founder Bruce Henderson wrote in 1968, "all products eventually become either cash cows or pets [dogs]. The value of a product is completely dependent upon obtaining a leading share of its market before the growth slows."
Once a company plots out its matrix, it can begin to further analyze its products' potential.
Das Auto. The Volkswagen Group with its headquarters in Wolfsburg is one of the world’s leading automobile manufacturers and the largest carmaker in Europe. In 2013, the Group increased the number of vehicles delivered to customers to 9.731 million (2012: 9.276 million), corresponding to a 12.8 percent share of the world passenger car market. In Western Europe, almost one in four new cars (24.8 percent) is made by the Volkswagen Group. Group sales revenue in 2013 totaled €197 billion (2012: €193 billion), while profit after tax amounted to €9.3 billion (2012: €21.9 billion). The Group consists of 12 brands from seven European countries: Volkswagen Passenger Cars, Audi, SEAT, ŠKODA, Bentley, Bugatti, Lamborghini, Porsche, Ducati, Volkswagen Commercial Vehicles, Scania and MAN. Das Auto or better known as the Volkswagen group is a star because of several reasons such as: 1. Diversification Of Portfolio: Das Auto has 12 automobile brands under their name; they cater to every possible income segments with brands starting from Volkswagen itself leading up to Bugatti. This very diversification has helped them minimize risk, maximize growth/profitability and also maximize market share.
2. Growth Rate: Das auto as a group has been growing in terms of profitability year after year and in the year 2012 the sales revenue amassed to a massive €194 billion and then €197 billion in the year 2013 all because of its diversification.
3. High Market Share: Das auto has ensured that it is a market leader in the automobile industry by acquiring twelve brands, which cater to every possible income segment. Das Auto increased the number of vehicles delivered to customers to 9.731 million (2012: 9.276 million), corresponding to a 12.8 percent share of the world passenger car market.
4. High Brand Awareness: High market share implies that Das auto is a well established and is a well-known group in the automobile industry.
BCG Matrix of Das Auto. Ø Stars: Volkswagen, Audi- These two brands are both extremely popular in both Europe and America. They deliver innovative products to the market every year, with their new model releases. These two brands sell the most units of all the Volkswagen brands.
Ø Cash Cows: Bentley, Lamborghini- These two brands are similar in their appeal to the high-end luxury markets. The markets tend to stay fairly stagnant with little growth, however these high price vehicles continue to bring in millions every year.
Ø Question Marks: Seat (Fiat 500)- With the acquisition of SEAT and the recent relaunch of the Fiat 500 (in the American market), we have yet to see where this vehicle will go from here. There environmental and social factors lead us to believe there is a growing market for vehicles such as this.
Ø Dogs:
Commercial
Vehicles-
With
so
much
commercial
competition, Volkswagen Commercial Vehicles produces quality vehicles, but it not the market leader by far.
Conclusion To conclude, Das Auto is one of the most profitable companies in the world due to several reasons such as Diversified portfolio, strong brand awareness, strong financial position, creative marketing campaigns and up to date technology for manufacturing. The group has the opportunity to now start manufacturing electric cars and they also have to strive to keep updating their existing models and constantly innovate new ones.
