The BCG index was designed to help managers determine how departments were performing in their company (NetMBA, 2002). The matrix is a simple calculation that labels the departments as a star, question mark, cash cow or dog. These designations have specific meanings as to the market position and cash flow. The company in question has had two departments analyzed using the BCG matrix. The question is to the efficacy of this analysis.
The two quadrants that the analysis came up with were those for the question mark (upper right) and the other is in the cash cow quadrant (lower left). The electronics department was rated as the question mark and the appliance division was a cash cow. The findings suggest, according to the BCG chart, that electronics is a department that consumes a lot of cash because it is growing rapidly, but it has small market share. This means that the electronics could gain market share and eventually become a real money maker, but it could also continue to absorb cash and never gain market share which would cost the company money with no return. The appliance department is a cash cow because it is in a slow growing market and generates a lot of cash for the company.
It seems that the company should use the appliance department to fund the electronics department until market growth slows in electronics. This may be risky because electronics has been a volatile market for a long time, but it is possible to see where the trend heads over a two to five-year time period. The company could also use a McKinsey or a COPE analysis to further analyze the departments to support the BCG findings.
This type of analysis does have some problems because of its narrow focus, but it is a good starting point. The efficacy of the approach is that it should only be used with supporting evidence. This analysis does show the approximate cash flow of the two departments.
Apple, Inc. is one of the most successful companies in the world. It has gotten this way because the managers of the company have maximized what they consider to be strengths and minimized the company's weaknesses. As with any company, both exist, but it is the management of what is known as a SWOT (strengths, weaknesses, opportunities, and threats) analysis by both the company itself and its competitors that determines its overall usefulness. Conducting a SWOT analysis of Apple, Inc. will help to determine what weaknesses exist at Apple that can be exploited.
Apple has many strengths which have allowed it to become so successful. Apple generously funds its research and development department because that has been the primary strength of the company. R & D. is important for any company, but for a major electronics manufacturer it is crucial so that the company can build new business. Another strength that the company has is that it has a strong hold on customers that it has developed for its computer products. With Apple, computers were the original products that were sold. Apple has a very loyal following because it has consistently produced a product that is superior to other personal computers. Maintaining this portion of the business is important because it acts as a base for all the other products that Apple tries to introduce. A third strength can be seen in the fact that Apple has built a brand that is one of the most successful in the world. The importance of branding cannot be understated. Apple maintains its brand by developing innovative and superior products that further build the brand. The reason this is probably Apple's greatest strength is that the company can sell a great deal of product based on its name alone. Apple also has diversified successfully into other markets. It is not enough to have a single product; Apple realized that they needed to enter other markets. So, they entered the music, phone and PDA markets. This further strengthened the overall status of the company and helped build its brand even further. A final strength is that though Apple has gotten into many different markets, they have kept to just a few strong markets. Apple does not get into a market unless they control the original technology. This means that they create their own markets and have immediate, large market share.
The second component of the SWOT analysis is a company's weaknesses. One issue for Apple is that there are many people who will not buy an Apple computer because they have not allowed clones to be created of their products. This means that their computer business could not grow to as great a business as possible. Apple has also become a one person company in many respects. Steve Jobs is the driving force behind the company and many worry that when he steps down (as he recently did) the innovation and drive of the company will stop. A third weakness is that there may be an end to the innovation that any electronics company creates. There is evidence that computers have gone almost as far as they can go using present technology. Although, there can be innovation, it is far from certain that new methods of computing will work. Apple has a large loyal fan base which could easily be turned if some other company comes up with a more innovative product or if Apple delivers a dud. A final weakness can be seen in the partnerships that Apple has developed with other industries specifically the music industry. iTunes is currently not able to deliver all artists for its customers because there remains an argument over what Apple charges per download. This could mean that more artists will flee to other download sites which have a more generous policy.
A SWOT analysis also includes a look at the opportunities a company has. There will always be new markets that Apple can exploit. This is an opportunity that all companies look for. Apple also has the opportunity to further build its brand through its stores. Apple has built stores around the United States and other parts of the world, and this will potentially build its brand even further. Apple has established the tablet market and they can continue to exploit this market by producing a product that is superior to other manufacturers. Another opportunity is with the iPhone market. There are many players in this market, but the variety of apps and superiority of the iPhone over competitors means that Apple has the opportunity to dominate this large segment of the cell phone market for many years. Finally, Apple iTunes has the opportunity to further its hold in the music distribution market if it further works with artists and music companies to sell a wider variety of music.
Every company has potential threats which can slow or completely retard growth. Many companies have been heavily impacted by the world financial downturn over the past three years, and Apple is no exception. Consumer electronics companies rely on their customers to have a great deal of disposable income that they can use for luxuries. Competition is also a threat because it is impossible to keep other companies from reverse engineering the new technology Apple brings to the market. This cuts into Apple's profit margin as consumers are wooed away from their products. Many countries do not police products in a very persistent manner. This means that Apple is faced with product, and possibly store pirates. Another threat is the fact that with Steve Jobs leaving Apple, the management team at Apple could drive the company into the ground. There is also always the threat that a product release will causes Apple to lose business because it is unsuccessful.