FAKULTI PENDIDIKAN DAN BAHASA

BBPS4103

STRATEGIC MANAGEMENT

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PUSAT PEMBELAJARAN : OUM CAWANGAN TAWAU

September 2019

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 TABLE OF CONTENT

NO. CONTENT PAGE

1.0 BCG MATRIX 3

2.0 STRATEGIES 6
3.0 GE MATRIX 8
4.0 DIFFERENCES 10

REFERENCES 12

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1.0 BCG MATRIX

In the business world, much like anywhere else, the problem of resource scarcity is affecting the
decisions the companies make. With limited resources, but many opportunities of using them, the
businesses need to choose how to use their cash best. The fight for investments takes place in every
level of the company: between teams, functional departments, divisions or business units. The
question of where and how much to invest is an ever going headache for those who allocate the
resources.

How does this affect the diversified businesses? Multi business companies manage complex
business portfolios, often, with as much as 50, 60 or 100 products and services. The products or
business units differ in what they do, how well they perform or in their future prospects. This
makes it very hard to make a decision in which products the company should invest. At least, it
was hard until the BCG matrix and its improved version GE-McKinsey matrix came to help. These
tools solved the problem by comparing the business units and assigning them to the groups that
are worth investing in or the groups that should be harvested or divested.

The BCG Matrix (also known as the Boston Consulting Group analysis, the Growth-Share matrix,
the Boston Box or Product Portfolio matrix) is a tool used in corporate strategy to analyse business
units or product lines based on two variables: relative market share and the market growth rate. By
combining these two variables into a matrix, a corporation can plot their business units accordingly
and determine where to allocate extra (financial) resources, where to cash out and where to divest.
The main purpose of the BCG Matrix is therefore to make investment decisions on a corporate
level. Depending on how well the unit and the industry is doing, four different category labels can
be attributed to each unit: Dogs, Question Marks, Cash Cows and Stars.

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RHB Bank Berhad is the main subsidiary under RHB Banking Group. It is under the Commercial
Banking Groupand is fully owned by RHB Capital Berhad. RHB Bank wholly owns RHB Islamic
Bank Berhad. Under a new corporate structure, various businesses have been categorized into four
Strategic Business Units (SBUs). RHB Bank Berhad is under the retail banking category, serving
retail customers and also small businesses. The bank’s forte is in products such as insurance,wealth
management, hire purchase, cards and unsecured loans as well as secured loans that provide
mortgages for both individuals and also small and medium enterprises. RHB Banking Group has
gone through various mergers and partnerships, forming the RHB Banking Group as it is today.
Now, the fourth largest fully integrated financial services group in Malaysia, The RHB Banking
Group provides financial products and services through its main subsidiaries – RHB Bank Berhad,
RHB Investment Bank Berhad, OSK Investment Bank Berhad, RHB Insurance Berhad and RHB
Islamic Bank Berhad, while its asset management and unit trust businesses are undertaken by RHB
Asset Management Sdn. Bhd. and RHB Islamic International Asset Management Berhad.

On 16 March 2005, the RHB Banking Group became the first domestic financial group in Malaysia
to set up an Islamic banking subsidiary, known as RHB Islamic Bank Berhad. In November 2012,
the RHB Banking Group acquired OSK Investment Bank Berhad (OSKIB) and in April 2013, the
merger between OSKIB with RHB Investment Bank (RHBIB) made RHBIB the largest

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investment Bank in Malaysia by assets. With the recent merger of OSKIB and RHBIB, the
investment banking business is now in seven ASEAN countries and Hong Kong.

Here is the analysis of Boston Consulting Group Matrix according to the data given:

1) The Cash Cows

The product lines that fall within this category enjoy a large share of the market in a slow-growing
industry. This means that they are able to generate revenues in greater amounts than the investment
required to maintain their business. The product line may be considered boring and settled in a
mature market, with the company holding it to continue to generate revenues. The company will
attempt to milk these as much as possible with as little investment as possible.

Perbankan Runcit (RB) can be the cash cow for this matrix. The reason is it has large market share
which is 13.3% and the growth market is 9.2% which can be said as a fast growing industries. The
revenue generates also high, 2215.1 milion.

2) The Dogs

The dogs are those product lines or business units that have a smaller market share in a mature and
slow-growing industry. Usually, these product lines manage to earn what is put into them,
breaking-even and maintaining the market share. Generally this unit is largely worthless to the
company in terms of earning potential but may afford other benefits to the company such as the
creation of jobs as well as synergies that assist other business units. These benefits may be enough
for the company to keep this business unit active despite its less than exciting position. However,
dogs can negatively affect how investors judge the management of a company and it is suggested
that these product lines be sold off.

As for this category, Perniagaan Syariah (SB) fulfill the criteria. The market share for this line is
8.9% meanwhile the growth market only 6.8% and generate the lowest revenues among 4 business
which is 574.4 mil.

3) The Stars

As the name makes clear, stars are those business units that have a large market share in a fast-
growing industry. These product lines have a clearly visible market or niche leading path and

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require large amounts of funding to ensure that they can fight of competitors and maintain their
growth rate. Companies aim to turn stars into their next cash cows with the inevitable decline in
the growth of the industry. This can happen potentially if they are able to maintain their position
as a market leader. If this does not happen, then stars can turn into dogs.

Perbankan Perniagaan dan Transaksi (BTB) seems to fall in this category. It has large share in the
market which is 11.3% and slow growing market which is 9.2%. The revenue generates as much
as 970.3 million.

4) The Unknowns/Question Marks

The unknowns (also called question marks or problem children) are those business units that have
a smaller market share in a high-growth market. This is where most businesses will start from and
at this point the business unit has the potential to grow market share and turn into a star or lose
further marker share and turn into dogs when the growth of the market itself declines. Careful
study and analysis is required for business units in this category to assess their potential and worth.
If any potential is seen then further investment can be made into them.

I categorized the the Perbankan Borong into this category. Perbankan Borong has 3.4% market
share and 4.2% market growth. However the revenues is quite high which is 2601.70 mil.

2.0 STRATEGIES

Perbankan Runcit (RB) (Cash Cow)

The cash cows are the most stable for any business and hence the strategy generally includes
retention of the market share. As the market is not growing, acquisition is less and customer
retention is high. Thus customer satisfaction programs, loyalty programs and other such
promotional methods form the core of the marketing plan for a cash cow product / SBU.

Perbankan Perniagaan dan Transaksi (BTB) (Star)

All types of marketing, sales promotion and advertising strategies are used for Stars. This is
because in cash cow, already these strategies have been used and they have resulted in the
formation of a cash cow. Similarly in Stars, because of the high competition and rising market

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share, the concentration and investment needs to be high in marketing activities so as to increase
and retain market share.

Perbankan Borong (WB)(Unknown/Question Mark)

As they are new entry products with high growth rate, the growth rate needs to be capitalized in
such a manner that question marks turn into high market share products. New Customer acquisition
strategies are the best strategies for converting Question marks to Stars or Cash cows. Furthermore,
time to time market research also helps in determining consumer psychology for the product as
well as the possible future of the product and a hard decision might have to be taken if the product
goes into negative profitability.

Perniagaan Syariah (SB) (Dog)

Depending on the amount of cash which is already invested in this quadrant, the company can
either divest the product altogether or it can revamp the product through
rebranding/innovation/adding features etc.

Other than this, there are four strategies for BCG Matrix which are used after BCG Analysis. These
strategies are:

1) Build

By increasing investment, the product is given an impetus such that the product increases its market
share. Example – Pushing a Question mark into a Star and finally a cash cow (Success sequence)

2) Hold

The company cannot invest or it has other investment commitments due to which it holds the
product in the same quadrant. Example – Holding a star there itself as a higher investment to move
a star into a cash cow is currently not possible.

3) Harvest

Best observed in the Cash cow scenario, wherein the company reduces the amount of investment
and tries to take out maximum cash flow from the said product which increases the overall
profitability.

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4) Divest

Best observed in case of Dog quadrant products which are generally divested to release the amount
of money already stuck in the business.

3.0 GENERAL ELECTRIC MATRIX

The GE McKinsey matrix is a nine-box matrix which is used as a strategy tool. It helps multi-
business corporations evaluate business portfolios and prioritize investments among different
business units in a systematic manner. This technique is used in brand marketing and product
management. The analysis helps companies decide what products need to be added to a product
portfolio as well as what other opportunities should continue to receive investments.

The business world is becoming increasingly focused on its investment decisions as resources
become more and more scarce. Each decision needs to be the best use of investments and aim to
bring in the most return on this investment. For diversified businesses, the fight for resource
allocation becomes even more complex because multiple products, brands and portfolios need to
be managed. This matrix helps companies make these decisions in a more systematic and informed
manner.

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The matrix is a 3×3 grid. The Y-axis measures market attractiveness while the x-axis measures the
business strength. The scale is high, medium and low. A few key steps are necessary to create this
matrix. This dimension helps determine the attractiveness of the market by analyzing the benefits
a company is likely to get by entering and competing within the market. A number of factors are
studied within this analysis. These include the size of the market, its rate of growth, profit potential,
and the nature, size and weaknesses of the competition within the industry. Some factors used to
determine market attractiveness include:

i. Long term growth rate

ii. Size of the industry
iii. Industry Profitability (Entry barriers, exit barriers, supplier power, buyer power, threat of
substitutes etc)
iv. Structure of the industry
v. Product life cycle
vi. Demand
vii. Pricing trends

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viii. Labor
ix. Market Segmentation

The other main dimension that makes up this grid is the competitive or business strength of the
company itself. An assessment along this dimension helps understand whether a company has the
required competence to compete in a particular market. This can be determined by internal factors
such as assets, market share and development of this market share, brand position and loyalty,
creativity, and handling of market changes and fluctuations. This can also be determined by
external factors such as environmental concerns, government regulations and laws, energy
consumption etc. Some factors that can determine this business/competitive strength include:

i. Total market share

ii. Market share growth compared to competitors
iii. Strength of the brand
iv. Company profitability
v. Customer loyalty
vi. Value chain
vii. Product differentiation
4.0 DIFFERENCES

BCG matrix is a matrix used by large corporations to decide the ratio in which resources are
allocated among various business segments. Similar to this, GE matrix also helps firms decide
their strategy with respect to different product lines, i.e. the product they should add in the range
of products offered by them and in which opportunity the firm should invest.

Both BCG matrix and GE matrix are two-dimensional models, that are used by big business
houses, having several product lines and business units. The latter was developed as an
improvement over the former, and so overcomes many limitations.

The points depicted below, elaborate the fundamental differences between BCG and GE matrices:

1. BCG matrix can be understood as the growth-share model, that reflects a growth of
business and the market share possessed by the firm. On the other hand, GE matrix is also

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 termed as multifactor portfolio matrix, which businesses use in making strategic choices
for product lines or business units based on their position in the grid.

2. BCG matrix is simpler in comparison to GE matrix, as the former is easy to draw and
consist of only four cells, while the latter consist of nine cells.

3. The two dimensions on which BCG matrix is based are market growth and market share.
Conversely, industry attractiveness and business strengths are two factors of GE matrix.

4. BCG matrix is used by the companies to deploy their resources among various business
units. On the contrary, firms use GE matrix to prioritize investment among various business
units.

5. In BCG matrix only a single measure is used, whereas in GE matrix multiple measures are
used.

6. BCG matrix represents two degrees of market growth and market share, i.e. high and low.
In contrast, in GE matrix there are three degrees of business strength, i.e. strong, average
and weak, and industry attractiveness, are high, medium and low.

BASIS FOR BCG MATRIX GE MATRIX

COMPARISON

Meaning BCG Martrix, is a growth share GE Matrix implies multifactor portfolio

model, representing growth of matrix, that assist firm in making
business and the market share strategic choices for product lines based
enjoyed by the firm. on their position in the grid.

Number of cells Four Nine

Factors Market share and Market growth Industry attractiveness and Business
strengths

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 Objective To help companies deploy their To prioritize investment among various
resources among various business units.
business units.

Measures used Single measure is used. Multiple measures are used.

Classification Classified into two degrees Classified into three degrees

REFERENCES

Aaker, D.A. (1995). Strategic Management (4 thed.). New York, NY: John Wiley & Sons Ltd.

Bergen, M., & Peteraf, M.A. (2002). Competitor Identification and Competitor Analysis: A Broad-
Based Managerial Approach. Managerial & Decision Economics, 23, 157–169.

Cesare, A. & Piazza, U. (2011); Strategic Analysis through the General Electric/McKinsey Matrix:
An Application to the Italian Fashion Industry. International Journal of Business and Management,
Vol. 6, No. 5

Day, G.S. (1977). Diagnosing the product portfolio. Journal of marketing, 20 (6). 36-43

Doyle, P., & Stern, P. (2006). Marketing management and strategy (4 thed.). Essex, England:
Pearson Education Ltd.

Drummond, G., & Ensor, J. (2001). Strategic marketing: Planning and control (2nd Ed.). Oxford,
England: Butterworth Heinemann.

Hamidizadeh, M. R., Farsijani, H. & Moqaddas, P. (2011), Examination and analysis of dredging
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Harrison, J. and Jan, K. (1997), Strategic Management, translated by Behrouz Ghasemi, Hey’at
Publishing, Tehran. [Persian]

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Hooley, G.J., Saunders, J.A., & Piercy, N.F. (1998). Marketing strategy and competitive position
(2nd Ed.) Hertfordshire, England: Prentice Hall Europe

Jan, Y.C. (2002). A three-step matrix method for strategic marketing management. Marketing
Intelligence & Planning, 20 (5), 269–272.

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