Measurability A major limitation of the growth/share matrix is that only utilises a single measure for each axis. The external opportunity axis utilises market growth whilst the internal strength utilises relative competitive position. This may result in a too broad positioning of a SBU/product/service along each axis, and consequently an overall positioning within the growth/share matrix that is not best. It is like analysing a car on performance and satisfaction, using only acceleration and smoothness respectively. Again, a position within the growth/share matrix that is not ideal could result in the wrong strategic decisions being made. De Wit and Meyer illustrate and describe another matrix alongside the BCG Growth/Share matrix, the GE/McKinsey matrix, where composite measures are used for each axis. Moreover in the GE/McKinsey matrix each axis is divided into three parts, and each bubble is in two shades showing the relative share of the SBU/product/services within the total business size. As such we can say that the BCG Growth/Share matrix is rather crude in comparison. Assuming that the side-by-side comparison depicted by De Wit and Meyer of the BCG Growth/Share and GE/McKinsey matrices refer to the same organisation, on can at a glance safely say that the GE/McKinsey matrix is gives more detail, and in particular, positions the bubbles differently. If Bank A used the GE/McKinsey matrix instead of the BCG Growth/Share one different competitive positions would be determined, with consequently different strategic choices. What is more important to bear in mind is that if Bank A used the BCG Growth/Share matrix while Bank B used the GE/McKinsey one, in view of what we have seen, one would assume that it is Bank B that would take the better strategic decisions to the detriment of Bank A, all other things being equal. Another limitation of the growth/share matrix is the element of measurement when determining the corporate distribution. Hedley (cited in De Wit and Meyer, 2005) suggests that either turnover or assets employed are used to determine the size of the bubbles. If just the elements of measurement as suggested by Hedley were used, this could eliminate or make difficult the determining of the corporate distribution in relation to a product or service. For example in Bank A’s growth/share matrix, bubble 10, Alternative Delivery Channels, is a service that does not actually generate or turnover cash. One could try to quantify the assets employed but this would complicate the matter beyond the simplicity of the growth/share matrix. Perhaps in addition to the two elements suggested by Hedley, one can add costs saved. In fact for Bank A the Alternative Delivery Channels provide two broad benefits, adding convenient channels for providing customer service, as well as reducing costs for Bank A. Thus if bubble 10 had not been included in Bank A’s growth/share matrix for lack of an appropriate measure of corporate distribution, it would have lost an important service for gaining a competitive position over Bank B. Alternative Delivery Channels are in fact the best placed star on Bank A’s growth/share matrix for receiving further investment to be nursed into a cash cow. A similar reasoning may be adopted for the deposits of Bank A. Deposits do not generate cash but they are an important product for any bank as they serve as a source from which to be able to offer advances. In the case of Bank A had deposits been left out of the growth/share matrix the competitive imbalance between deposits and advances with Bank B would not be evident. This might probably result in Bank A taking no action to improve the whole advances portfolio in respect of Bank B. Profitability for an SBU/product/service is implied by the position within the growth/share matrix. A cash cow for example would usually have the greatest profitability, question marks and dogs would hardly be expected to provide any profits at all. This would be true in most cases but there are exceptions. For example an organisation may be fighting a price was with an aggressive new entrant and might be selling a cash cow product at cost or just above to discourage the new entrant in the long run. Likewise question marks and dogs might be serving niche markets and may indeed be generating adequate profits whilst receiving sufficient investment of resources in order to maintain or improve their positions. These scenarios might not apply to Bank A in all circumstance but they help keep things in perspective when deciding on the strategic course of action for each element in the growth/share matrix. |
