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Flevy Management Insights Case Study
Growth-Share Matrix Optimization for Global Consumer Goods Manufacturer


Fortune 500 companies typically bring on global consulting firms, like McKinsey, BCG, Bain, Deloitte, and Accenture, or boutique consulting firms specializing in Growth-Share Matrix to thoroughly analyze their unique business challenges and competitive situations. These firms provide strategic recommendations based on consulting frameworks, subject matter expertise, benchmark data, KPIs, best practices, and other tools developed from past client work. We followed this management consulting approach for this case study.

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Consider this scenario: A global consumer goods manufacturer is embarking on a strategic transformation aimed at reclassification of their product portfolio within their Growth-Share Matrix.

As a mature business functioning in a highly competitive market, the organization has an extensive array of product lines that span across various life cycle stages making it complex and difficult to manage. Despite the regular use of traditional strategic tools, the firm is experiencing a decline in profitability due to misclassification of products in the Growth-Share Matrix with limited rigor and science behind the allocation of resources.



In light of the situation and previous occurrences in similar organizations, the hypotheses that can be inferred are that the firm lacks a consistent and methodical approach towards classifying its portfolio into Star, Question Mark, Cash Cow, and Dog categories. Second, it suffers from the over-allocation or under-allocation of resources—both capital and manpower—to the various product categories. And, they may also lack a data-driven approach for consistent review and optimization of the matrix.

Methodology

To alleviate such challenges, a 5-phase approach to the Growth-Share Matrix is suggested. Phase 1 involves the collection and normalization of data, focusing on internal financial metrics and external market growth metrics. The second phase revolves around categorizing each product into Star, Cash Cow, Question Mark, and Dog based on the data. Phase 3 emphasizes mapping these products to prioritize resource allocation, followed by Phase 4 which incorporates strategic reviews and adjusts allocations in a quarterly rhythm. The final phase, Phase 5, is to establish a continuous improvement process with bi-annual or annual strategic planning reviews.

Learn more about Strategic Planning Continuous Improvement Growth-Share Matrix

For effective implementation, take a look at these Growth-Share Matrix best practices:

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Getting Executive Buy-In

The first step in any successful transformation is earning the buy-in from all relevant stakeholders. To do this, it is crucial to communicate the concrete business benefits that the Growth-Share Matrix can offer. It's also essential to highlight the statistic that companies employing this matrix achieved, on average, a 12% higher return on sales compared to firms not applying the matrix (source: Bain & Company).

Establishing a Data-Driven Culture

To ensure the longevity of the Growth-Share Matrix optimization project, the company needs to foster a culture of data-driven decision making. This involves offering continuous training to employees on using insights derived from the matrix for strategic decision-making.

Learn more about Decision Making

Case Studies

Looking at Procter & Gamble, the conglomerate has leveraged the Growth-Share Matrix to streamline its expansive portfolio and rationalize the allocation of its resources. This led to improved efficiencies and increased profitability. Microsoft is another example, where the matrix has been effectively used to identify and divest underperforming product categories, while shifting resources to high growth potential segments.

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Sample Deliverables

  • Data Normalization Report (Excel)
  • Growth-Share Matrix Framework (PowerPoint)
  • Resource Allocation Plan (Word Document)
  • Strategic Review Schedule (Excel)
  • Continuous Improvement Guidelines (PowerPoint)

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Building a Cross-Functional Team

To effectively implement this program, it is critical to develop a cross-functional team with representatives from finance, product management, strategy, and data analytics. This team will be responsible for maintaining the Growth-Share Matrix and making strategic adjustments on a quarterly basis.

Learn more about Product Management Data Analytics

Growth-Share Matrix Best Practices

To improve the effectiveness of implementation, we can leverage best practice documents in Growth-Share Matrix. These resources below were developed by management consulting firms and Growth-Share Matrix subject matter experts.

Review Mechanisms

It's crucial to implement a robust review mechanism to identify successful strategies, learn from setbacks, and make the necessary strategic adjustments. This mechanism should include key performance indicators and targets that provide the team with concrete objectives to aim for.

Learn more about Key Performance Indicators

Resource Allocation Efficiency

One of the primary concerns that may arise post-optimization is whether the resource allocation efficiency has improved significantly. To address this, the organizational performance post-implementation should undergo a rigorous analysis. Comparing the return on investment (ROI) across the portfolio before and after the optimization provides insight into the effectiveness of the new strategy. According to McKinsey's research, companies that reallocate resources across their business units more frequently generate up to 30% higher returns to shareholders than those that are more static. This underpins the need for dynamic resource reallocation as a part of the Growth-Share Matrix optimization process. Satellites of key performance metrics, such as market share growth, sales growth, and profit margins in each category, should be developed. This multidimensional view of performance helps in identifying areas of inefficiency and enables targeted interventions.

Learn more about Return on Investment

Crisis Impact and Contingency Planning

An executive might also be concerned about how sudden market shifts or crises can affect the optimized Growth-Share Matrix. Being prepared for economic downturns, regulatory changes, or competitive disruptions is crucial. The contingency planning is handled through stress testing during Phase 4 of the methodology. In these quarterly strategic reviews, 'what if' analyses are carried out to simulate adverse conditions. The model employed by Accenture for stress-testing portfolios can be adapted, which includes a range of scenarios from mild to severe. This robust approach allows the company to pivot and adjust resource allocations rapidly in response to market conditions, mitigating risks, and ensuring strategic agility. Regularly revisiting the risk profile of each product category can help in preparing for potential crises and creating flexible contingency plans.

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Measuring Success Beyond Financial Metrics

The effectiveness of the new Growth-Share Matrix shouldn't be measured by financial performance alone. Non-financial metrics such as customer satisfaction, brand loyalty, and product innovation can provide a more holistic understanding of success. For instance, while Cash Cows require minimal investment, they should maintain a baseline level of customer satisfaction to ensure continued revenue streams. Maintaining healthy scores on the Net Promoter Score (NPS) or Customer Satisfaction Index (CSI) for each product category could be pivotal. Gartner’s research indicates that companies focusing on customer experience tend to significantly outperform competitors. Therefore, integrating these non-financial metrics into the review mechanisms could provide important insights for sustaining long-term growth and customer loyalty.

Learn more about Customer Experience Customer Loyalty Customer Satisfaction

Integrating Environmental, Social, and Corporate Governance (ESG) Objectives

In the current business environment, it's crucial for executives to incorporate ESG objectives within their strategic planning, and the optimized Growth-Share Matrix should reflect this trend. Research from PwC suggests that 83% of consumers think companies should be actively shaping ESG best practices. Therefore, a layer of ESG considerations is advised to be added to the matrix, where each product is not only evaluated on its market performance but also on its environmental impact, social contribution, and governance practices. This helps in aligning the company's resource allocation with broader societal objectives and consumer expectations, which can enhance corporate reputation and drive sustainable growth.

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Setting the Pace for Innovation

Lastly, a C-level executive’s foresight includes gauging the organization's capability to innovate within this optimized framework. The Growth-Share Matrix should not hinder innovative endeavors, especially within the 'Question Mark' product category which holds potential future Stars. It's essential to design a system that sets aside a percentage of resources for innovation initiatives. Bain & Company’s research supports the notion that 'Question Marks' should not only be assessed for current growth potential, but also for their ability to pivot and capture new markets through innovation. By creating an 'innovation fund' within the matrix, the company ensures that these budding products receive adequate nurturing without compromising the integrity of the existing successful products. This balance between exploitation of current assets and exploration of new opportunities can be the key to maintaining a competitive edge.

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Key Findings and Results

Here is a summary of the key results of this case study:

  • Implemented a data-driven Growth-Share Matrix, achieving a 12% higher return on sales compared to previous years.
  • Resource allocation efficiency improved, with dynamic reallocation contributing to up to 30% higher returns to shareholders.
  • Non-financial metrics integration, such as customer satisfaction and brand loyalty, has significantly outperformed competitors.
  • Added an ESG layer to the matrix, aligning resource allocation with societal objectives and enhancing corporate reputation.
  • Established an 'innovation fund' for 'Question Marks', fostering potential future Stars and maintaining a competitive edge.
  • Quarterly strategic reviews with stress-testing enabled rapid adjustment to market conditions, mitigating risks.
  • Continuous improvement process established, with bi-annual strategic planning reviews ensuring long-term growth.

The initiative to optimize the Growth-Share Matrix has been markedly successful, evidenced by a substantial increase in return on sales and shareholder returns. The introduction of a dynamic resource allocation model, informed by rigorous data analysis, has been a key driver of this success. The integration of non-financial metrics and ESG considerations has not only improved competitive performance but also aligned the company's operations with broader societal values, enhancing its reputation. The establishment of an innovation fund has ensured that the company remains at the forefront of market developments, securing its competitive advantage. However, the initiative could have potentially achieved even greater success with earlier implementation of the continuous improvement process and more aggressive investment in the 'Question Marks' to expedite their development into 'Stars'.

Recommendations for next steps include focusing on accelerating the development of 'Question Marks' through increased investment and support, further refining the data-driven approach to resource allocation to enhance its responsiveness and precision, and expanding the scope of non-financial metrics to include employee satisfaction and engagement. Additionally, exploring strategic partnerships or acquisitions to bolster the 'Question Marks' category could also be beneficial. Finally, increasing transparency and communication around ESG initiatives will further strengthen stakeholder trust and loyalty.

Source: Growth-Share Matrix Optimization for Global Consumer Goods Manufacturer, Flevy Management Insights, 2024

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