Analyzing BCG Matrix and Strategic Management

The provided assignment delves into the world of strategic management, specifically analyzing the BCG (Boston Consulting Group) matrix as a tool for evaluating business strategy. It highlights the potential problems with this framework, such as ignoring other market indicators and high costs associated with products in the dog category. The importance of strategic management is emphasized, particularly in the face of competitive challenges faced by businesses like BP and the steel industry. A critical examination of Porter's Five Competitive Forces is also mentioned, along with references to various strategic management theories and frameworks.

Running head: STRATEGIC MANAGEMENT
STRATEGIC MANAGEMENT
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Introduction......................................................................................................................................2
Task 1...............................................................................................................................................2
Analysis of the factor that offer the most significant opportunities and threats to BP using
PESTLE...........................................................................................................................................2
Task 2...............................................................................................................................................5
Analysis of world steel industry using Five Forces.........................................................................5
Selection of products of Apple Inc and analyzing market share using BCG matrix.......................6
Analyzing the potential problems with the BCG matrix.................................................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................10

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Introduction
The report focuses on the significance of strategic management of the organization
operating in the competitive business environment. Strategic management basically involves
identification of how the enterprise stacks up in comparison with other rivalries and the
opportunities as well as threats facing them. This has huge significance in the organization as it
helps to optimize profit in the long run and improve their financial performance (Bisbe &
Malagueño, 2012). The first section of the study highlights on the major oil company BP that
faced complex environment in the year 2013. The factors that provide the most important
opportunities as well as threats to this company are analyzed in this paper using PESTLE. The
second section of the report reflects on the analysis of the consolidated steel industry using the
Porter’s Five Forces. The market share of this steel industry is also analyzed by using BCG
matrix. The study also discusses about the potential problems that is integrated with the BCG
matrix.
Task 1
Analysis of the factor that offer the most significant opportunities and threats to BP using
PESTLE
British petroleum (BP) is a British multinational gas and oil corporation that is
headquartered in England and UK. It is one of the world’s biggest corporations, which has been
ranked sixth in terms of market capitalization. It is the vertically integrated enterprise that
operates in every area that includes exploration, manufacturing, refining, distribution and
marketing. Their biggest sources of their oil production are USA and Russia. This company has

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also energy business that is active in windpower a well as biofuels. This corporation has been
involved in various environmental as well as safety incidents. The Deepwater Horizon Oil spill
that occurred in the year 2010 is the biggest accidental oil release into the marine waters. This
resulted in major health, economic and environmental outcome.
There are several factors that contributed to opportunities and threats to BP, which has
been explained by applying PESTLE (Yüksel, 2012). It is an acronym of Political, economic,
social, technological, legal and environmental. PESTLE is basically an analytical instrument that
is used for making strategic business planning. This strategic framework is used for analyzing
external influences on BP.
Political-The big issue of Deepwater Horizon disaster caused by spill of oil crates threats to BP
as they was under huge pressure owing to other oil sectors. As a result, there was huge
fluctuation in the price of oil(Ho, 2014) This is reflected by the fact that the oil prices hiked to
about $120 barrel during the year 2008, declined to about $30 during the recession period and
then recovered to about $100 in the year 2012. Owing to this price of oil, the industry also faced
huge challenges from their rivalries.
Economic-Historical evidences reflect that political instability in US and rise in demand of oil
from India as well as China lead to increase in prices of oil. This in turn provided them
opportunity to stabilize the company. However, they strategized to invest huge amount of money
on oil as well as gas manufacturing and in infrastructure (Kapferer, 2012). Moreover, the
inflation rate and exchange rate also influences the BP enterprise.
Social- The marketing strategies of BP also gets influenced by the increase in factor in the
domestic gas as well as oil price. In addition, variation in climate has been considered as another

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factor that influences the BP business. Income distribution is one of the social factors that
influence the organization. This creates opportunity to BP as the increase in income distribution
increases the demand for oil since middle class people uses more energy (Ho, 2014). Moreover,
rise in total population of the national also leads to increase in demand for oil despite there is less
improvement in distribution in income. Hence, this lowers the risk of this company.
Technological- This is one of the major factors that contributes to competition in this energy
market. This poses threat to BP as they had to invest huge amount of money for reducing the
greenhouse gas emission. In fact, they also invested in new technology for oil production process
in order to improve sub-sea oil technology (Eden & Ackermann, 2013). Additionally, another
threat posing BP is to provide employees skills training for helping them adapt with
technologies.
Legal- Fuel duty as well as taxation of the government acts impacts the oil price. In fact, the
Renewable transport Fuel obligation act pressures the customers for using the bio-fuels, which
might deteriorate sales in the oil sector. However, the EU emission scheme for trading poses
threats to this particular company. In addition, as all these laws impacts the operation, product
demand and pricing of this company. Therefore, this organization is required to consider
acquiring monopolies from legislation and also from the offshore regulation of trade.
Environmental- It has been stated by () that, the change in climate also impacts the oil sector of
the country. This factor creates huge threat to the company as they have to reduce greenhouse
emission with huge effort. In addition to this, for cutting the greenhouse gas emission by near
about 40%, this company has adopted new strategy by promoting utilization of the nuclear

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power. However, maintaining proper infrastructure and avoiding further damage in the pipelines
as well as oil well, the company faces threat in making proper sustainable management.
Task 2
Analysis of world steel industry using Five Forces
Recent evidences reflect that the consolidated steel industry has been static as well as
unprofitable for over the last few years. In this present century, the global steel industry has seen
huge revolution. The porter’s five forces facilitate to analyze the varying attractiveness of this
industry, which is described below:
 Power of buyers-Some of the major buyers of this steel involves global car producers
such as Toyota, Ford etc and leading producers of can including Crown Holdings that
makes near about one-third of the food cans manufactured in the Europe as well as North
America. These enterprises purchases in huge volume and thus coordinating purchases
across the globe (Dälken, 2014). However, these car producers are the sophisticated users
that lead to technological development of their materials.
 Power of suppliers-The vital material for the steel manufacturers is iron ore. Some of the
major ore producers that control 70% of the world market involve- CVRD, BHP Billiton
and Rio Tinto. In the year 2005, the producers of iron ore has exploited surging huge
demand by enhancing prices by near about 72 %. Even in the year 2006, these
manufacturers also enhanced prices by about 19%.
 Threats of new entrants- The two most powerful groups entered the global steel market
in the past 10 years (D'Costa, 2013). Firstly, after the period of privatization, Russian

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manufacturers including Severstal entered the export market and exported steel by near
about 30 million tonnes by the year 2005. During the period 2003-2005, the Chinese
manufacturers also invested in some of the new manufacturing facilities at the rate of
30% per year. Furthermore, the share of Chinese of global capacity has enhanced by
more than about two times that is 25% in the year 2006. However, the Chinese
manufacturers have become one of the third biggest exporters in the world behind Russia.
 Threats of substitutes- Steel being the technology of 19th century has been increasingly
substituted by some other materials that includes aluminum in plastics, packaging,
ceramics, cars and in several other high technology applications (Hill, Jones & Schilling,
2014). Advancement of technology of Steel works to decline requirement and hence steel
cans became thinner for the past few decades.
 Competitive rivalry- Recent study reflects that this sector has been highly fragmented for
the last few years. The global top five manufacturers mainly accounted for about 14% of
the total production. Steels are basically sold in account of commodity basis thereby by
tonne. In fact, the growth of demand for steel averaged to about 2% per annum in the late
20th century. In the beginning of the 21st century, this industry faced boom in demand that
is especially driven by the Chinese growth. Some of the enterprises involving Nucor,
Thyssen-Krupp, Mittal usually responded by purchasing weaker players of this industry.
Historical evidences also reflect that Mittal mainly accounted for 10% of the global
production in the year 2007. They actually decreased the total capacity in some of their
production centers.

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Selection of products of Apple Inc and analyzing market share using BCG matrix
BCG matrix is basically a framework that is created by Boston Consulting Group for
evaluating strategic position of brand portfolio in business and its potentiality (BCG Matrix for
Apple Inc.. 2018). This matrix classifies the business portfolio into four different categories
including- stars, question mark, cash cows and Dogs based on the growth rate of industry and its
relative share in market. However, these two dimensions generally reveal probability of business
portfolio as accounted by cash required to support this unit and the amount generated by it. This
analysis also helps the business to understand which brands they should make their investment.
Apple Inc is one of the biggest manufacturers of the electronic devices, which has market share
in global sector. The products of Apple Inc that are selected for this analysis involve- iPod,
iphone, Apple TV and Mac Book.
Stars-The products that are considered in this category have higher market share and have huge
growth potential in the respective industry. The star products have the potential to become cash
cows for the firms in future. iphone has been considered as star products as it has huge demand
in market and high market share as well as growth rate.
Cash Cows-This category in this matrix signifies those products which generate higher income
for the firms owing to bigger market share of products (BCG Matrix for Apple Inc.. 2018).
Nevertheless, the products lying in this category have the ability to bring more capital to firms as
they have high demand in market. Mac Books are regarded as cash cows for this enterprise as
this product generates large profit and its market share is also high. But they are kept under this
category since they lose their growth in market.

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Question Mark- This category is mainly used for identifying the products that have the potential
of becoming star products for the enterprise. These products have lower market share and low
growth rate in the industry. Apple TV lies in this category as it could not capture good market as
compared to others. As a result, the sales of this product declined at high rate over the last few
years and thus it has been one of the vital areas of their concern.
Dogs-This category indicates the products that are expected to have huge growth potential. These
products fail to deliver expected results and thus become makes loss for the respective firm.
Apple’s iPod has been classified in this category as its growth rate in the market has been
continuously falling over the years. Moreover, its market share and growth rate also declined as
it could not bring in higher profit for the firms.
Figure 1: BCG matrix of Apple Inc
Source: (BCG Matrix for Apple Inc.. 2018)

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Analyzing the potential problems with the BCG matrix
Some of the potential problems of this BCG matrix are given below-
 The market cannot be clearly defined under this framework
 This framework ignores other indicators of probability apart from market share and
growth rate
 There are times when products lying under dog category might help to gain competitive
advantage against other rivalries
 Higher market share does not always indicate higher profit as high cost is also involved
in it. However, this model does not consider high cost of product.
Conclusion
It is evident from the above study that strategic management is extremely important for
every enterprise as it helps them to attain higher profit margin and improve the performance of
business. As the companies in the present world face huge challenges from their competitors,
the management of these companies should adopt proper strategy in order to mitigate these
challenges. The above study also highlights that both BP and the world steel industry has been
facing several difficulties in the competitive marketplace. However, strategic management helps
them to maintain stable business growth and attain good reputation in the marketplace.

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References
BCG Matrix for Apple Inc.. (2018). BCG Matrix Analysis. Retrieved 23 March 2018, from
http://bcgmatrixanalysis.com/bcg-matrix-for-apple-inc/
Bisbe, J., & Malagueño, R. (2012). Using strategic performance measurement systems for
strategy formulation: Does it work in dynamic environments?. Management Accounting
Research, 23(4), 296-311.
Dälken, F. (2014). Are porter’s five competitive forces still applicable? a critical examination
concerning the relevance for today’s business (Bachelor's thesis, University of Twente).
D'Costa, A. (2013). The global restructuring of the steel industry: Innovations, institutions and
industrial change. Routledge.
Eden, C., & Ackermann, F. (2013). Making strategy: The journey of strategic management.
Sage.
Gamble, J., & Thompson, A. A. (2014). Essentials of strategic management. Irwin Mcgraw-Hill.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an
integrated approach. Cengage Learning.
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2012). Strategic management cases:
competitiveness and globalization. Cengage Learning.
Ho, J. K. K. (2014). Formulation of a systemic PEST analysis for strategic analysis. European
academic research, 2(5), 6478-6492.

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Johnson, G. (2016). Exploring strategy: text and cases. Pearson Education.
Kapferer, J. N. (2012). The new strategic brand management: Advanced insights and strategic
thinking. Kogan page publishers.
Kim, W. C., & Mauborgne, R. A. (2014). Blue ocean strategy, expanded edition: How to create
uncontested market space and make the competition irrelevant. Harvard business review
Press.
Lasserre, P. (2017). Global strategic management. Palgrave.
Slack, N. (2015). Operations strategy. John Wiley & Sons, Ltd.
Stead, J. G., & Stead, W. E. (2017). Sustainable strategic management. Routledge.
Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2017). Strategic management
and business policy. pearson.
Yüksel, İ. (2012). Developing a multi-criteria decision making model for PESTEL
analysis. International Journal of Business and Management, 7(24), 52.