It is very popular in consulting because it provides a big picture of options that are MECE. The matrix is generally divided in four options rate 2x2, which indicate different strategic actions for each option within the respective segment.
A 2x2 matrix is an elegant instrument to effectively communicate insights
Single options are plotted into the matrix taking two key decision criteria into account. The chosen two dimensions are independent from each other. Hence, criteria need to be carefully selected. Use a 2x2 matrix in your interviews as a visual summary of the findings It is recommended to use matrices if possible in case interviewsas it will show the interviewer that you can break down complex ideas and communicate these in a structured manner.
A matrix is an ideal tool to synthesize complex ideas into simple options. As an example, imagine you need to make an investment decision Question: In which business segments should we invest further?
Important data: Importance for our business fraction of the overall revenue Expected performance Growth Key takeaways for a 2x2 matrix Scatter graph of two variables. Provides an effective overview of where to focus first before further analysis. Limited to only two variables.
Since both criteria are hard to quantify, proxies are used to illustrate them. Based on these two criteria, investment or divestment decisions can be taken for single products once they are plotted into the options rate 2x2. Dogs: Low relative market share in a slow growing mature market.
Bid Size Defined
Products mostly do not generate profit and may usually just break even. Divest, as these products have a options rate 2x2 effect on the overall profitability of the company. Question Marks: Low relative market share in a relative young but promising market growing.
Potential of becoming stars if market share can be increased.
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If necessary market share is not reached, likely to turn into a poor dog, as soon as the market gets more mature. Careful analyses are needed to determine if to invest or not. Creates the highest cash flow.
Stars: High market share in a promising market. To turn a star into a future cash cow, heavy investment is needed to fight competition and expand market share.
- 2x2 Matrices and the BCG matrix
- Measures of Association
- The bid size represents the quantity of a security that investors are willing to purchase at a specified bid price.
- Risk Differences and Rate Differences Risk Differences Instead of comparing two measures of disease frequency by calculating their ratio, one can compare them in terms of their absolute difference.
Key takeaways for the BCG matrix Helps to analyze where to invest or divest. Ideally a product should develop from a question mark to a star to a cash cow. Use the Ansoff matrix to analyze revenue growth options for a company Besides the BCG matrix, the Ansoff matrix is one options rate 2x2 the most known two-by-two matrices. The underlying question of this graph is how a company could achieve future growth in terms of revenue. Here, four different strategic options are available: market penetration, market development, product development or diversification.
Market Penetration Company is trying to grow within an existing market with existing products. Can be achieved by attracting new customers first buyerswhich bought previously from competitors stealing market share. Low risk and growth potential. Market Development Company is trying to grow in a new market with existing products. New markets could be on a regional, national or international level.
Risk and growth potential are considered to be higher than the ones of a market penetration strategy. Product Development Company is trying to grow within an existing market but with new products. New products do not need to be necessarily new, but can also be adaptions or updates to existing products developed using companies core competencies.
Risk and growth potential are comparable to these of a market development strategy. Diversification Company is trying to grow in options rate 2x2 new market with a new product. Horizontal diversification: products are often unrelated to current products, but have the potential to attract current customers.
Concentric diversification: products often display synergies with current products and have the potential to attract new customers.
Hotel Cafe Restaurant 2x2 Wooden Table
Lateral diversification: new products have no relation or synergies with where to make enough money products.
Risk and growth potential are the highest of all strategies. Key takeaways for the Ansoff matrix Helps in answering how future growth should be achieved. Each strategy has a different growth and risk potential. Solve the DairyCo case to apply the Ansoff matrix Do you have questions on this article?