The ‘positional’

school
 The ‘positional’ school
Premises of the Model Main Points of the School

• Strategies are generic, specifically common, • Focuses on a rational, analytical approach of

identifiable positions in the marketplace. making strategy
• That marketplace (the context) is economic • Attempts to place the organization and its
and competitive. products in a favorable market or
environment.
• The strategy formation process is therefore
one of selection of these generic positions • Based on performance measurement and
based on analytical calculation. decision-making tools.
• Analysts play a major role in this process, • Emphasizes competitive advantage
feeding the results of their calculations to
managers who officially control the choices.
• Strategies thus come out from this process
full blown and are then articulated and
implemented; in effect, market structure
drives deliberate positional strategies that
drive organizational structure
 The ‘positional’ school: BCG matrix –
The growth share matrix
The company's management needs to answer the question: which products should be preferred, which
markets should be chosen, which types of activities should be abandoned, in which areas of activity it is
possible to invest with greater efficiency, etc.
• Relative Market Share = Sales This Year / Leading
Main Points of the School Rival’s Sales This Year
• Market Growth Rate = Industry sales this year —
1.Low Growth, High Share. Companies Industry Sales last year
should milk these “cash cows” for cash to High
reinvest.
2.High Growth, High Share. Companies Diversification Stars
should significantly invest in these “stars” as
they have high future potential.

Market growth
3.High Growth, Low Share. Companies
should invest in or discard these “question
marks,” depending on their chances of
becoming stars. Pet Cash cow
4.Low Share, Low Growth. Companies
should liquidate, divest, or reposition these
“pets.” Low Market share High
 The ‘positional’ school: BCG matrix –
The Product Portfolio
To be successful, a company should have a portfolio of products with different growth rates and different market
shares. The portfolio composition is a function of the balance between cash flows. High growth products require
cash inputs to grow. Low growth products should generate excess cash. Both kinds are needed simultaneously.
The role of cash flow in the BCG matrix The main points

• Margins and cash generated are a function of • The payoff for leadership is very high indeed, if it is
market share. High margins and high market achieved early and maintained until growth slows.
share go together. Investment in market share during the growth phase
• To grow, you need to invest in your assets. The can be very attractive, if you have the cash.
added cash required to hold share is a function of • Growth in market is compounded by growth in share.
growth rates. Increases in share increase the margin.
• High market share must be earned or bought. • High margin permits higher leverage with equal safety.
Buying market share requires an additional The resulting profitability permits higher payment of
increment or investment. earnings after financing normal growth.
• No product market can grow indefinitely. You • The return on investment (ROI) is enormous.
need to get your payoff from growth when the
growth slows; you lose your opportunity if you
hesitate. The payoff is cash that cannot be
reinvested in that product.
 The ‘positional’ school: BCG matrix –
four strategies
There are four strategies possible for any product or business unit, which are used after the BCG-Analysis:

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
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 higher investment to move a star into
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.
4.Divest: Best observed in case of Pet quadrant products which are generally divested to release the
amount of money already stuck in the business.
 The ‘positional’ school: BCG matrix –
The growth share matrix
• Founded in 1976, by Steve Jobs, Steve Wozniak and Ronald Wayne, Apple Inc. has grown into an
American multinational technology company that designs, develops, and sells consumer
electronics, computer software, and online services.
• Considered as one of the Big Four technology companies, alongside Amazon, Google, and Microsoft,
Apple became the first public U.S. company to be valued at over $1 trillion in August 2018.
• World’s largest technology company by revenue, Apple also has a high level of brand loyalty and is ranked
as the world’s most valuable brand.
• Apple boasts a strong product line that caters to a wide customer base

• iPhone
• iPad
• iMac
• iWatch
• Apple TV
• Air Pods
• iOs
• Apple TV+
• iCloud
 The ‘positional’ school: BCG matrix –
The growth share matrix
High

Apple TV and Apple Airpods iPhones

Market growth

iPods Apple Laptops

Low Market share High

 The ‘positional’ school: BCG matrix –
5 forces Porter
• Porter's Five Forces is a model that
identifies and analyzes five
competitive forces that shape every
industry and helps determine an
industry's weaknesses and
strengths.
• Five Forces analysis is frequently
used to identify an industry's
structure to determine corporate
strategy.
• Porter's model can be applied to
any segment of the economy to
understand the level of competition
within the industry and enhance a
company's long-term profitability.
• The Five Forces model is named
after Harvard Business School
professor, Michael E. Porter.
The ‘positional’ school: BCG matrix –
5 forces Porter

• These forces determine an industry

structure and the level of competition in
that industry.
• The stronger competitive forces in the
industry are the less profitable it is.
• An industry with low barriers to enter,
having few buyers and suppliers but
many substitute products and
competitors will be seen as very
competitive and thus, not so attractive
due to its low profitability.
 The ‘positional’ school: BCG matrix –
5 forces Porter – stages
Competitive rivalry Threat of substitute products Bargaining power of buyers
• The first aspect to analyze is the • This refers to the possibility that • Ask yourself how much power do
amount of competition your customers will find a different (read: your buyers have over you. If
company faces. Think both on a quicker and easier) way of doing you’re selling a product, their
macro and micro scale about the what your company does. You may
power is likely contained to order
number of direct competitors you have originally conceived products
have in your industry and the or services that help customers, but
amounts or customization needs.
products/services they offer in as technology changes over time, However, if you’re offering a
comparison to yours. so do the desires and problems of service, customers are more open
customers. to negotiation.
• Markets with few competitors are
attractive but can be short-lived. On • Always examine how your • Remember that customers are
the other hand, highly-competitive customer’s lives have changed as extremely price-savvy and may
markets with many companies your company has grown. For already have experience of
chasing the same work reduce your example, you may sell a piece of dealing with your competitors.
power and can push you to lower software that automates a process
your prices and innovate new or synchronizes activity into one Determining your relationship
products. platform. As user behavior with buyer power is all about how
changes, you can find opportunities flexible you can be on service
to update your product, or even while maintaining an authoritative
grow a new service offering. position in your market.
 The ‘positional’ school: BCG matrix –
5 forces Porter – stages
Threat of new entrants Bargaining power of suppliers
• Industries that are tightly regulated • When it comes to brass tax, you
and require large investments of need to focus as much on your
capital mean that companies who costs as you do on your revenue.
make it can gain a serious foothold Assess the suppliers you rely on
in a market. Alternatively, markets and the potential power they have
that you can get set up in quickly over the products/services you
and with little financial risk mean provide.
you can start building customers
faster, though there may be a • The greater the number of
proliferation of copycat companies suppliers available to you, the
and similar products. easier it is to switch to a cheaper
alternative. If there are few
• The threat of new entry is based on suppliers you can work with, such
how secure your company is from as when you sell products made
being surrounded by competitors. with highly-specific materials, the
Let’s say you’ve discovered a way greater the control they have over
to cut costs in the IT industry - you your company. A rise in their prices
need to protect your company from has an immediate effect on your
imitators and rival companies who bottom line.
can drive down your prices.
 The ‘positional’ school: BCG matrix –
case Under Armour
Quick Take

• Under Armour is a growth company,

Under Armour (NYSE:UA), a developer and distributor of
which has seen its top-line grow by
athletic apparel, footwear and accessories, has seen its
more than 20% over the last 12
stock rise by more than 20% since the last three months.
quarters.
• However, there are certain risks that
The company has shown impressive performance over
need to be taken into account while
the past few years with its top-line growing by more than
extrapolating UA’s past growth into the
20% over the last 12 quarters. Its growth continues to be
future.
fueled by its expansion in footwear, women’s, international
• UA faces competition from the likes of
and direct-to-consumer business.
Nike and Adidas, which have far
greater resources at their disposal. In
While the company’s growth story remains intact, we look
addition, it does not hold process or
at how Under Armour stacks up along Porter’s Five
fabric patents.
Forces to understand where it can gain or lose going
• Dick’s Sporting Goods and The Sports
forward.
Authority account for more than 20%
of UA’s revenues, and hence, they hold
bargaining power.
 The ‘positional’ school: BCG matrix –
case Under Armour
Competitive rivalry Bargaining power of suppliers Bargaining power of buyers
Nike, Adidas pose threat and Under Amour
does not hold patents • Under Armour’s customers include both
• In 2012, Under Armour’s products were wholesale customers as well as end-customers.
produced by 27 manufacturers located Wholesale and direct-to-consumer channel
• Under Armour faces intense competition from the across 14 countries, of these top 10 accounted for 69% and 29% of Under Armour’s
likes of Nike and Adidas as well as newer accounted for 49% of the products total net revenue respectively in 2012.
players. manufactured.
• Dick’s Sporting Goods and The Sports Authority
• Nike and Adidas, which have considerably larger • Asia accounted for the largest proportion of comprised for 22% of Under Armour’s net
resources at their disposal, are making a play products manufactured with 53% share revenue in 2012; with one of these customers
within the performance apparel market to gain followed by Central and South America responsible for at least 10% of net revenue in
market share in this upcoming product category. (19%), Middle East (18%) and Mexico (8%). 2012.

• These larger companies could leverage their • On account of a diverse base of suppliers,
• Wholesale customers hold certain degree of
strong brand recognition and marketing efforts to we expect their bargaining power to be bargaining leverage as they could substitute UA’s
enhance their presence in international markets limited. products with other competitors’ products or
(outside North America) where Under Armour has private label offerings to gain higher margins.
• However, suppliers generally share the
a limited presence. UA derives only 6% of its
increased costs of raw material and labor • Bargaining power of end customers is lower as
revenues from the international markets.
with Under Armour typically through pricing
Under Armour enjoys strong brand recognition
• Private label offerings of retailers also pose a so this is an area to watch. among them on account of innovative product
threat to Under Armour. portfolio and high quality products.

• Under Armour does not hold any fabric or • However, customers could also gravitate towards
process patents, and hence its product portfolio other brands on account of factors such as price,
could be copied in the future. advertising, product sponsorship, and changing
styles.
 The ‘positional’ school: BCG matrix –
case Under Armour
Threat of new entrants Threat Of Substitute Products
• Large capital costs are required for • The demand for performance
branding, advertising and creating apparel, sports footwear and
product demand, and hence this accessories is expected to
limits the entry of newer players in continue, and hence we think this
the sports apparel market. force does not threaten Under
Armour in the foreseeable future.
• However, existing companies in the
sports apparel industry could enter
the performance apparel market in
the future. Under Armour does not
hold patents over its products and
hence this factor poses a threat.