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Questions and Answers
What type of product generates high revenue but requires substantial investment to develop and promote?
Cash cows require high investment to maintain their market position.
False
What should be done with products categorized as dogs in the BCG matrix?
Divest or discontinue them
Products that have high potential but generate low revenue and require substantial investment are known as __________.
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Match the product categories from the BCG matrix with their characteristics:
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What is the primary focus of market-oriented businesses?
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Market-oriented businesses typically ask 'what to produce'.
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What is a disadvantage of market-oriented businesses?
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In product orientation, businesses focus on ___________.
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Match the following terms with their definitions:
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What does market size refer to?
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A firm's market share can only be measured in terms of value, not volume.
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Which approach typically leads to the first-mover advantage?
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A disadvantage of the product-oriented approach is that it does not require research and development.
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What is the formula for calculating market growth?
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What type of businesses focuses on what to sell rather than what to produce?
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Market leaders benefit from economies of _____ through efficient large-scale production.
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Match the following terms with their definitions:
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Which of the following is an advantage of being a market leader?
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A company can increase its market share by reducing prices, which will always lead to increased profitability.
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What must market leaders invest in to maintain their position?
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Study Notes
Marketing Overview
- Marketing ensures appropriate goods and services reach the right customers at the right place and time.
Market Orientation
- Focuses primarily on market research and understanding customer needs and wants.
- Businesses ask "what to sell" rather than "what to produce."
- They conduct continuous market research to adapt quickly to customer demands.
- Advantage: Quick response to market needs.
- Disadvantage: Market research can be expensive and time-consuming.
Product Orientation
- Emphasizes innovation and development of unique products without alternatives.
- Businesses focus internally, asking "what to produce."
- Advantage: Reduces competition by being first to market with unique offerings.
- Disadvantage: Research and development can be costly and may not guarantee success.
Market Definition
- Refers to all consumers purchasing specific products or the places where trade occurs, as well as the products offered by businesses.
Market Size
- Total sales in an industry measured by value (currency) or volume (units sold).
- Calculated as cumulative sales of all organizations in the industry.
Market Share
- Percentage of total sales in a market attributed to a specific business.
- Calculated as organization’s sales divided by total market sales multiplied by 100.
- Higher market share often translates to increased market power.
Market Growth
- Indicates the percentage change in market size over time.
- Calculated as (current market size - previous market size) divided by previous market size multiplied by 100.
Market Leadership
- Defined by having the highest market share in an industry.
Advantages of Market Leadership
- Increased brand recognition and access to more distribution channels.
- Economies of scale leading to lower production costs.
- High influence over prices and product innovation.
Challenges in Maintaining Market Leadership
- Requirement for ongoing investment in market research and product development.
- Need to balance profitability with maintaining high market share.
- Risk of complacency and failure to innovate due to lack of competition.
BCG Matrix
- A tool for analyzing product portfolios based on market share and growth rates.
- Divides products into four categories: Stars, Cash Cows, Question Marks, and Dogs.
Product Categories
- Stars: High market share, high income, but high reinvestment requirements.
- Cash Cows: Established products generating strong revenue with low investment needs.
- Question Marks: High potential products that require significant investment but currently yield low revenue.
- Dogs: Low revenue generation with declining markets; often recommended for divestment.
Pros and Cons of the BCG Matrix
Pros
- Helps rebalance product portfolio effectively.
- Adapts as products shift between categories over time.
Limitations
- High market share does not guarantee profitability.
- Lacks insight into the reasons behind product positions.
- Should be supplemented with additional planning tools for comprehensive analysis.
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