Boston Consulting Group free essay sample

It has 2 dimensions: market share and market growth. The basic idea behind it is that the bigger the market share a product has or the faster the product’s market grows the better it is for a company. Placing products in the BCG matrix results in 4 categories in a portfolio of a company: 1. STARS(high growth, high market) Use large amounts of cash and are leaders in the business so they should also generate large amounts of cash. -Frequently roughly in balance on net cash flow. However if needed any attempt should be made to hold share, because the rewards will be a cash cow if market share is kept. . CASH COWS(low growth, high market share) Profit and cash generation should be high, and because of the low growth, investments needed should be low. Keep profit high. Fondation of company. 3. DOGS ( low growth, low market share) Avoid and minimize the number of dogs in a company. Beware of expensive ‘turn around plans’ Deliver cash, otherwise liquidate. 4. QUESTION MARKS ( high growth, low market share) Have the worst cash characteristics of all, because high demands and low returns due to low market share. If nothing is done to change the market share, question marks will simply absorb great amounts of cash and later, as the growth stops, a dog. Either invest heavily or sell or invest nothing and generate whatever cash it can. Increase market share or deliver cash. The BCG Matrix Method can help understand a frequenly made strategy mistake: having a one-size-fits-all-approach to strategy, such as a generic growth target (9 percent per year) or a generic return on capital of say 9,5% for an entire corporation. In such a scenario: a. Cash Cows Business Units will beat their profit target easily; their management have a easy job and are often praise anyhow. Ever worse, they are often allowed to reinvest substantial cash amounts in their business which are mature and not growing anymore. b. Dog Business Units fight an impossible battle and, even worse, investments are made now and then in hopeless attempts to ‘turn the business around’. c. Question Marks and Stars Business Units get medicore size investment funds. In this way they are unable to ever become cash cows. These inadequate invested sums of money are a waste of money. Either these SBUs should recieve enough investment funds to unable them to achieve a real market dominance and become a cash cow (or star), or otherwise companies are advised to disinvest and try to get whatever possible cash out of the possible cash out of the question marks that were not selected. Boston consultant group’s advantage matrix * Volume business. In this case there are considerable economies of scale, but few opportunities for differentiation. This is the classic situation in which organizations strive for economies of scale by becoming the volume, and hence cost, leader. Examples are volume cars and consumer electronics. * Stalemated business. Here there is neither the opportunity for differentiation nor economies of scale; examples are textiles and shipbuilding. The main means of competition, therefore, has been reducing the `factor costs (mainly those of labor) by moving to locations where these costs are lower, even to different countries in the developing world. * Specialized business. These businesses gain benefits from both economies of scale and differentiation (often characterized by experience effects in their own, differentiated, segment); examples being branded foods and cosmetics. The main strategies are focus and segment leadership. * Fragmented business. These organizations also gain benefit from differentiation, particularly in the services sector, but little from economies of scale; examples being restaurants and job-shop engineering. Competition may be minimized by innovatory differentiation. Practical use of the advantage matrix These two factors – the size of the advantage and the number of ways it can be achieved – can be combined into a simple matrix to help guide more creative strategy development. The specific requirements for success are different in each quadrant. Richard Lochridge[2] Size of Advantage The Boston Consulting Group described the size of advantage as a companys ability to gain economies of scale. Number of Approaches to Achieving Advantage The number of approaches to achieving advantage is the companys ability to differentiate from their competitors. Experience Curve Effects Costs of value added decline approximately 20 to 30 percent in real terms each time accumulated experience is doubled. The above relationship plotted on ratio paper (i. e. , logarithmic coordinates) appears as follows: Such cost declines do not occur automatically. They require management. In particular, added investment is required in an amount commensurate with the marginal cost of capital. The whole history of increased productivity and industrialization is based on specialization of effort and investment in tools. So is the experience curve. It is a measure of the potential effect of specialization and investment. Models of the learning curve effect and the closely related experience curve effect express the relationship between equations for experience and efficiency or between efficiency gains and investment in the effort. Result for the effect of Experience Curve Effect: * Labour efficiency * Standardization, specialization, and methods improvements * Technology-Driven Learning * Better use of equipment * Product redesign * Network-building and use-cost reductions IMPLEMENTATION The BCG matrix method This reference guide explains some of the special terms used on a daily basis at jobsites at Toyota Motor Manufacturing. It is our hope that this glossary of special terms will be of use to anyone wishing to further their understanding of the Toyota Production System. * Continuous Flow Processing One of the three basic requirements of Just-In-Time. This means eliminating the stagnation of work in and between processes and carrying out one-piece-at-a time production. * Cycle Time The total amount of time required for a worker to complete one cycle of his entire job process, including manual working time and walking time. This cycle time can be categorize a cash cows because Profit and cash generation should be high, and because of the low growth, investments needed should be low. Toyota keep the cycle for the job because its job should make a high efficiency so every product that out from toyota can be on time and if the efficiency * Flexible Manpower Line This means preparing a production line so that it can meet changing production requirements with any number of workers without lowering productivity. In contrast, a fixed-manpower line is one that always requires a fixed number of workers. No upward or downward adjustment can be made in it to meet changes in production demand. This strategy is related to DOGS ( low growth, low market share) in here toyota make a fixed number of employee needed to minimize the number of dogs in company means with ths strategy toyota will cut unefficient woker so it can improve the performance of company and save the cost Beside that we can also see another term that use by toyota that adopted from questions marks and stars. Toyota coorporation use that strategy to make a better performance for company. After that you will see anothe strategies that use by toyota to decrease the waste material and time and also to catch and caring about market growing in the world STARS(high growth, high market)| QUESTION MARKS ( high growth, low market share)| | | CASH COWS(low growth, high market share)| DOGS ( low growth, low market share)| | | Boston consultant group’s advantage matrix Based on Boston Consulting Group’s Advantage Matrix, Toyota use volume business, there are considerable economies of scale, but few opportunities for differentiation. 1. Considerable of economies of scale 2. Few Opportunities for differentiation This statement means that not only Toyota that produce vehicle, many other competitors that can competed each other in produce the vehicle. Therefore, the Toyota still can view and prove that they have something different with other vehicle such as: 1. Environmental Technology 2. Toyota’s Safety technology 3. TPS (Toyota Production System) The 5 Safety Stages – Integrated safety management concept 1. Parking â€Å"Park Safely† – parking systems, like backup cameras with Guide Monitors, assist drivers in parking or reversing safely, helping to reduce collisions. 2. Active Safely â€Å"Prevention is the Best Medicine† Active Safety technology, like lane Keeping Assist  and Night View  help drivers recognize potential dangers and reduce the likelihood of a collision. 3. Pre-crash Safety â€Å"Predict the Future† Our Pre-crash Safety systems provide a warning when an obstacle is detected by radar. They apply the brakes automatically and tighten the safety belt in preparation for a collision — reducing the likelihood and severity of damage. 4. Passive Safety â€Å"Show some restraint† In order to best prepare each Toyota vehicle in case of collision, Toyota strives for the best Passive Safety measures in the world. This includes building collision-absorbing body structures, and restraint systems like seats, seatbelts and airbags, that help protect passengers in a collision. Rescue If a severe collision does occur, the location of the vehicle is transmitted to our Emergency Dispatch Service (in Japan), and emergency rescue services are contacted to assist. This helps to reduce response time and the likelihood of casualties or further accidents. Experience Curve Effects Experience Curve Theory Implementation in Toyota World Company Result for the effect The primary reason for why experience and learning curve effects apply, of course, is the complex processes of learning involved. Learning generally begins with making successively larger finds and then successively smaller ones. The equations for these effects come from the usefulness of mathematical models for certain somewhat predictable aspects of those generally non-deterministic processes. They include: * Labour efficiency Workers become physically more dexterous. They become mentally more confident and spend less time hesitating, learning, experimenting, or making mistakes. Over time they learn short-cuts and improvements. This applies to all employees and managers, not just those directly involved in production. * Standardization, specialization, and methods improvements As processes, parts, and products become more standardized, efficiency tends to increase. When employees specialize in a limited set of tasks, they gain more experience with these tasks and operate at a faster rate. Standard operations are descriptions of work that combine people, equipment and materials to create value as effectively as possible. The components of tandard operations are takt time, the work procedure, and the parts and materials essential to start work within the process, including parts or materials at the machines. If all three of these components are not present, standard operations cannot exist. * Technology-Driven Learning Automated production technology and information technology can introduce efficiencies as they are implemented and people learn how to use the m efficiently and effectively. According to Boston Consulting Group theory of Experience Curve Effects, Toyota World Corporation has experienced the decline of cost as it has experience in the vehicle business. The decline of cost is caused by the development of technology. More advance its technology, more cost Toyota World Company can save. It has been 75 years since the first establishment of Toyota World Corporation. That long involvement made Toyota looking for the more efficient and effective way to manufacture the cars. Obviously, one of important aim is to reduce the production cost. Below is present some Toyota’s development that affecting cost of production: * Toyota Production System (TPS) TPS strives for the absolute elimination of waste, overburden and unevenness in all areas to allow members to work smoothly and efficiently. The foundations of TPS are built on standardisation to ensure a safe method of operation and a consistent approach to quality. Toyota members seek to continually improve their standard processes and procedures in order to ensure maximum quality, improve efficiency and eliminate waste. This is known as kaizen and is applied to every sphere of the companys activities. TPS has three desired outcomes: 1. To provide the customer with the highest quality vehicles, at lowest possible cost, in a timely manner with the shortest possible lead times. 2. To provide members with work satisfaction, job security and fair treatment. 3. It gives the company flexibility to respond to the market, achieve profit through cost reduction activities and long-term prosperity. * - Kaizen Continuous Improvement Kaizen is the heart of the Toyota Production System. Like all mass-production systems, the Toyota process requires that all tasks, both human and mechanical, be very precisely defined and standardised to ensure maximum quality, eliminate waste and improve efficiency. Toyota Members have a responsibility not only to follow closely these standardised work guidelines but also to seek their continual improvement. Just In Time (JIT) It is perhaps not widely known that the just in time approach to production that has now gained almost universal acceptance in world manufacturing was actually pioneered by Toyota. In fact, a Toyota engineer coined the term itself. Essentially, just in time manufacturing consists of allowing the entire production process to be regulated by the natural laws of supply and demand. The linkage betw een customer demand and production is made by analysing takt time, a device for measuring the pace of sales in the market in relation to the capacity of a manufacturing plant. For example, if a plant operates for 920 minutes per day and daily demand is for 400 vehicles, then takt time will be 2. 3 minutes. * Kanban Within the plant itself, the mechanism whereby production is regulated in this way is known as the kanban. A kanban is simply a message. For example, in the assembly shop this message takes the form of a card attached to every component that is removed and returned when the component is used. The return of the kanban to its source stimulates the automatic re-ordering of the component in question. Paperwork is minimised. Efficiency is maximised. And the Members themselves are completely in charge. Robot Workers Robot Workers can perform hard task that cannot be performed well by human. Also if the situation where the task has risk to harm the human. By implementating the development, Toyota World Corporation can eliminate the waste, takt time, and non value added activities in production. If not, those waste will be costumers’ burden. This articles below show how Toyota can have low cost production â€Å" The paint spray line of a car factory usually is a highly complex system that is built in place. Very expensive parts and experts have to be flown in. Not in Ohira. For Ohira, Toyota developed a modular paint spray line. The modules can be built somewhere else and are assembled at the plant in a much shorter time. Advantage: Cost savings â€Å" Toyota’s Secret Weapon: Low Cost Car Factories, By  Bertel Schmitt  on February 16, 2011 www. thetruthaboutcars. com â€Å"Toyota has always backed its hybrid technology as the key to reducing fuel consumption and carbon emissions, but as advanced as the technology is, diesel powered cars manage to offer similar levels of eco-friendliness but with more performance to boot † Toyota Cutting Hybrid Costs Claims Every Car Produced Will be Hybrid by 2020, By Ralph Hanson on May 11 2007 www. motorauthority. com Better use of equipment as total production has increased, manufacturing equipment will have been more fully exploited, lowering fully accounted unit costs. In addition, purchase of more productive equipment can be justifiable. Toyota Motor Co. , Ltd. s machinery and equipment became obsolete, and as mentioned above, by the end of 1950, mo re than half (53 percent) of its machinery had been in use for 10 years or more. Updating of obsolete equipment and increasing capacity was planned, and in February 1951, the Production Facility Modernization Five-Year Plan was adopted (covering the period from April 1951 to March 1956). Target monthly production under the plan was 3,000 units, approximately double the 1,542 units produced in March 1951. * Product redesign As the manufacturers and consumers have more experience with the product, they can usually find improvements. â€Å"Tokyo — TOYOTA MOTOR CORPORATION (TMC) announces the launch in Japan today of the third-generation Prius, which combines superior environmental performance with improved driving pleasure. Like its predecessors, the new Prius remains worthy of its name—Latin for to go before—by being equipped with the latest in TMC hybrid and other environmentally friendly technology. Its Toyota Hybrid System II (THS II) has been more-than-90-percent designed anew and synergizes with one of the best aerodynamic performances in the world. This synergy combines with other advances to achieve a world-leading fuel efficiency of 38. 0km/l2, while providing driving performance on par with that offered by a vehicle with a larger 2. 4-liter engine. † * Network-building and use-cost reductions (network effects) As a product enters more widespread use, the consumer uses it more efficiently because theyre familiar with it. To strengthen service-parts logistics, for the purpose of improving the quality of after-sales services, a Japan-wide distributor network for service parts was completed in August 1987. The network served to link Toyota and its sales outlets and came to be indispensable for the swift supply of service parts and accessories. In 1988, an online system was introduced, allowing the network to make daily orders to Toyota. † TO DO: * BETULIN FORMATN YA * KASIH PAGE NUMBER * LENGKAPIN BCG MATRIX TOYOTA (TABEL) * KASIH BEBERAPA GAMBAR TTG PENJELASANNYA * DELETE PAGE INI * PRINT N JILID