Business Entities

Matrix is an important tool. ThatBCG portfolio Matrix model was developed by Boston consulting group in 1970’s. That matrix also incorporates the product life cycle concept. That model can be used to access the position of strategic business units and very helpful for the organizations operating in number of different markets. BCG matrix shows various SBU on graph of Market growth Vs Market share. According to BCG Company’s business unit can be divided into four categories based on market share and market growth relative to competitors, Market growth as an industry attractiveness and market share as competitive advantage.

Following are the names of four categories in BCG Matrix.

Cash Cows

Stars
Question Marks
Dog

Each service or product should be eventuated by company and then position it on matrix. This should be done for every service and product and then plot the position of competitors’ product and services in order to determine the relative market share.

Cash Cows

The products or business with high relative market share and low industry growth rate falls into cash cows cell.As they are generate high cash flows so cash cows must be milked and extracting the profits and investing the cash in stars and question marks. These business entities generate more cash inflow with less requirements of investment. The Cash cows have high market share but industry growth is slow as compared to stars.

star products

Stars are the business entities with high market share and industry growth. These are normally known are raising star. Stars are leaders in business as they generate a large amount of cash because of its high market share but still need a lot of cash inflow as they also consume large amount of cash due to high growth potential.

Question Marks

Question marks are products having low market share but high growth potential. Reason for low market share is that they are emerging and they are yet to receive recognition by potential customer. They consume large amount of cash because they are growing rapidly but produces low cash inflowsdue to low market share. When question marks will grow they will turn into star products and ultimately into cash cows. Question marks always require critical analysis as they require high amount of capital. Management needs to develop sound business prudently and apply good project management rules and Business strategy if it is to avoid costly disasters. Because in question marks products there will be high overhead costs, high research and development costs, high publicity costs, high market education costs and low economies of scale. Due to these factors a question mark is very well possibly be loss making product until it moves toward star products.

Dogs

Dog products are low market share and low market growth products that are why they not generate inflow nor consume cash in large. A common belief that there is no point to develop these products. But these products must be present on the shelf for the peoples still using these products. Business that has been denied adequate funding for development may find themselves with high proportion of their products in this quadrant.

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Amsoil is a name well known among automotive and motor sports enthusiasts; having said that, what some people don’t realize, is that Amsoil is also a long standing direct selling company. The company was founded by Albert Amatuzio, a Lt. Colonel and jet figher pilot in the Air Force. Amatuzio recognized the important role synthetic lubrication played in keeping a high performance jet fighter in the air. Knowing that these same properties would be invaluable in automotive applications, Amatuzio set out to create a synthetic formulation for motor vehicles. He launched his first commercially sold product in 1970, which led to the creation of the Amsoil company. In 1972 Amsoil became the first synthetic motor oil to achieve American Petroleum Institute specifications.

Since those early days, Amsoil has gone on to become a pioneer in the field of synthetic lubrication. The company now offers lubrication solutions for automotive, recreational, agricultural and industrial applications. The company has also expanded into further product lines such as Mother’s car appearance care line, Trico wipers, Donaldson and Wix filters, Altrum nutritional supplements and Aggrand organic fertilizer solutions.

Despite the fact at it’s heart the Amsoil opportunity is a direct sales business, the company provides its dealer network unsurpassed opportunities to build a substantial business in the marketplace. Beyond just the traditional model of direct selling, that allows dealers to purchase at a reduced wholesale cost and sell at a higher retail price, the company also encourages the development of commercial accounts and retail on the shelf accounts. In the commercial and retail on the shelf accounts, the enrolling dealer becomes the servicing agent for those business entities. Also, Amsoil offers retail sales opportunities through catalog orders and dealer replicated websites.

The Amsoil business works on a stairstep/breakaway compensation plan. Dealers progress in the levels based on their group sales volume and upon their recruiting efforts. Each level has qualification requirements for achievement and these qualifications are based upon not simply the productivity of the individual dealer, but also of their sales group altogether.

There are a number of advantages that a prospective dealer finds with the Amsoil business opportunity. The first of these advantages is company longevity and name recognition, especially in the automotive arena. Since the company is a regular sponsor of motor sports events, racing teams and even the Sturgis motorcycle rally, little explanation is required when introducing the company for the first time. Another substantial advantage is the ability of a dealer to partner with commercial businesses and traditional brick and mortar outlets. Both of these components can be substantial money making avenues for the proactive dealer who is willing to invest the time and energy to go after these kinds of accounts. Additional benefits would include the low startup cost, the wide selection of marketing tools available and the ability to sell a diversified product line.

There are also some demanding situations a potential Amsoil dealer must be aware of if they are going to be successful in this particular opportunity. This is a volume based business, so it is critical that the dealer develop that volume through both the active recruiting of additional dealers and the acquisition of high volume users such as commercial and retail on the shelf accounts. The business will also put a dealer into direct contact with a customer base that in many instances is highly advance in their knowledge of mechanical systems and lubrication. It will be critical for the prospective dealer to take advantage of the training resources made available by Amsoil to help them become a capable expert when speaking to these types of individuals.

As with every direct selling business, it is necessary that a prospective Amsoil dealer learn their craft. This will not only include the knowledge of mechanical systems and lubrication, but also needs to include basic business building principles. The ability of a dealer to excel in personal branding, lead generation, product presentation, follow up and replication cannot be understated.

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