Invest in long term asset building If Demand is almost equal to or a bit less

Invest in long term asset building if demand is

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Invest in long term asset building. If Demand is almost equal to or a bit less than Supply, and the industry growth rate is high while the Business Unit’s market share is low, then the company should go for Harvest . If Demand is very less than Supply, and both industry growth rate and Business Unit’s market share are low, then the company should Divest . If the industry growth rate is high, but the Business Unit’s market share is low, then there is a need to think of what to do further, thus the “?” sign. Now market share for PtPD was very high and the growth rate of oil industry (inspite of being high) was growing as well. Thus, going by the BCG Matrix, they were supposed to Invest more. But from the year 1947 onwards, they refrained from investing any further, as they could see that their division would not grow further inspite of the market having a huge growth rate. The reason behind their actions was that they were being coerced out of the market by BIG OIL. Hence, they decided to Harvest whatever profit they could from the market with their existing resources, as they were not expecting any further investment, and maintaining status quo. Thus, for them ROI evaluation did no matter much, as even after being in the Harvest phase of the BCG Matrix, they were still a highly profitable division for the company.
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  • Winter '17
  • Prof Natwar Lal
  • Marketing, PtPD

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