BUSINESS
POLICY AND
STRATEGIC
MANAGEMENT
BCG Matrix
BOSTON CONSULTING GROUP (BCG)
Matrix is developed by Bruce Henderson of the
Boston Consulting Group in the early 1970s
According to this technique, business or products
are classified as low or high performance
depending upon their market growth rate &
relative market share.
RELATIVE MARKET SHARE &
MARKET GROWTH
To understand the Boston Matrix you need to
understand how market share & market growth
interrelated.
Market
Share
Market share is the percentage of the total
market that is being serviced by your
company measured either in the revenue
terms or unit volume terms.
RELATIVE MARKET SHARE
Business Unit Sales this year
RMS :Leading rival sales this year
The higher your market share, the higher
proportion of the market you control.
MARKET GROWTH RATE
Market Growth is used as a measure of a
markets attractiveness.
Individual Sales this year Individual sales last year
MGR =
Individual Sales last year
Markets experiencing high growth are ones
where the total market share available is
expanding & there is plenty of opportunity for
everyone to make money
THE BCG GROWTH-SHARE MATRIX
It is portfolio planning model which is based on the
observation that companys business unit can be
classified in to four categories .
Question Marks
Stars
Cash cows
Dogs
It is based on the combination of market growth &
market share relative to the next based competitor.
QUESTION MARKS/PROBLEM CHILDREN
( HIGH GROWTH, LOW MARKET SHARE)
Most business start of as question marks
They will absorb great amount of cash if the
market share remains unchanged (low)
Question marks have potential to become star &
evenly cash cow but can also become dog.
Investment should be high for question marks.
STARS
(HIGH GROWTH, HIGH MARKET
SHARE)
Stars are leader in business
They also require heavy investment to maintain
its large market share.
It leads to large amount of cash consumption &
cash generation.
Attempts should be made to hold the market
share otherwise the star will became a cash cow.
CASH COWS
( LOW GROWTH, HIGH MARKET
SHARE)
They are foundation of the company & often the
stars of yesterday.
They generate more cash than required
They generate more cash than required.
They extract the profits by investing as little cash
as possible
They are located in an industry that is mature
not growing or declining
DOGS
(LOW GROWTH, LOW MARKET
SHARE)
Dogs are the cash traps
Dogs do not have potential to bring
High cost Low quality
Business is situated at a declining stage
WHY BCG MATRIX
To asses
Profile of product /business
Cash demands of products
The development cycle of product
Resource allocation & investment decisions
MAIN STEPS OF BCG MATRIX
Identifying & dividing a company into SBU
Assessing & comparing the prospects of each SBU
according to two criteria
1) SBUs relative market share
2) Growth rate of SBUs industry
Classifying the SBUs on the basis of BCG matrix
Developing strategic objective for each SBU
BENEFITS
BCG matrix is simple & easy to understand
It helps to quickly & simply screen the
opportunity open to you, & help you think about
how you can make the most of them.
It is used to identify how corporate cash
resources can best be used to maximize
companys future growth & profitability.
LIMITATION
BCG matrix uses only two dimensions relative
market share & market growth rate.
Problem of getting data on market share &
market growth
High market share does not mean profits all
time.
Business with market share can be profitable too.
BCG-MATRIX FOR THE PRODUCT
LINE OF
Coca-Cola
QUESTION MARKS
(HIGH GROWTH, LOW MARKET
SHARE
STARS
(HIGH GROWTH, HIGH MARKET
SHARE)
CASH COWS
(LOW GROWTH, HIGH MARKET
SHARE
DOGS
(LOW GROWTH, LOW MARKET
SHARE)
QUESTION MARKS
STARS
Invest for growth
CASH COWS
( MILK TO FUND OTHER BUSINESS)
DOGS
CONCLUSION
Though BCG matrix has its limitation it is one of
the most famous & simple portfolio planning
matrix, used by large companies having multiproducts.
