BCG Matrix

Strategic Management
 Strategic Management Model

External
Audit

Implement
Long-Term Generate, Measure &
Implement
Evaluate, Evaluate
Strategies: Strategies:
Vision Objectives Select Performan
Mgmt Issues Marketing,
& Strategies ce
Fin/Acct,
Mission
R&D, CIS
Stateme
nts

Internal
Audit

Ch.
2-2
2
Levels of Strategy
What it means

Business You
should be in
Corporate
.
Strategy

Business Tactics to beat

the
Strategy competition

Operational
Functional Strategy methods to
implement the
tactics
 A Simple Organization Chart

Multibusiness
Corporate
Corporation
Level

Business Business 1 Business 2 Business 3

Level

Functional Human
Research and Marketing Finance
Level DevelopmentManufacturing Resources
 Strategic Business Units (SBUs)

Definitions of a SBU:
• A particular product market combination that typically requires
its own business plan
• A part of a company that is large enough to have its own well-
defined markets, attract its own set of competitors and demand
tangible resources and capabilities from the overall corporation
• A discrete grouping within an organization with delegated
responsibility for strategically managing a product/ service or
group of product of services
• A division within a large national or multinational company is a
SBU

5
 Tata Group

• TCS • Tata Power

• Tata Motors • Tata Docomo ( TTSL)
• Titan • Voltas
• Tata Chemicals – Salt and • Tata AIG
Pulses • Real Estate and Housing
• Tata Steel • Tata Cliq
• Indian Hotels • Tata Advanced Material

6
 Apple

• Iphones
• Apple Watch
• MacBooks
• Imacs
• Ipad
• Apple TV
• Homepods
• Apple Music

7
 What is BCG Matrix

• Matrix is developed by Bruce Henderson of the

Boston Consulting Group in the early 1970’s
• Portfolio Analysis Tool.
• According to this technique, business or products
are classified as low or high performance
depending upon their market growth rate & relative
market share.

8
9
Alternate View of BCG Matrix

10
 To assess
• Profile of product /business

WHY BCG • Analyze the development cycle of

product

MATRIX • Resource allocation among

business.
• Decide the Strategy of – Harvest,
Hold and Divest
 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.
Business Unit Sales this year
RMS :-
Leading rival sales this year
• The higher your market share, the
higher proportion of the market you
control.
12
 MARKET GROWTH RATE

Market Growth is used as a measure of a market’s attractiveness.

Markets experiencing high growth are ones where the total market share
available is expanding & there is plenty of opportunity for everyone to
make money

SBU Sales this year – SBU sales last year

MGR =
SBU Sales last year
13
BCG Matrix

14
 QUESTION MARKS
(HIGH GROWTH, LOW MARKET SHARE)

Question Marks are

Question marks
the units with low
Most business start have potential to
market share in a
of as question marks become star &
fast-growing
eventually cash cow.
industry.

They required large

amount of cash to
Investment will be
But can also become grow their market
high for question
dog. share. for e.g.:
marks.
Promotional
expenses.
15
 • Stars are the unit with a high market
share in a fast-growing industry.
• Product is in growth stage.
STARS • Stars are leader in business
(HIGH • Star represent the best profits and
growth opportunities in the
GROWTH, organizations.
HIGH • Generates high revenues and also
requires huge cash for sustaining the
MARKET STAR position.

SHARE) • Attempts should be made to incresae

the market share otherwise the star will
become a cash cow.
• Increase sales – e.g. new markets, new
channels of distribution. Increase market
16

share
They are the business with low growth rate
and high market share CASH
They are foundation of the company & often
the stars of yesterday.
COWS
They are located in an industry that is mature
( LOW
not growing or declining. Product in maturity
Stage.
GROWTH,
Generating cash more than its requirement HIGH
which can be used by other units.
MARKET
Such business units should be "milked",
extracting the profits and investing as little
cash as possible.
SHARE)
Maintain market share e.g. ensure quality,
build customer loyalty, develop substitute
brands 17
 • It has a small market share in a mature
industry.

DOGS • Business is situated at a declining stage.

Product is in decline stage, with no chance
(LOW of revival.
• Dogs often have little future and are big
GROWTH, cash drainer on the company.
• A dog may not require substantial cash
LOW because dogs have low market share
and a low growth rate and thus neither
MARKET generate nor consume a large amount
of cash. Generating cash just to BREAK-
SHARE) EVEN. It is a self-sustaining unit.
• They do not generate any profit for the
overall business and hence can be sold off
and hired off.
18
• Product may be Repositioned or killed.
Apple

19
Portfolio
Analysis
21
Strategy Implications of BCG Matrix

Build Hold Harvest Divest

Build – Hold – Maintain Harvest – Divest –
Increasing the the competitive Reduce the Release the
Investment. advantage and investment into amount of
Building the sustain the the business, money already
Market Share business as try to take out stuck into the
long as the maximum business.
possible. cash out of this
business.

22
 • Star – Leader in Expanding Industry
• BUILD - Continue to increase
Strategy market share, at expense of short-
term earnings
Implication
s of BCG • Problem Child – Low market share in
Expanding Industry
Matrix • HARVEST if weak, BUILD if strong.
• Assess chances of dominating
segment. If good, go after share. If
bad, redefine business or withdraw.

23
 • Cash Cow – Leader in mature or
declining industry
• HOLD - Maintain share and cost
Strategy leadership until further investment
becomes marginal
Implication • Maximize cash flow
s of BCG • Dogs – Low market share in a mature
or declining industry
Matrix • DIVEST Plan an orderly withdrawal
so as to maximize cash flow or
concentrate on niches that require
limited effort

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 Sequence of Movement

Success Disaster
Sequence Sequence

1-2-3-4 1-4
1-2-4
1-2-1
3-4

25
Sequence of Movement
 • BCG matrix is simple & easy to
understand
• It helps to quickly & simply screen the
opportunity open to you, & help you
BENEFITS 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 company’s future growth &
profitability.

27
Portfolio
Analysis
MAIN STEPS OF BCG MATRIX
Identifying & Assessing &
Classifying
dividing comparing
Identifying & Assessing & Classifying the SBU’s
dividing a company comparing the on the basis of BCG
into SBU prospects of each matrix. Developing
SBU according to strategic objective
two criteria for each SBU
• SBU’s relative market
share
• Growth rate of SBU’s
industry

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MARKET GROWTH ANALYSIS
- HUL

1
1
MARKET SHARE
ANALYSIS

HUL
3
1
3
2
BCG OF HUL

HUL
3
3
Some more
examples

34
 The BCG Matrix for ITC
Ltd.
Stars ?
• Hotels • FMCG- Others
•Paperboards/
Packaging.
• Agri business.
Cows Dogs
• FMCG-Cigarettes
36
 (Rs. In Crores)

Sr Revenue of Revenue Market Revenue of

SBU RMS MGR
SBU % Leader/Competitor ML/Competitor
No
1 Idea Cellular 12852.5 26.12 Airtel 41588.3 0.309 20

2 Ultra Tech 12246 24.88 ACC 8376 1.462 12

3 Aditya Birla Minacs 1431 2.91 TCS 6025 0.238 13

4 Hindalco 12142.7 24.67 NALCO 3298.78 3.681 13

5 Birla Sun Life Insurance 361 0.73 LIC 4395.38 0.082 20

6 Aditya Birla Retail 817 1.66 Reliance Retail 19140.3 0.043 19

UTI Asset
7 Birla Sun Life Asset Management 4996.98 10.15 4998.67 1 12
Management

8 Aditya Birla Chemicals (India) ltd 809.9 1.65 Tata Chemicals 4011.87 0.202 15

9 TANFAC Industry Ltd 574.5 1.17 Tata Chemicals 4011.87 0.143 15

10 Aditya Birla Money 2981.7 6.06 HDFC Mutual Funds 5859.19 0.509 17

Total 49213.28
Stars Category Question Mark Category
• Birla Sun Life Asset • Idea Cellular
Management • Birla Sun Life Insurance
• Aditya Birla Money
• Aditya Birla Retail
• Aditya Birla Chemicals
Cash Cow Category
(India) Ltd
• Hindalco
• TANFAC Industry Ltd
• Ultra Tech
• Aditya Birla Minacs
39
40
End of the
Section

41
42
• Star – Leader in Expanding Industry
– BUILD - Continue to increase market share – if
necessary at expense of short-term earnings

• Problem Child – Low market share in

Expanding Industry
– HARVEST if weak, BUILD if strong.
– Assess chances of dominating segment. If good, go
after share. If bad, redefine business or withdraw.
• Cash Cow – Leader in mature or
declining industry
– HOLD - Maintain share and cost leadership until
further investment becomes marginal
– Maximize cash flow
• Dogs – Low market share in a
mature or declining industry
– DIVEST Plan an orderly withdrawal so as to
maximize cash flow or concentrate on niches that
require limited effort
46
47
48
49
 Business wise Sales
data Year Growth Value (Rs in Crore)
Business/
% 2005 2004
FMCG-Cigarettes 8.4 10002.54 9230.27
FMCG-Others 85.2 563.39 304.16
Hotels 124.1 577.25 257.53

Agribusiness 4.2 1780.07 1708.77

Paper & pkg. 24.9 1565.31 1253.29
Net revenue 12.99 13349.58 11815.04
CAGR during FY
2005-2008
Category CAGR Growth parameters

Cigarettes 10.9 % Pricing power

Hotels 22.7% Inward traffic, occupancy
Paper 17.2 % Capacity utilization, value
added products
Agri 34.3 % E-choupal, choupal sagar,
business
FMCG- 60.2 % Fast track, decent share.
Others
 Market share of ITC Ltd.
Outstanding market leader
 Cigarettes, Hotels, Paperboards,
Packaging and Agri-Exports.
Gaining market share
 Nascent businesses of Packaged
Foods & Confectionery, Branded
Apparel and Greeting Cards.
Segment Dominance Contribution %
Revenue PBIT
Cigarettes 70% share 77.0% 87.7%

Paper & Packaging board – No. 7.3% 10.7%

Packg 1 in Asia
.
Agri 1of the largest xporters 7.0% 3.7%
business from India
Hotels ITC Group ranks No.2 4.3% 5.4%

FMCG 20% share of greeting 4.4% -7.5%

(Others) cards market,
'Aashirvaad' atta is
No.1 in branded
segment
A
c
t

Market attractiveness & Competitive

strength is also important.
 Business wise Sales
data
Business/ Year Growth Value (Rs in
% Crore)
2005 2004

FMCG- 8.4 10002.5 9230.27

Cigarettes 4
FMCG-Others 85.2 563.39 304.16
Hotels 124.1 577.25 257.53

Agribusiness 4.2 1780.07 1708.77

Paper & pkg. 24.9 1565.31 1253.29
CAGR during FY 2005-
2008
Category CAGR Growth parameters
Cigarette 10.9 % Pricing power
s
Hotels 22.7% Inward traffic,
occupancy
Paper 17.2 % Capacity utilization,
value added products
Agri 34.3 % E-choupal, choupal
busine sagar,
ss
FMCG- 60.2 % Fast track, decent
Others share.
 Market share of ITC
Ltd.
• Outstanding market leader
Cigarettes, Hotels,
Paperboards, Packaging
and Agri-Exports.
• Gaining market share
Nascent businesses of Packaged
Foods & Confectionery, Branded
Apparel and Greeting Cards.
Segment Dominance Contribution %
Revenue PBIT
Cigarettes 70% share 77.0% 87.7%

Paper & Packaging board – No. 1 7.3% 10.7%

Packg in Asia
.
Agri 1of the largest xporters 7.0% 3.7%
business from India
Hotels ITC Group ranks No.2 4.3% 5.4%

FMCG 20% share of greeting 4.4% -7.5%

(Others) cards market,
'Aashirvaad' atta is
No.1 in branded
segment
 The BCG Matrix for ITC
Ltd.
Star ?
•sHotels • FMCG-
•Paperboard Others
s/
Packaging.
•Cow
Agri Dog
sbusiness. s
• FMCG-
Cigarettes
60
Product Portfolios chosen for Analysis
Industry Company
Telecom Idea Cellular

Cement Ultratech

IT-ITeS Aditya Birla Minacs

Aluminium Hindalco

Insurance Birla Sun Life Insurance

Asset Management Birla Sun Life Asset Management

Chemical Aditya Birla Chemicals (India)

Chemical TANFAC Industry Ltd

Retail Aditya Birla Retail (More)

Financial Services Aditya Birla Money

 (Rs. In Crores)

Sr Revenue of Revenue Market Revenue of

SBU RMS MGR
SBU % Leader/Competitor ML/Competitor
No
1 Idea Cellular 12852.5 26.12 Airtel 41588.3 0.309 20

2 Ultra Tech 12246 24.88 ACC 8376 1.462 12

3 Aditya Birla Minacs 1431 2.91 TCS 6025 0.238 13

4 Hindalco 12142.7 24.67 NALCO 3298.78 3.681 13

5 Birla Sun Life Insurance 361 0.73 LIC 4395.38 0.082 20

6 Aditya Birla Retail 817 1.66 Reliance Retail 19140.3 0.043 19

UTI Asset
7 Birla Sun Life Asset Management 4996.98 10.15 4998.67 1 12
Management

8 Aditya Birla Chemicals (India) ltd 809.9 1.65 Tata Chemicals 4011.87 0.202 15

9 TANFAC Industry Ltd 574.5 1.17 Tata Chemicals 4011.87 0.143 15

10 Aditya Birla Money 2981.7 6.06 HDFC Mutual Funds 5859.19 0.509 17

Total 49213.28
 BCG Matrix of Aditya Birla Group
25
High
Low
Idea Cellular
Birla Sun Life

High
Insurance
20
Market Growth Rate

Aditya Birla Retail

a Birla Money Aditya Birla

Adity
Chemicals (India) ltd
15 TANFAC Industry Ltd
Birla Sun Life Asset
Hindalco agement
Aditya Birla Minacs
Man
10 Ultra Tech
5.12 2.56 1.28 0.64 0.32 0.16 0.08 0.04 0.02 10.0
Low

Relative Market Share

 BCG Matrix of Aditya Birla Group
25
High
Low
Idea Cellular
Birla Sun Life

High
Insurance
20
Market Growth Rate

Aditya Birla Retail

a Birla Money Aditya Birla

Adity
Chemicals (India) ltd
15 TANFAC Industry Ltd
Birla Sun Life Asset
Hindalco agement
Aditya Birla Minacs
Man
10 Ultra Tech
5.12 2.56 1.28 0.64 0.32 0.16 0.08 0.04 0.02 10.0
Low

Relative Market Share

65
QUESTION MARKS
 STAR
S
 Invest for growth
CASH
( MILKCOWS
TO FUND OTHER BUSINESS)
DOGS
71
72
Competitive Advantage
73
Framework for Operations
Strategy
74