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Topic - 8 BCG Matrix

The BCG Matrix, developed by Bruce Henderson in the 1970s, is a portfolio analysis tool that classifies products based on market growth rate and relative market share into four categories: Stars, Cash Cows, Question Marks, and Dogs. It aids in strategic planning by helping businesses identify where to invest, discontinue, or develop products. Despite its limitations, such as relying on only two dimensions and potential data issues, it remains a widely used method for managing multi-product portfolios.

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18 views20 pages

Topic - 8 BCG Matrix

The BCG Matrix, developed by Bruce Henderson in the 1970s, is a portfolio analysis tool that classifies products based on market growth rate and relative market share into four categories: Stars, Cash Cows, Question Marks, and Dogs. It aids in strategic planning by helping businesses identify where to invest, discontinue, or develop products. Despite its limitations, such as relying on only two dimensions and potential data issues, it remains a widely used method for managing multi-product portfolios.

Uploaded by

69q92stx5s
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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BCG MATRIX

PORTFOLIO ANALYSIS
 In portfolio analysis,
 Top management views its product lines and business
units as a series of investments from which it expects
a profitable return.
 The product lines/business units form a portfolio of
investments that top management must constantly
juggle to ensure the best return on the corporation’s
invested money.

 Two of the most popular portfolio techniques are the BCG


Growth-Share Matrix and GE Business Screen.

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BOSTON CONSULTING GROUP
(BCG)
 Matrix is developed by Bruce Henderson of
the
Boston Consulting Group in the early 1970’s

 This matrix classifies business or products


as low or high performance based on
assessment on two dimensions - market
growth rate & relative market share.

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BOSTON CONSULTING GROUP
(BCG)
 Helps with long-term strategic planning
 Helpsa business consider growth opportunities by
reviewing its portfolio of products to decide where
to invest, where to discontinue or develop
products.

 Let us review the two dimensions….

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MARKET SHARE

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RELATIVE MARKET SHARE

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MARKET GROWTH RATE
Market Growth is used as a measure of a market’s
attractiveness.
Market Growth rate is defined as the rise in sales or
market size within a given customer base over a specific
period of time.

Individual Sales this year – Individual sales last


year/ 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.

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BCG matrix model
The BCG matrix model is divided into 4
quadrants derived from market growth rate
and relative market share:
Stars
Cash Cows
Question Marks
Dogs

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BCG matrix model

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BCG MATRIX

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BCG matrix model

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Stars (high share and high
growth):
 Stars are leaders in business with market leading
products .
 They also require heavy investment
 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.
 Rest companies will follow the stars.

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QUESTION MARK ( high growth, low market share)

 It is also called PROBLEM CHILD (company in danger


zone).
 It has the potential to become a star, if they work on
market share.
 It absorbs maximum cash as they have to very hard to
build up market share.
 Has the potential to convert into Dogs.

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CASH COWS ( low growth, high market share)

 It implies brand loyalty, as consumers are


habitual of a particular product.
 Example tea leaves, usually people do not
change the brand frequently once which
they consume.
 More cash is earned form cash cow which
can be invested in question marks to
improve the situation.

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DOGS (low growth, low market share)
 Dogs are the cash traps
 Dogs do not have potential to bring innovation
 High cost – Low quality
 Business is situated at a declining stage .
 The question for managers is whether the investment
currently being spent on keeping these products alive
could be spent on making something that would be more
profitable. The answer to this question is usually yes.

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BENEFITS OF BCG MATRIX
 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 company’s future growth &
profitability.

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LIMITATIONS
 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.

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BCG MATRIX OF GOOGLE

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BCG MATRIX OF MARUTI SUZUKI

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CONCLUSION

Though BCG matrix has its limitation it is one


of the
most famous & simple portfolio planning
matrix,
used by large companies having multi-
products.

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