BCG Matrix

BCG Matrix

1. BCG Matrix

2. The BCG growth share matrix is a portfolio planning model developed by Bruce Henderson of the Boston Consulting Group in the early 1970s. According to this technique, businesses or products are classified as low or high performers depending upon their market growth rate and relative market share. It is based on product life cycle theory.

3. The BCG Matrix has 2 dimensions    Market share  Market growth .

4. Market share Market share is the percentage of the total market that is being serviced by your company, measured either in revenue terms or unit volume terms. RELATIVE MARKET SHARE • RMS = Business unit sales this year /Leading rival sales this year

5. Market growth is used as a measure of a market’s attractiveness. MGR = ( Individual sales this year - individual sales last year)/ Individual sales last year The  basic idea behind it is, if a product has a bigger  market  share  or if the product's market grows faster,  it is better for the company. Market Growth

6. THE BCG GROWTH-SHARE MATRIX

7. It is a portfolio planning model which is based on the observation that a company’s business units can be classified in to four categories: Stars Question marks Cash cows Dogs

8. Star (high growth, high market share)    Stars are leaders in the business.  Stars  use large  amounts  of cash.   Stars usually generate cash for the  company Attempts should be made to hold the market share otherwise the star will became a cash cow .

9. Cash Cows (low growth, high market share) Cash Cows are often the stars of yesterday and they are the foundation of a company. Profits  and cash generation should be high.   Low market growth does not attract new  competitors. Low market growth, call for less  investments.  

10. Dogs (low growth, low market share) Business is situated at a declining stage . Dogs are the cash traps. Avoid  and minimize the number of Dogs  Watch out for expensive 'rescue plans‘ Dogs must deliver cash, otherwise they must be liquidated.

11. Question Marks (high growth, low market share) Most business start of as question marks. Question marks have potential to become star & evenly cash cow but can also become dog . They will absorb great amount of cash if the market share remains unchanged . Question Marks have high cash  demands. Question Marks generate low  returns.  

12. Limitations of BCG Matrix The model uses only two dimensions – market share and growth rate. High market share is not the only success factor. Market  growth is not the only indicator for  attractiveness of a   market Problems of getting data on market share and market growth. There  is no clear definition of what constitutes a  “ market”.

13. Thank You