BCG Matrix - a business norm to understand sales.pptx

The BCG Matrix, developed by the Boston Consulting Group in the 1970s, is a strategic management tool used to analyze a company's portfolio of businesses or products based on two dimensions: market growth rate and relative market share. It categorizes businesses or products into four quadrants: Stars, Cash Cows, Question Marks, and Dogs.

Stars represent high-growth, high-market-share businesses or products. They typically require heavy investment to sustain their growth but have the potential to become future Cash Cows if managed properly.

Cash Cows are low-growth, high-market-share businesses or products. They generate significant cash flows that can be reinvested in other areas of the business or returned to shareholders.

Question Marks, also known as Problem Children or Wild Cats, are high-growth, low-market-share businesses or products. They require careful consideration and investment decisions because they have the potential to become either Stars or Dogs depending on strategic actions taken.

Dogs are low-growth, low-market-share businesses or products. They neither generate significant cash flows nor require substantial investment. It's often recommended to divest or liquidate Dogs unless there's a strategic reason to keep them within the portfolio.

The BCG Matrix provides a framework for strategic planning and resource allocation. Companies can use it to identify where to allocate resources (e.g., investment, divestment) based on the relative position of their businesses or products within the matrix.

While the BCG Matrix has been widely used by companies for decades, it's not without its limitations. For instance, it oversimplifies complex business dynamics by focusing solely on market growth rate and market share. Additionally, its reliance on historical data may not always accurately predict future performance.

Despite its limitations, the BCG Matrix remains a valuable tool for strategic decision-making, particularly in industries with multiple business units or product lines. It encourages companies to assess their portfolio's overall balance and make informed choices about resource allocation to maximize long-term profitability and growth.
BCG Matrix Matrix serves several important purposes in strategic management:

Portfolio Analysis: One of its primary uses is to analyze a company's portfolio of businesses or products. By plotting each business unit or product on the matrix based on its market growth rate and relative market share, managers can gain insights into the overall composition of their portfolio.

Resource Allocation: The BCG Matrix helps managers allocate resources effectively by guiding decisions about where to invest, divest, or maintain resources within the portfolio. For example, businesses categorized as Stars may require significant investment to sustain their growth, while Cash Cows may generate excess cash that can be reinvested elsewhere.

Strategic Planning: It facilitates strategic planning by highlight

1. Strategic Choice – Traditional Approach BCG

2. 2 BCG Growth-Share Matrix Objectives Analyze ‘ generators ’ and optimum ‘ users ’ . Allocate resources between competing SBUs Criterion The growth rate of the market The relative market share of the SBUs Categories of SBUs Cash Cows Stars Question Mark Dogs

3. 3 BCG Growth-Share Matrix

4. 4 BCG Growth-Share Matrix Cash Cows Large market share in a mature and slow-growing industry. A strong business position and negligible investment requirements The returns from these businesses are often more than their investment requirements Net cash generators Organizations often tap their ‘cash cows’ in order to draw out resources required elsewhere in the organization. Ex All established profitable brands

5. 5 BCG Growth-Share Matrix Stars Large market share in fast growing markets or industries Firms need to invest in stars as the industry is still emerging and the market share is also growing Stars often generate as much revenues as they use But once the industry reaches the stage of maturity, the stars hardly need any investment and become major sources of revenue for the firms

6. 6 BCG Growth-Share Matrix Question Marks ? Low market share and high growth rate Demand significant investment because their cash needs are high  the norm in a growing industry These organizations have to make a huge investment in advertising and promotion With the market growing rapidly, it is easier to gain a market share Only a few question marks move to stars

7. 7 BCG Growth-Share Matrix Dogs A low market share in an intensely competitive , mature industry characterized by low profits. Not much need of an investment, but it ties up capital that could be invested in industries with better returns Concentrate on recovering as much as possible from these units in terms of returns on investment and often undertake ruthless cost cutting Unless there is a larger purpose in keeping such units, an organization should divest itself of dogs at the earliest