BCG Matrix Model and GE 9 Cell Model.pdf

Strategic Business Models: BCG Matrix & GE 9-Cell Model

This presentation explains into two essential strategic tools for business growth and portfolio analysis: the BCG Matrix and the GE 9-Cell Model. Both models help organizations evaluate their product lines or business units to allocate resources effectively and drive long-term success.

The BCG Matrix categorizes products into four quadrants—Stars, Cash Cows, Question Marks, and Dogs—based on their market growth and market share. It provides clear strategies for investment, growth, and divestment.

The GE 9-Cell Model goes a step further by evaluating both market attractiveness and competitive strength, allowing for a more nuanced analysis of where to invest, maintain, or harvest. By ranking products across nine cells, companies like Nestlé can determine which segments to grow and which to phase out.

Through real-world examples from major companies, this presentation demonstrates how to use these models to make informed decisions, optimize investment, and maximize profitability across diverse product portfolios.

1. BCG
Matrix
Model

2. Boston Consulting Group is
renowned as a thought leader in
the management consulting
world.
One of the firm’s most famous
analytical frameworks includes the
BCG Matrix, also known as the BCG
Growth Share matrix.
The tool was first introduced in the
1970s by Bruce Henderson, the
founder of BCG.

3. So What Exactly is the BCG Matrix?
The BCG Matrix is used to help companies analyze
their product portfolio by categorizing them into
four distinct categories based on their market
shares and growth rates relative to their largest
competitors.
These four categories include: cash cows, dogs,
question marks, and stars.

5. Cash Cows
Cash cows are the products with high market share
in a slow-growing industry.
These business units typically generate more cash
than what’s needed to maintain them. Because they
tend to be in more mature markets, cash cows are
more “boring.” While “boring,” they are valuable due to
their cash-generating abilities. They should continue
to be “milked” with as little investment as possible
given that additional time, capital, and efforts
wouldn’t yield much in a low growth industry.

6. Dogs
Dogs are the least favorable in the BCG Matrix and are
business units with low market share in a mature and
slow-growing industry. These products are seen to have
little future with the company and typically either break
even, generate very little cash, or even reduce a
company’s cash flow. Though these products provide
employees jobs and possibly result in revenue or cost
synergies, the opportunity cost of utilizing resources for
other favorable products is too high. Dogs should therefore
be divested and sold to another company.

7. Question Marks
Question marks are the business units operating with low
market share in a high-growth market. These products
tend to reduce a company’s cash flow initially because they
require heavy investment in order to grow. If the unit
performs well, question marks have a chance to becomes
stars and eventually into cash cows once the industry
growth declines. If the product fails to gain traction, the
question mark becomes a dog. Question marks must be
analyzed thoroughly and carefully to determine whether
they are worth the investment required to grow market
share.

8. Stars
The Stars are business units with both high market
share and a high growth industry. They lead a niche or
a market and have monopolistic qualities due to
dominant competitive advantages or fortuitous timing.
As the stars continue to boom, additional investment
generates excess cash, making stars extremely
valuable products for a company. The hope is that
eventually as the industry growth rate dies down, the
stars become cash cows.

9. Example: Tata Group
Tata
Consultancy
Services
(TCS)
Tata Motors'
Electric Vehicle
(EV) Division
Tata Steel Tata Nano

10. GE Nine
(9) Cell
Matrix

11. GE nine-box matrix is a strategy tool that offers a
systematic approach for the multi business
enterprises to prioritize their investments
among the various business units.
It is a framework that evaluates business
portfolio and provides further strategic
implications.
Each business is appraised in terms of two major
dimensions – Market Attractiveness and
Business Strength.
If one of these factors is missing, then the
business will not produce desired results. Neither a
strong company operating in an unattractive
market, nor a weak company operating in an
attractive market will do very well.

13. The vertical axis denotes: Industry attractiveness
Industry attractiveness indicates how hard or easy it
will be for a company to compete in the market and
earn profits.
The more profitable the industry is the more
attractive it becomes. When evaluating the industry
attractiveness, analysts should look how an industry will
change in the long run rather than in the near future,
because the investments needed for the product
usually require long lasting commitment.

14. Long run growth rate
Industry size
Industry profitability: entry barriers, exit barriers, supplier power,
buyer power, threat of substitutes and available complements (use
Porter’s Five Forces analysis to determine this)
Industry structure (use Structure-Conduct-Performance framework
to determine this)
Product life cycle changes
Changes in demand
Trend of prices
Macro environment factors (use PEST or PESTEL for this)
Seasonality
Availability of labor
Market segmentation

15. Horizontal axis represent: Business Unit Strength
Along the X axis, the matrix measures how strong, in
terms of competition, a particular business unit is
against its rivals.
In other words, managers try to determine whether
a business unit has a sustainable competitive
advantage (or at least temporary competitive
advantage) or not.

16. Total market share
Market share growth compared to rivals
Brand strength (use brand value for this)
Profitability of the company
Customer loyalty
VRIO resources or capabilities (use VRIO framework
to determine this)
Strength of a value chain (use Value Chain Analysis
and Benchmarking to determine this)
Level of product differentiation
Production flexibility

17. Green zone (Grow)
Suggests to ‘go ahead’, to grow and build, pushing through
expansion strategies. Businesses in the green zone attract
major investment.
Yellow zone (Hold)
Cautions you to ‘wait and see’ indicating hold and maintain type
of strategies aimed at stability.
Red zone (Divest)
Indicates that you have to adopt turnover strategies of
divestment and liquidation or rebuilding approach.

18. Advantages
Helps to prioritize the limited resources in order to achieve the best
returns.
The performance of products or business units becomes evident.
It’s more sophisticated business portfolio framework than the BCG
matrix.
Determines the strategic steps the company needs to adopt to
improve the performance of its business portfolio.
A simplified approach to portfolio analysis and investment
allocation decisions.
Applicable across different industries.
Helps measure and map the strategic position of business units.
Helps understand which businesses are making a profit and which
aren't.