Explain What is the BCG Matrix with Example?

BCG Matrix stands for (Boston Consulting group’s) product portfolio matrix is designed to help businesses to consider growth opportunities with long-term strategic planning.

1. Name: Sonam Mishra SEM: MBA 1 Section: C Subject: Marketing Management

2. What is the BCG Matrix? BCG Matrix is stand for (Boston Consulting group’s) product portfolio matrix is designed to help business to consider growth opportunities with long-term strategic planning. The companies that are large enough to organized into strategic business units face the challenge of allocating resources among those units. In the early 1970’s the BCG developed a model for managing a portfolio of different business units (or major product lines). The BCG growth- share matrix displays the various business units on graph of the market growth rate vs. market share relative to competitors.

3. The Model Given By… This BCG Matrix product portfolio planning model developed by Bruce Henderson in early 1970’s . 

4. Matrix is divided into 4 quadrants

5. Matrix is divided into 4 quadrants 1. Stars-   Stars represent business units having large market share in a fast growing industry. They may generate cash but because of fast growing market, stars require huge investments to maintain their lead.  These are well established products or brands with fantastic opportunities to generate large amounts of ROI . High growth market High market share Cash neutral Hold

6. Example for Stars The bottled water  Kinley , a Coca-Cola product, is one such example of Stars. This example is suitable here because the mineral water industry is still viewed as a gradually growing segment on an international scale. The rising population would require more bottled water to fulfill the needs of the people. Due to the rising need for bottled water, the growth opportunities for this business product in the industry has increased. Even though Kinley faces competition from other competitors. 

7. Matrix is divided into 4 quadrants 2. Question Marks- Question marks represent business units having low relative market share and located in a high growth industry. They require huge amount of cash to maintain or gain market share. Most businesses start as question marks as the company tries to enter a high growth market in which there is already a market-share. If ignored, then question marks may become dogs, while if huge investment is made, then they have potential of becoming stars. Unsure in which direction these products will go. Known as the problem child(s), they can be turned into stars or end up as dogs. High market growth Low market share Cash absorbing Build

8. Example for Question Fanta,  a Coca-Cola product, is one such example where the business units can be seen as a question mark. As the brand has not been able to gain widespread popularity similar to Coke. Therefore, the brand is losing its popularity. However, in some areas, it has been able to obtain a generous sales volume.

9. Matrix is divided into 4 quadrants 3. Cash Cows- Cash Cows represents business units having a large market share in a mature, slow growing industry. Cash cows require little investment and generate cash that can be utilized for investment in other business units. These SBU’s are the corporation’s key source of cash, and are specifically the core business. They are the base of an organization. These businesses usually follow stability strategies. These are well-established and consistently produce cash, however the growth opportunities are limited. Low market growth High market share Cash generating Milk

10. Example for Cash Cows Coca-Cola  is one such example of Cash Cows. This product is sold across 200 countries in a mature beverage industry. The bottling partners in different regions help in making the finished beverages available to the market. This is how the organization is earning a significant amount of revenues from its finished products. In a mature industry, it is advisable for a company to keep the sales volume high as the business unit is comparatively a good source to generate revenue.

11. Matrix is divided into 4 quadrants 4. Dogs- Dogs represent businesses having weak market shares in low-growth markets. They neither generate cash nor require huge amount of cash.  These business firms have weak market share because of high costs, poor quality, ineffective marketing, etc. Unless a dog has some other strategic aim, it should be liquidated if there is fewer prospects for it to gain market share. Number of dogs should be avoided and minimized in an organization. Products which have little or no value. They are a drain on resources and cash. It is often difficult to make a profit from dogs. Low market growth Low market share Cash neutral Diversify

12. Example for Dogs Diet coke , a Coca-Cola product, is on such example of Dogs. It was launched with the motive to offer consumers relatively healthier beverage option in terms of calories consumed. However, the brand has not been able to fetch consumers’ interest, which led to declined sales of this business unit. The soda industry has been matured in recent years; therefore, the growth prospects for new products are limited now.

13. Limitations of BCG Matrix BCG matrix classifies businesses as low and high, but generally businesses can be medium also. Thus, the true nature of business may not be reflected. Market is not clearly defined in this model. High market share does not always leads to high profits. There are high costs also involved with high market share. Growth rate and relative market share are not the only indicators of profitability. This model ignores and overlooks other indicators of profitability. At times, dogs may help other businesses in gaining competitive advantage. They can earn even more than cash cows sometimes. This four-celled approach is considered as to be too simplistic.