BCG Matrix

Presented by

Pankaj BajajMobile number

9913151617/7802905737

Outlines of the PPT

• History of BCG• Market Share and Market Growth• Portfolio Analysis• Product Lifecycle• The BCG Matrix• Conclusion

History of BCG Matrix

• Founded by Bruce D Henderson in 1963

• A global consulting firm with 42 offline countries

• One of only three companies to appear in the top 15 of fortunes best companies to work for report for seven consecutive years in the 2011 12 fortune list BCG is listed as the second best company to work

BCG Matrix

• BOSTON CONSULTING GROUP MATRIX is developed by BRUCE Henderson of the BOSTON CONSULTING GROUP in the early 1970

• According to this technique business or product are classified as low or high performers depending upon their market growth rate and relative market share

Relative market share and market growth

• To understand the Boston Matrix we need to understand market share and market growth interrelate

Market share• Market Share is the percentage of the business

unit sales to the total market that is being services by your company measured either in revenue terms or unit volume terms. In indicate the business unit strength

MS= Business Unit Sales This Year

Total Market Size

MS= Market Share

Relative market share • Is the percentage of the business

unit sales to the highest competitors sales measured either in revenue terms or unit volume terms it indicate the business unit strength

• RMS= (business unit sale this year)

leading competitor sales this year

RMS= Relative Market Share

Market Growth Rate

• Market growth is used as a measure of a market’s attractiveness

• Market experiencing high growth are ones where the total market share available is expanding and threes plenty of opportunity for everyone to make money.

MGR= (total market sales this year) – (total market sales this year) total market sales last year

Portfolio Analysis

• Product portfolio:- the range of product a company has in development or available for consumer at any time

• Managing product portfolio is important for cash portfolio

• Strategic business unit definition :-

single independent operation of a company

has its own competitors

one manager responsible for the performance

Product life cycle

• Show the stages that product go through from development to withdrawal from the market

• Each product may have a different life cycle

• Contributes to strategic marketing planning

• Helps to identify when a product needs support redesign withdrawal

• Helps in forecasting and managing cash flow

Stages in Product life cycle

• Development • Introduction/launch • Growth • Maturity • Decline • Withdrawal

Product life cycle and BCG matrix

Why BCG Matrix?

To access Profiles of product and business The cash demand of product The development cycle of products Resource allocation and divestment

decisions

The BCG Matrix

Stares

• High Growth, High Market Share

stares are leaders in business by having heavy high market share in a growing market share

they also require heavy investment to maintain its large market share

its leads to large amount of cash consumption and cash generations

Strategy recommendations

• Investment

Further Growth

maintain market position • Cash flow

Self sustaining : fund there own growth

require funds from other SBU (Cash Cows)

• Assure the future of the company• Grow into the cash cows

Question Marks • High Growth, Low Market Share • Question marks are essentially new products

where buyers have yet to discover them. Most businesses start of as question marks in growing markets but have low market share

• Question marks have high demand and low returns due to low market share. Investment should be high for question marks

• They will absorb great amounts of cash if the market share remains unchanged

• Question marks have potential to become stares and eventually cash cow but can become also a dog

Strategy recommendations • Investment

increase market share

selectively develop into Stares • Cash Flow

Require Funds From Other SBUs ( cash cows)• Unrealized future opportunities• The marketing strategy is to get markets to adopt this

products• These product need to increase their market share

quickly or they becomes a dog.• The best way to handle question marks is to either

invest heavily in them to gain market share or to sell them

Cash Cow

• Low growth, High Market Share• They are foundations of the company

and often the stares of yesterday.• They generate more cash then required.• They extract the profit by investing as

littlie cash as possible • They are located in an industry that is

mature, not growing or declining

Strategy recommendations

• Investment

maintain market share

maintain capacity • Cash Flow

positive cash flow

provides funding to support Stares and ?.

• No potential for profit growth

Dogs

• Low Growth, Low Market Share• Dogs are the cash trap • Dogs do not have potential to bring

in much cash• Number of dogs in the company

should be minimized• Business is situated at declining

stage

Strategy recommendations

• Investment diversified strategy reduce capacity to free up resources• Cash Flow Goal or positive cash flow negative cash flow • No real growth opportunities

Evaluation of BCG Matrix

• Oversimplifies complex decisions • BCG MATRIX users only two dimensions Market

Share and Market Growth• Only considered current business no dynamics• Does not recognize possible synergies between SBUs• High market share does not mean profits all that time• Business with low market share can be profitable too.

Evaluation of BCG Matrix

• BCG matrix is simple and easy to understand.• It helps you to quickly and simply screen the opportunities

open to you and helps you think about how you can make most of them.

• Good measurability of market share and growth • Provides information about efficient resources allocation with

in the organization • Generator for strategic option • It is used to identify how corporate cash resources can best be

used to maximize a companies futures growth and profitability.

Main Steps in BCG Matrix

• Identify and dividing company into SBU.• Assessing and comparing the prospects of each SBU

according to criteria:

SBU’s relative market share

Growth rate of SBUs industry• Classifying the SBU’s on the basis on the BCG

Matrix• Developing Strategic objective for each SBU.

Conclusion

• Though BCG Matrix has its limitations it is one of the most famous and simple portfolio planning matrix,

used by large companies having multi-products.

• As long as management understands that the BCG growth/Share Matrix generates option which is

require further analysis and validation, this tool can greatly enhance strategic decision making.

Thank-Y

ou