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BCG Matrix Model

BCG Matrix Model

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BCG Matrix Modelhttp://www.maxi-pedia.com/BCG+matrix+model[31/05/2009 16:55:45]
BCG Matrix Model
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BCG Matrix Model
BCG matrix
or also called
BCG model
relates to marketing.The BCG model is a well-knownportfolio management tool used inproduct life cycle theory. BCGmatrix is often used to prioritizewhich products within companyproduct mix get more funding andattention.The
BCG matrix
model is a
portfolio planning
model developedby Bruce Henderson of the BostonConsulting Group in the early1970's.The BCG model is based onclassification of products (andimplicitly also company businessunits) into four categories based oncombinations of 
market growth
market share
relative to the largest competitor.
When should I use the BCG matrix model?
Each product has its
, and each stage in product's life-cyclerepresents a different profile of risk and return. In general, a company shouldmaintain a
portfolio of products. Having a balanced product portfolio includesboth
products as well as
high-growth product
is for example a new one that we are trying to get to somemarket. It takes some effort and resources to market it, to build distributionchannels, and to build sales infrastructure, but it is a product that is expected tobring the gold in the future. An example of this product would be an iPod.A
low-growth product
is for example an established product known by the market.Characteristics of this product do not change much, customers know what they aregetting, and the price does not change much either. This product has only limitedbudget for marketing. The is the milking cow that brings in the constant flow of cash.An example of this product would be a regular Colgate toothpaste.But the question is, how do we exactly find out what phase our product is in, and howdo we classify what we sell? Furthermore, we also ask, where does each of ourproducts fit into our product mix? Should we promote one product more than theother one? The
BCG matrix
can help with this.The
BCG matrix
reaches further behind product mix. Knowing what we are sellinghelps managers to
decisions about what priorities to assign to not onlyproducts but also company departments and business units.
What is the BCG matrix and how does the BCG model work?
BCG Matrix Model
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Easy SWOT Diagram Software IncludesTemplates. Free Trial!www.SmartDraw.com/2009
Place to discuss yourquestions and issues.
Sunday 5/31/2009
The SPACEmatrix is amanagement toolusedto analyze acompany. It is usedto determine whattype ...
The Internal-External (IE)matrix is anotherstrategicmanagement toolused toanalyze workingcond ...
Product Life Cycle(PLC) is a termused to describeindividual stages inthe life of aproduct. Prod ...
SWOT analysis,method, or modelis a way to analyzecompetitiveposition of yourcompany. SWOTanaly ...
External FactorEvaluation (EFE)matrix method is astrategic-management tooloften used forassessm ...
Internal Factor
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BCG Matrix Modelhttp://www.maxi-pedia.com/BCG+matrix+model[31/05/2009 16:55:45]
Placing products in the BCG matrix
in 4 categories in a portfolio of acompany:
(high growth, high market share)- Stars are defined by having high market share in a growing market.- Stars are the leaders in the business but still need a lot of support for promotion aplacement.- If market share is kept, Stars are likely to grow into cash cows. 
(high growth, lowmarket share)- These products are in growing markets but havelow market share.- Question marks are essentially new productswhere buyers have yet to discover them.- The marketing strategy is to get markets to adopt these products.- Question marks have high demands and low returns due to low market share.- These products need to increase their market share quickly or they become dogs.- The best way to handle Question marks is to either invest heavily in them to gainmarket share or to sell them.
(low growth, high market share)- Cash cows are in a position of high market share in a mature market.- If competitive advantage has been achieved, cash cows have high profit marginsand
a lot of cash flow.- Because of the low growth, promotion and placement investments are low.- Investments into supporting infrastructure can improve efficiency and increase cashflow more.- Cash cows are the products that businesses strive for.
(low growth, low market share)- Dogs are in low growth markets and have low market share.- Dogs should be avoided and minimized.- Expensive turn-around plans usually do not help.And now, let's put all this into a picture:
Are there any problems with the BCG matrix model?
Some limitations of the BCG matrix model include:Thefirstproblem can be how we define market and how we get data about marketshareA high market share does not necessarily lead to profitability at alltimesThe model employs only two dimensions – market share and product or servicegrowth rateLow share or niche businesses can be profitable too (some Dogs can be moreprofitable than cash Cows)The model does not reflect growth rates of the overall marketThe model neglects theeffectsof synergy between business unitsMarket growth is not the only indicator for attractiveness of a marketThere are probably even more aspects that need to be considered in a particular useof the BCG model.
Where can I find more information about the BCG matrixmodel?
What economicsector do youwork in?:
ServicesManufacturingFinancial sectorAgricultureOtherEvaluation (IFE)matrix is astrategicmanagement toolfor auditing orevaluating majorstrengths andweaknesses infunctional areas of a business ... 
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BCG Matrix Modelhttp://www.maxi-pedia.com/BCG+matrix+model[31/05/2009 16:55:45]
 2 + 6 - 3 =
We recommend reading the following book:
Book: Carl W. Stern, George Stalk - Perspectives on Strategy
This book was published by the Boston Consulting Group.
Are there other models that I might be interested in?
We can recommend reading about the
, and
.The BCG matrix model has some similarities with the
What is the next level of strategic management analysis?
The BCG matrix can help to find a strategy. But, what if we have 2-3 strategies andneed to decide which one is the best one? The
model can be used to compare strategic alternatives.
I have questions about the BCG matrix
In case you have any questions about the
BCG matrix
, you might want to submitthem at our
.You might also be interested in reading about the
model andabout the
Email this article to a friend:
Discuss this article or this topic in our discussionorum:
(The table bellow shows a list of 8 most recent topics posted in our
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May 29, 2009, 09:27:31 am
May 28, 2009, 11:11:19 am
May 28, 2009, 08:25:42 am
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