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BOSTON CONSULTING GROUP ( BCG ) MATRIX INTRODUCTION BOSTON CONSULTING GROUP (BCG) MATRIX is developed by BRUCE HENDERSON of the

BOST ON CONSULTING GROUP in early 1970s. According to this technique, businesses or pr oducts are classified as low or high performers depending upon their market grow th rate and relative market share. RELATIVE MARKET SHARE AND MARKET GROWTH RELATIVE MARKET SHARE Market share is the percentage of the total market that is being serviced by you r company, measured either in revenue terms or unit volume terms. Relative Marke t Share The higher your market share, the higher proportion of the market you co ntrol. RMS = Business unit sales this year Leading rival sales this year MARKET GROWTH RATE Market growth is used as a measure of a markets attractiveness. Markets experienc ing high growth are ones where the total market share available is expanding, an d theres plenty of opportunity for everyone to make money. MGR = Individual sales - individual sales this year last year Individual sales last year THE BCG GROWTH-SHARE MATRIX It is based on the combination of market growth and market share relative to th e next best competitor. It is a portfolio planning model which is based on the observation that a companys business units can be classified in to four categorie s: Stars Question marks Cash cows Dogs STARS High growth, High market share 1. Stars are leaders in business. 2. They also require heavy investment, to maintain its large market shar e. 3. It leads to large amount of cash consumption and cash generation. 4. Attempts should be made to hold the market share otherwise the star will become a CASH COW. CASH COWS Low growth , High market share 1. They are foundation of the company and often the stars of yesterday. 2. They generate more cash than required. 3. They extract the profits by investing as little cash as possible 4. They are located in an industry that is mature, not growing or declining . DOGS Low growth, Low market share 1. Dogs are the cash traps. 2. Dogs do not have potential to bring in much cash. 3. Number of dogs in the company should be minimized. 4. Business is situated at a declining stage. QUESTION MARKS High growth , Low market share 1. Most businesses start of as question marks. 2. They will absorb great amounts of cash if the market share remains uncha nged, (low). 3. Why question marks? 4. Question marks have potential to become star and eventually cash cow but can also become a dog. 5. Investments should be high for question marks. WHY BCG MATRIX ? To assess : 1. Profiles of products/businesses

2. The cash demands of products 3. The development cycles of products 4. Resource allocation and divestment decisions MAIN STEPS OF BCG MATRIX 1. Identifying and dividing a company into SBU. 2. Assessing and comparing the prospects of each SBU according to two crite ria : SBUS relative market share. Growth rate OF SBUS industry. 3. Classifying the SBUS on the basis of BCG matrix. 4. Developing strategic objectives for each SBU. BCG MATRIX BENEFITS 1. BCG matrix is simple and easy to understand. 2. It helps you to quickly and simply screen the opportunities open to you, and helps you think about how you can make the most of them. 3. It is used to identify how corporate cash resources can best be used to maximize a companys future growth and profitability. BCG MATRIX LIMITATIONS 1. BCG matrix uses only two dimensions, Relative market share and market gr owth rate. 2. Problems of getting data on market share and market growth. 3. High market share does not mean profits all the time. 4. Business with low market share can be profitable too.

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