Boston Consulting Growth Matrix [BCG

]
The BCG matrix (aka B.C.G. analysis, BCG-matrix, Boston Box, Boston Matrix, Boston Consulting Group analysis) is a chart that had been created by Bruce Henderson for the Boston Consulting Group in 1970 to help corporations with analyzing their business units or product lines. This helps the company allocate resources and is used as an analytical tool in brand marketing, product management, strategic management, and portfolio analysis. The Boston Matrix categorizes opportunities into four groups, shown on axes of Market Growth and Market Share:

Dogs These are more charitably called pets, are units with low market share in a mature, slow-growing industry. These units typically "break even", generating barely enough cash to maintain the business's market share. Though owning a break-even unit provides the social benefit of providing jobs and possible synergies that assist other business units, from an accounting point of view such a unit is worthless, not generating cash for the company. Cash Cows They are units with high market share in a slow-growing industry. These units typically generate cash in excess of the amount of cash needed to maintain the business. They are regarded as staid and boring, in a "mature" market, and every corporation would be thrilled to own as many as possible. They are to be "milked" continuously with as little investment as possible, since such investment would be wasted in an industry with low growth. Stars They are units with a high market share in a fast-growing industry. The hope is that stars become the next cash cows. Sustaining the business unit's market leadership may require extra cash, but this is worthwhile if that's what it takes for the unit to remain a leader. They have a high point shares and are the ideal businesses.

Question Marks (Problem Child) Businesses with low point share but which may have a high growth rate. This suggests that they have potential but may require huge ever, a competing force extraordinary effort in order to grow point share.

As the BCG stated in 1970: Only a diversified company with a balanced portfolio can use its strengths to truly capitalize on its growth opportunities. The balanced portfolio has: y stars whose high share and high growth assure the future; y cash cows that supply funds for that future growth; and y Question marks to be converted into stars with the added funds. Relative Market Share: This indicates likely cash generation, because the higher the share the more cash will be generated. As a result of 'economies of scale' (a basic assumption of the BCG Matrix), it is assumed that these earnings will grow faster the higher the share. The exact measure is the brand's share relative to its largest competitor. Thus, if the largest competitor had a share of 60 percent, the ratio would be 1:3, implying that the organization's brand was in a relatively weak position. Market Growth Rate: Rapidly growing brands, in rapidly growing markets, are what organizations strive for; but, as we have seen, the penalty is that they are usually net cash users - they require investment. The reason for this is often because the growth is being 'bought' by the high investment, in the reasonable expectation that a high market share will eventually turn into a sound investment in future profits. The theory behind the matrix assumes, therefore, that a higher growth rate is indicative of accompanying demands on investment. The cut-off point is usually chosen as 10 per cent per annum. Determining this cut-off point, the rate above which the growth is deemed to be significant (and likely to lead to extra demands on cash) is a critical requirement of the technique; and one that, again, makes the use of the BCG Matrix problematical in some product areas. What is more, the evidence, from FMCG markets at least, is that the most typical pattern is of very low growth, less than 1 per cent per annum. This is outside the range normally considered in BCG Matrix work, which may make application of this form of analysis unworkable in many markets.

ITC LIMITED
ITC Limited which previously stood for Imperial Tobacco Company of India Limited, is one of India`s foremost private sector companies with a market capitalisation of more than US $ 15 billion and a turover of US $ 4.75 billion. Rated among the World's Best Big Companies by Forbes magazine, ITC ranks third in pre-tax profit among India's private sector corporations. The company is headed by Yogesh Chander Deveshwar. It employs over 20,000 people at more than 60 locations across India and is listed on Forbes 2000.  ITC was incorporated on August 24, 1910 under the name of 'Imperial Tobacco Company of India Limited'.  ITC's Packaging & Printing Business Division was set up in 1925.  In 1975 the Company launched its Hotels business with the acquisition of a hotel in Chennai.  In 1979, ITC entered the Paperboards business.  In 1990, ITC acquired Tribeni Tissues Limited.  In 2000, ITC's Packaging & Printing business launched a line of high quality greeting cards under the brand name 'Expressions'.  ITC also entered the Lifestyle Retailing business with the Wills Sport range of international quality relaxed wear for men and women in 2000.  In 2000, ITC spun off its information technology business into a wholly owned subsidiary, ITC Infotech India Limited.  From 2002 onwards, ITC have also ventured in the market of safety matches, agarbattis and fragrances. ITC Business Portfolio 
    Cigarettes, other FMCG Hotels Agri Business- Leaf Tobacco, Agri Commodities Paperboard, paper and packaging Infotech

Rural Initiatives
ITC's Agri-Business is India's second largest exporter of agricultural products. ITC is one of the India's biggest foreign exchange earners (US $ 2 billion in the last decade). The Company's 'e-Choupal' initiative is enabling Indian agriculture significantly enhance its competitiveness by empowering Indian farmers through the power of the Internet. This transformational strategy, which has already become the subject matter of a case study at Harvard Business School, is expected to progressively create for ITC a huge rural distribution infrastructure, significantly enhancing the Company's marketing reach.

Corporate philanthropy
ITC Echoupal creatively leverages information technology to set up a meta-market in favor of India's small and poor farmers, who would otherwise continue to operate and transact in 'un-evolved' markets. As of July 2007, ITC Echoupal services, through 6400 Echoupal across 8 states, reach more than 4 million farmers in about 40,000 villages. ITC intends scaling up the initiative with 20,000 choupals and 700 saagars to reach 10 million farmers in 100,000 villages by 2010. Free access to Internet is also opening windows of rural India to the world at large. ITC eChoupal is now being regarded as a reliable delivery mechanism for resource development initiatives. Its potential is being tested through pilot projects in healthcare, educational services, water management and cattle health management with the help of several service providers including nongovernmental organizations.

BCG MATRIX FOR ITC LIMITED

Stars
Growth Rate ‡ Hotels ‡ Paperboards/ Packaging ‡ Agri business
High

? 
FMCG- foods, lifestyle Retailing, Personal care, Education and stationery  ITC Infotech

Cows
‡
Low

Dogs 
FMCG- Safety Matches,

FMCG-Cigarettes

Agarbattis

High

Low

Market share

1. CASH COW - ITC`s cigarette business        Market leadership Powerful brands across segments Leadership in all segments - geographic & price Extensive FMCG distribution network o Direct servicing of 1,00,000 markets & 2 million retail outlets World-class state-of-the-art technology and products o Investment - Rs.10 billion in six years Exciting long term growth potential Growth Potential: o Cigarettes account for only 15% of tobacco consumed in India unlike world pattern of 85% due to prolonged punitive taxation o Cigarettes (15% of tobacco consumption) contribute nearly 85% of Revenue to the Exchequer from tobacco sector o Of the 58% of adult Indian males who consume tobacco, barely 15% can afford cigarettes Biri : Cigarettes ratio = 10 : 1 Annual per capita adult cigarette consumption in India is appx. one tenth world average : 141 Future growth depends on relative rates of growth of per capita income and moderation in taxes 

 

2. STARS - ITC`s Paperboard Industries  Market leader in growth segment - value added coated boards  World-class contemporary technology o Elemental Chlorine Free (ECF) Pulp Mill fully operational only one of its kind in India meeting world-class environmental standards  Internationally competitive quality and cost  Social farm forestry in mill command area to improve access to cost effective fibre & to attain self-sufficiency o Biotech research based high yielding Clones effectiveness tested in nearly 68,000 hectares  Fully integrated operations with in-house pulping capacity at appx. 1.10 lac MT o Expansion programme underway; source of sustainable competitive advantage - ITC`s Agri commodity Business  Farm linkages in 14 states covering Soya, Wheat, Rice, Marine products, Coffee etc.  Unique CRM programme in commodity exports  Leveraging IT for the transformational e-Choupal initiative o Rural India s largest Internet-based intervention o Over 38000 villages linked through around 6400 e-Choupals servicing over 3.5 million farmers  Distinctive sourcing capability for ITC s Foods business

- ITC`s Hotel Business ITC-Welcomgroup: A leading hotel chain in India  Strategy to establish presence in key business locations to complete the chain achieved in end 2004  Over 5200 rooms under 4 distinct brands
CATEGORY Luxury Upper Scale Upper- mid- scale Heritage BRAND POSITIONING ITC Hotel: Luxury Mansions of Luxury Collection Welcome Hotel: Sheraton Passion for Quality Fortune Hotels Promise of True Value Welcome Heritage Unique Experiences 

Capacity expansion underway at Bangalore and Chennai; plans for other locations also being progressed  Fastest growing hotel chain with highest operating efficiency (PBDIT/Net Income @ 45%) amongst the 3 leading chains  Leverages unique service proposition and international alliance with Starwood Hotels & Resorts o Luxury Collection / Sheraton

3. Question Mark- ? - Wills Lifestyle 
ITC's Lifestyle Retailing Business Division has established a nationwide retailing presence through its Wills Lifestyle chain of exclusive specialty stores, which offers: y y y y Wills Classic work wear Wills Sport relaxed wear Wills Clublife evening wear Wills Signature designer wear 

It believes in the philosophy of Enjoying the Change' - the change that comes through actively exploring one's own multifacetedness and stretching one's limits.  Wills Lifestyle provides a truly 'International Shopping Experience' through world-class ambience, customer facilitation and clearly differentiated product presentation.  Plans to increase its footprints by doubling the number the stores and triple the floor area and thus open larger stores. - Education and stationery  ITC's Greeting & Gifting products include Expressions range of greeting cards and gifting products.  The gifting portfolio includes autograph books, slam books, party invitations, letter pads, gift-wraps, pop up books & mini books.  The business also markets Expressions Regalia, a connoisseur's collection of greeting cards.  ITC has a tie-up with the NGO SOS Children's Villages of India. This range comprises social cause cards and desk calendars. 

ITC's stationery brands Paper Kraft & Classmate are the most widely distributed brands across India.  ITC has invested in building a digital library of world class images at its business headquarters at Chennai.  The business also exports greeting cards to the U.S., Europe, UAE.

- Foods 
ITC made its entry into the branded & packaged Foods business in August 2001 with the launch of the Kitchens of India brand.  A more broad-based entry has been made since June 2002 with brand launches in the Confectionery, Staples and Snack Foods segments.  The packaged foods business is an ideal avenue to leverage ITC's proven strengths in the areas of hospitality and branded cuisine, contemporary packaging and sourcing of agricultural commodities.  The unwavering commitment to internationally benchmarked quality standards enabled ITC to rapidly gain market standing in all its 6 brands: ‡ Kitchens of India ‡ Aashirvaad ‡ Sunfeast ‡ mint-o ‡ Candyman ‡ Bingo! - ITC Infotech  A service delivery footprint spanning over 140 countries  ITC Infotech conforms to the highest standards in international process quality, with ISO 27001, ISO 9001, SEI CMM Level 5 and BS 7799 accreditations. Featured amongst Top 100 Global Outsourcing Companies in the Leaders category 

TC Infotech offers IT services and solutions across five key industry verticals: Banking, Financial Services & Insurance (BFSI), Consumer Packaged Goods (CPG) & Retail, Manufacturing & Engineering Services, Travel, Hospitality & Transportation and Media & Entertainment.