BCG MATRIX

Ques: 1 Explain in brief BCG Matrix?

Ans:- BCG matrix (or growth share matrix) is a corporate planning tool, which is used to portray
firm’s brand portfolio or SBUs on a quadrant along relative market share axis (horizontal axis)
and speed of market growth axis (vertical axis).

Ques: 2 Explain each quadrants of the BCG Growth Share Matrix?

Ans: - BCG matrix is a framework created by BOSTON Consulting Group to evaluate the
strategic position of the business brand portfolio and it’s potential. It classifies business portfolio
into four categories based on industry attractiveness (growth rate of industry) and competitive
position (relative market share).

There are four quadrants into which firms brands are classified:

1. Dogs: - Dogs hold low market share compared to competitors and operate in a slowly
growing market. Basically, they are not worth investing in because they generate low or
negative cash returns.
2. Cash Cows: - Cash cows are the most profitable brands and should be “milked” to
provide as much cash as possible. The cash gained from “cows” should be invested into
stars to support their future growth. According to growth-share matrix, corporate should
not invest into cash cows to induce growth but not only to support them so they can
maintain their current market share.
3. Stars: - Stars operates in high growth industries and maintain high market share. Stars
are both cash generators and cash users. They are the primary units in which the company
should invest its money, because stars are expected to become cash cows and generate
positive cash flows.
4. Question marks: - Question marks are the brands that require much closer consideration.
They hold low market share in fast growing markets consuming large amount of cash and
incurring losses. It has potential to gain market share and become a star, which would
later become cash cows. Question marks do not always succeed and even after large
amount of investments they struggle to gain market share and eventually become dogs.

These four quadrants are based on following two dimensions-

● Relative market share: - One of the dimensions used to evaluate business portfolio
is relative market share. Higher corporate market share results in higher cash returns.
 ● Market growth rate: - ​Market growth rate is used as a measure of a market’
attractiveness.

Ques:-3 Show the results what will happen if Market Growth for product 1 changes from
3% to 30 %, product 5 7% to 17 %?

Ans:-

● When Market Growth for product 1 changes from 3% to 30%

● When Market Growth for product5 changes from 7% to 17%
● When Market Growth for product1 changes from 3% to 30%, product5 7% to 17%
Observation​:-

When the market growth rate increases for product1 from 3% to 30% & product5 from 7% to
17% simultaneously, both the products shifted from Dogs to Question-marks.
Ques:-4. Prepare a BCG Growth Matrix for following tables? Also explain what is the
difference in both the table once forming the growth matrix?

Ans:-

Table-1:

Table -2:
Comparison between both theTables-

● In Table1, Product3 and Product2 were ‘Cash-cows’ for the company, but they shifted to
‘Stars’ in Table2 as their relative market share increased.
● Product1 remained as a ‘Question-mark’ in both the tables. There was no change in
position of this particular product.
● Product4 & Product5 were considered to be ‘Question-marks’ in the table1, which shifted
to ‘Dogs’ because of their low market share and no growth.
Ques: - 5 Show the results what will happen if Market share for product 3 changes from 51
% to 15 %.

Ans: - When market share of product3 was 51%

When Market share for product 3 changes from 51% to 15%

Observation:-

● When the Market share for product 3 changes from 51% to 15%, the market share of the
product has decreased.
● Product3 shifted to ‘Cash-cows’ from ‘Star’ as the relative market share decreased.
Ques:- 6 Show the results what will happen if Market share of largest competitor of
Product4 changes from 26% to 36 %?

Ans: - When Market share of largest competitor of Product4 is 26%

When Market share of largest competitor of Product4 changes from 26% to 36%
Observation:-

When Market share of largest competitor of Product4 changes from 26% to 36%, the product
shifted slightly right as the Relative Market Share decreased to 10% from 0.46 to 0.33

Ques: - 7 What is the formula for Relative Market Share?

Ans: - Relative market share indexes a firm’s or a brand’s market share against that of its leading
competitors. Relative market share is calculated as:

Relative Market Share (%)

= 100* Brand’s market share/ Largest competitor’s market share

The another formula is-

Relative market share = firm’s market share/largest competitor’s market share

Ques: - 8 Create your own BCG matrix of your company? There should be a proper name of a product.
Also explain in brief the position of each and every product?

Ans: -​ BCG​ matrix of Cadbury

Ques:-9 How I can convert Dogs into Question mark? Explain it by showing it in the form
of excel BCG Template?

Ans: - ​Dogs are those product lines or business units that have a smaller market share in a mature
and slow-growing business. Usually, these product lines manage to earn what is put into
them, ​breaking-even​ and maintaining the market share. Generally, this unit is largely worthless
to the company in terms of earning potential but may afford other benefits to the company such
as the creation of jobs as well as synergies that assist other business units. These benefits may be
enough for the company to keep this business unit active despite its less than exciting position.

Converting the Dogs products into Question mark is very important as dogs leaves a negative
impact on ​how investors judge the management of a company and it is suggested that these
product lines be sold off. In context to the BCG matrix, the dogs can be converted to Question
marks through ​increasing the market growth of the particular product through Re-designing it
according to the market requirements. It is important to keep reinventing/upgrading the products
as per the target market to make them survive for long-run.

When the market growth of product1 was 3%

The Product1 is a Dog for the company as there is no potential relative market share growth.
When we increase the market growth of product1 from 3% to 13%
Therefore, when the market growth of Product1 increased, the product shifted to the
Question-Mark quadrant from Dogs. As the market growth ultimately resulted in improved
Relative market share.

Ques:-10 ​How I can convert Stars into Cash Cows? Explain it by showing it in the form of
excel BCG Template?

Ans: - ​Star is the business unit that has a large market share in a fast growing industry. Stars may
generate cash, but because the market is growing rapidly they require investment to maintain
their lead. Stars are converted into a '​Cash-Cow​' position as the market growth rate slows and
market leadership is achieved. As the impact of the product life cycle takes effect and the market
growth rate slows the product moves from the star position of high growth to the Cash Cow
position of low growth / high share.

In BCG matrix,

When the product3 has a market growth rate of 14%, it lies in the star quadrant
Now, if the market growth rate of product3 declines to 7%, it will reach the maturity stage of its
life cycle and it will help in generating revenues. Therefore, it will be a cash cow for the
company.
As a result, Product 3 shifted to Cash-cows quadrant.