Table of Contents

BCG Matrix .................................................................................................................................... 2

BCG matrix of Pepsico ................................................................................................................... 4
Samsung’s Product Portfolio .......................................................................................................... 5
BCG Matrix of Nestle ..................................................................................................................... 7
Advantages and disadvantages ....................................................................................................... 8
Refrences....................................................................................................................................... 10

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BCG Matrix
The BCG Matrix (also known as the Boston Consulting Group analysis, the Growth-Share
matrix, the Boston Box or Product Portfolio matrix) is a tool used in corporate strategy to
analyze business units or product lines based on two variables: relative market share and the
market growth rate. By combining these two variables into a matrix, a corporation can plot their
business units accordingly and determine where to allocate extra (financial) resources, where to
cash out and where to divest. The main purpose of the BCG Matrix is therefore to make
investment decisions on a corporate level. Depending on how well the unit and the industry is
doing, four different category labels can be attributed to each unit: Dogs, Question Marks, Cash
Cows and Stars. The Boston Consulting Group developed a matrix for assessing the product
lines of a company, called the BCG Matrix. BCG matrix (also referred to as Growth-Share
Matrix) is a portfolio planning model which is based on the observation that a company’s
business units can be classified into four categories.

➢ Cash Cows

➢ Stars

➢ Question Marks

➢ Dogs

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It is based on the combination of market growth and market share relative to the next best
competitor.

Stars

High Growth, High Market Share

Star units are leaders in the category. Products located in this quadrant are attractive as they are
located in a robust category and these products are highly competitive in the category.

Question Marks

High Growth, Low Market Share

Like the name suggests, the future potential of these products is doubtful. Since the growth rate
is high here, with the right strategies and investments, they can become Cash cows and
ultimately Stars. But they have low market share so wrong investments can downgrade them to
Dogs even after lots of investment.

Cash Cows

Low Growth, High Market Share

These products or services generate interesting profits and cash but need to be replaced because
the future growth will be lower. If they are profitable, they can finance other activities in
progress (including stars and question marks).

Dogs

Low Growth, Low Market Share

Dogs hold low market share compared to competitors. Neither do they generate cash nor do they
require huge cash. In general, they are not worth investing in because they generate low or
negative cash returns and may require large sums of money to support. Due to low market share,
these products face cost disadvantages.

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BCG matrix of Pepsico
A perfect example to demonstrate BCG matrix could be the BCG matrix of Pepsico. The
company has perfected its product mix over the years according to what’s working and what’s
not.

Here are the four quadrants of Pepsico’s growth-share matrix:

Cash Cows

With a market share of 58.8% in the US, Frito Lay is the biggest cash cow for Pepsico.

Stars

Even though Pepsi’s share in the market has been reduced to 8.4%, it’s still the star for Pepsico
because of its brand equity. Other stars are Aquafina (biggest selling mineral water brand in the
USA), Tropicana, Gatorade, and Mountain Dew.

Question Marks

Since it’s a mystery whether the diet food and soda industry will boom in the future and will
Pepsico’s products will find their place or not, Diet Pepsi, Pepsi Max, Quaker, etc. fall in the
question marks section of the Pepsico’s BCG matrix.

Dogs

As of now, there isn’t any product line that falls in the dog’s section of the Pepsico’s BCG
matrix. However, seasonal and experimental products like Pepsi Real Sugar, Mtn Merry Mash-
up can be inserted in this section.

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Samsung’s Product Portfolio
Samsung is a conglomerate consisting of multiple strategic business units (SBUs) with a diverse
set of products. Samsung sells phones, cameras, TVs, microwaves, refrigerators, laundry
machines, and even chemicals and insurances. This is a smart corporate strategy to have because
it spreads risk among a large variety of business units. In case something might happen to the
camera industry for instance, Samsung is still likely to have positive cash flows from other
business units in other product categories. This helps Samsung to cope with the financial setback
elsewhere. However even in a well-balanced product portfolio, corporate strategists will have to
make decisions on allocating money to and distributing money across all of those business units.
Where do you put most of the money and where should you perhaps divest? The BCG Matrix
uses Relative Market Share and the Market Growth Rate to determine that.

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Dogs

These are the products with low growth or market share. These are low growth or low market
share products and have very few chances of showing any growth. The investment strategy for
these products has to be very well thought through by the management as there are chances that
these businesses might not yield any profit for the organization. These business units or products
are cash traps and therefore are not seen as a useful source of earning

Cash Cows

These are the products which are in low growth markets with high market share. Products which
are market leaders in their specific industry and their industry is not expected to see any major
growth in the future are considered as Cash Cows. These products are the money churners for the
company and require very low investments to sustain their leadership and profitability in the
market.

Star

These are the products which are in high growth markets with a high market share. Products or
Business Units which hold a high market share and are also considered to grow in the future are
positioned as Stars. As a result, companies are interested to invest in developing these units
further to gain a larger market share and attain a stronger position in the market. These products
have the potential of being positioned as cash cows in the future owing to the industry growth
prospects.

Question Mark

Products in high growth markets with a low market share. Products or business units of the
company that are still in the nascent stage of their product lifecycle and can either become a
revenue generator by taking the position of a Star or can become a loss-making machine for the
company in the future. The industry has high potential to grow hence giving the room to the
products to grow as well only if the pertinent issues are managed effectively

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Market Growth Rate

The second variable is the Market Growth Rate, which is used to measure the market
attractiveness. Rapidly growing markets are what organizations usually strive for, since they are
promising for interesting returns on investments in the long term. The drawback however is that
companies in growing markets are likely to be in need for investments in order to make growth
possible. The investments are for example needed to fund marketing campaigns or to increase
capacity. High or low growth rates can vary from industry to industry, but the cut-off point in
general is usually chosen around 10 percent per annum. This means that if Samsung would be
operating in an industry where the market is growing 12 percent a year on average, the market
growth rate would be considered high.

BCG Matrix of Nestle

Cash Cow

For Nestle, there is one product that has undoubtedly been the Cash Cow and its Nestlé’s Maggi
Noddle’s.

With a market share of 80-85 %, Maggi Noddle’s holds a very strong hold in the market and
have high customer loyalty.

The product requires very less investment to maintain its market share and fight off any
competition.

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Stars

In the case of Nestle, Nestlé’s Mineral Water and Nestlé’s Nescafe Coffee fall in the Star
quadrant of the BCG Matrix of Nestle.

Growing healthier lifestyle trends and emerging markets have prompted the brand to invest large
amounts of investments in order to differentiate the bottled water brands from competitors in
mature markets and grow brand awareness in emerging markets.

Question Marks

There are products that formulate a part of the industry that is still in the phase of development,
yet the organization has not been able to create a significant position in that industry. The small
market share obtained by the organization makes the future outlook for the product uncertain,
therefore investing in such domains is seen as a high-risk decision.

With increasing competition and growing need to consume healthy products among consumers,
Nestle’s Milk products and Nutrition requires significant investment from the brand to maintain
and grow its market share.

Nestle’s Chocolates and confectionaries is another business unit that can be placed in the
Question Mark quadrant of the BCG Matrix of Nestle. High competition and small market share
of the product in the industry is what makes it place in this quadrant.

Dogs

Are those products that were perceived to have the potential to grow but however failed to
create magic due to the slow market growth.

Nestle’s Milo was launched as chocolate and malt powder for Milk and water, however, the
product failed to create any significant impact on the business and is placed in the Dog Quadrant
of BCG Matrix of Nestle.

Advantages and disadvantages

Benefits of the matrix:

➢ Easy to perform;

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 ➢ Helps to understand the strategic positions of business portfolio;

➢ It’s a good starting point for further more thorough analysis.

Growth-share analysis has been heavily criticized for its oversimplification and lack of useful
application. Following are the main limitations of the analysis:

➢ Business can only be classified to four quadrants. It can be confusing to classify an SBU
that falls right in the middle.

➢ It does not define what ‘market’ is. Businesses can be classified as cash cows, while they
are actually dogs, or vice versa.

➢ It denies that synergies between different units exist. Dogs can be as important as cash
cows to businesses if it helps to achieve competitive advantage for the rest of the
company.

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Refrences
➢ Pearce, John A. (2000). Strategic management: formulation, implementation, and control.
Robinson, Richard B. (Richard Braden), 1947- (7th ed.). Boston: Irwin/McGraw-Hill.
➢ Fripp, Geoff."BCG Matrix and the Experience Curve"
➢ Henderson, Bruce D. "The Product Portfolio"

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