 BCG Growth Matrix Analysis

- BCG Growth Share Matrix describes the business units (products, services, etc) in two dimensions, overall
market growth and share of the market, which results in four classifications:
o Question mark – are products, services or business units that are in a fast-growing market but with a
small share of the market. These products or services have a lot of potential to dip well, but have yet
to actually deliver good results. Organizations usually design EXPLORE strategies for this kind of
business.
o Star – are products or services that have high share on a fast-growing market. Organizations typically
needs to spend significant resources to maintain its share of the market. If organizations can hold on
to its share, the business can turn into a cash cow when market stabilizes. Organizations usually
design INVEST strategies for this kind of business.
o Cash cow – are products or services that have a large share of an established (slow growth) market.
It requires little investment and can generate a lot of cash that can be used in other business units.
Organizations usually design HARVEST strategies.
o Dog – are undesirable business. A small share of a market that isn’t growing does not require much
cash to maintain, but there is often significant capital resources and management attention tied up
in this business. Unless there is an important purpose to remain in this market, organizations usually
design divest strategies.

 Define Transfer Pricing and Identify Methods

- Transfer pricing is used to improve and control performance evaluation in an organization by setting up an
“open market” system for business unit within the organization to negotiate on goods and services that are
transferred within the organization.
- Transfer is essentially a budget transfer between business units that by itself doesn’t actually change overall
profits in the organization.
- Methods used in transfer pricing are the following
o Market price
o Cost of production plus opportunity cost
o Variable cost
o Full cost
o Cost plus
o Negotiated transfer price
o Arbitrary
o Dual rate

 Components of Sales Budget

- Sales budget shows the expected sales in units of each product and each product’s selling price. The sales
budget is based upon firm’s forecasted sales level, its short- and -long-term objectives, and its production
capacity.

 Factors Affecting Sales Budget

- Sales budget reflects forecasted sales volume and selling price and is influenced by previous sales pattern,
current and expected economic conditions and activities of the competitors.