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MATRIX
Bhumika More
SIES Nerul College of ASC.
INTRODUCTION
scorpio
Jeep
balero
BCG Matrix for Bharti Airtel
BCG Matrix for ITC Ltd.
WHY BCG MATRIX ?
To assess :
Profiles of products/businesses
The cash demands of products
The development cycles of products
Resource allocation and divestment
decisions
MAIN STEPS OF BCG MATRIX
Identifying and dividing a company into SBU.
Assessing and comparing the prospects of
each SBU according to two criteria :
1. SBU’S relative market share.
2. Growth rate OF SBU’S industry.
Classifying the SBU’S on the basis of BCG
matrix.
Developing strategic objectives for each SBU.
Key Assumptions of BCG Matrix
Stable cost/price relationship
Not valid if the firm is pricing on
projected lower average unit costs in
the future
Market leader influences the
average costs
Profit margin is a function of market
share
This ignores profitable niches
Strategic Perspectives of
Products in Different Quadrants
Four different strategic perspectives
Investment
Earnings
Cash-flow, and
Strategy Implications
Question Marks
(Problem Children)
Investment—heavy initial capacity
expenditures and high R&D costs
Earnings—negative to low
Cash-flow—negative (net cash user)
Strategy Implications
If possible to dominate segment, go after
share. If not, redefine the business or
withdraw
Stars
Investment—continue to invest for
capacity expansion
Earnings—Low to high earnings
Cash-flow—Negative (net cash user)
Strategy Implications
Continue to increase market share—even
at the expense of short-term earnings
Cows
Investment—Capacity maintenance
Earnings—High
Cash-flow—Positive (net cash
contributor)
Strategy Implications
Maintain market share and cost
leadership until further investment
becomes marginal
Dogs
Investment
Gradually reduce capacity
Earnings—High to low
Cash-flow
Positive (net cash contributor) if
deliberately reducing capacity
Strategy Implications
Plan an orderly withdrawal to maximize
cash flow
BCG Matrix
(Three Paths to Success)
Continuously generate cash cows and
use the cash throw-up by the cash cows
to invest in the question marks that are
not self-sustaining
Stars need a lot of reinvestments and as
the market matures, stars will
degenerate into cash cows and the
process will be repeated.
As for dogs, segment the markets and
nurse the dogs to health or manage for
cash
BCG Matrix
(Three Paths to Failure)
Over invest in cash cows and under
invest in question marks
Trade further opportunities for present
cash flow
Under invest in the stars
Allow competitors to gain share in a high
growth market
Over milked the cash cows
BENEFITS
BCG MATRIX is simple and easy to
understand.
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.
It is used to identify how corporate cash
resources can best be used to maximize a
company’s future growth and profitability.
LIMITATIONS