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BCG Matrix: Business Portfolio Analysis

The document discusses the BCG matrix, which is a portfolio analysis tool developed by the Boston Consulting Group in the 1970s. It categorizes a company's business units into four groups - Stars, Cash Cows, Question Marks, and Dogs - based on their relative market share and market growth rate. Stars are high share in a high growth market, while Cash Cows have high share but the market growth is low. Question Marks have low share but the market is growing, while Dogs have low share and low growth. The matrix is used to analyze which business units a company should invest in, maintain, or divest.

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chinmay manjrekar
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304 views17 pages

BCG Matrix: Business Portfolio Analysis

The document discusses the BCG matrix, which is a portfolio analysis tool developed by the Boston Consulting Group in the 1970s. It categorizes a company's business units into four groups - Stars, Cash Cows, Question Marks, and Dogs - based on their relative market share and market growth rate. Stars are high share in a high growth market, while Cash Cows have high share but the market growth is low. Question Marks have low share but the market is growing, while Dogs have low share and low growth. The matrix is used to analyze which business units a company should invest in, maintain, or divest.

Uploaded by

chinmay manjrekar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd

BOSTON CONSULTING

GROUP MATRIX

( BCG Matrix OR Growth Share Matrix OR Product


Portfolio Matrix)
Business portfolio analysis

 Portfolio analysis is the analysis of the company as a


portfolio or collection of different businesses with a view
to identifying the status and potential of the various
businesses with regard to the resource use and resource
generation.
 The objective is to help the company to formulate
appropriate portfolio strategy, which involves issues such
as:
1. should there be a change in the current portfolio?
2. Which businesses should be developed further?
3.Which are the business to be harvested?
Business portfolio analysis
“ Business portfolio analysis can be defined as a set of
techniques that help strategist in taking strategic
decisions with regard to individual products or business
in a firm’s portfolio.”
• It is primarily used for competitive analysis and
corporate strategic planning in multiproduct and multi-
business firms.
• A no. of techniques which can be used for business
portfolio analysis:
• TOWS Matrix
• BCG Matrix
• GE Nine Cell Matrix
INTRODUCTION

 BOSTON CONSULTING GROUP (BCG)


MATRIX is developed by BRUCE
HENDERSON of the BOSTON
CONSULTING GROUP IN THE EARLY
1970’s.

 According to this technique, businesses or


products are classified as low or high performers
depending upon their market growth rate and
relative market share.
Relative Market Share
and Market Growth

To understand the Boston Matrix you


need to understand how market share
and market growth interrelate.
 
MARKET SHARE
• Market share is the percentage of the total
market that is being serviced by your company,
measured either in revenue terms or unit volume
terms.

• RELATIVE MARKET SHARE

• RMS = Business unit sales this year


Leading rival sales this year

• The higher your market share, the higher


proportion of the market you control.
MARKET GROWTH RATE

Market growth is used as a measure of a


market’s attractiveness.

MGR = Individual sales - individual sales


this year last year
Individual sales last year

Markets experiencing high growth are ones


where the total market share available is
expanding, and there’s plenty of opportunity for
everyone to make money.
BCG Matrix
 The Boston Group Consulting Matrix.
 Four square grid devised by Boston Consulting Group.
 Matrix formed by using industry growth rate on vertical
axis and relative market share on horizontal axis.
 Placing products in BCG Matrix results in four
categories in portfolio of a company:
 Problem Children
 Stars
 Cash Cows
 Dogs
BCG Matrix
Question Mark
 High growth, low market share
 growing rapidly and thus consume large amounts of cash
 Low returns
 Have the potential to gain market share and become a star,
and eventually a cash cow when the market growth slows
 If no steps taken for increase the market share, they simply
absorbs high cash and when market growth declines,
becomes dogs
 must be analyzed carefully in order to determine whether
they are worth the investment required to grow market
share
Stars
 High growth rate, high market share
 Use large amount of cash and are business leaders
 Successful Question Marks will grow their business and
capture more market share and will hopefully become
Stars
 If able to maintain the category leadership, the stars can
become the cash cows when market growth slows
Cash Cows

 Low growth, high market share


 Low investment, high returns
 Foundations of a company
Dogs

 Low growth, low market share


 Business units called Dogs because of
 Fails to generate cash flow on long term basis
 BCG suggests weak Dogs should be harvested, divested
or liquidated depending on the ability of the strategy to
yield more cash

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