Information about BCG Matrix


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Information about BCG Matrix

  1. 1. BCG Matrix Presented by Pankaj Bajaj Mobile number 9913151617/7802905737
  2. 2. Outlines of the PPT • • • • • • History of BCG Market Share and Market Growth Portfolio Analysis Product Lifecycle The BCG Matrix Conclusion
  3. 3. History of BCG Matrix • Founded by Bruce D Henderson in 1963 • A global consulting firm with 42 offline countries • One of only three companies to appear in the top 15 of fortunes best companies to work for report for seven consecutive years in the 2011 12 fortune list BCG is listed as the second best company to work
  4. 4. BCG Matrix • BOSTON CONSULTING GROUP MATRIX is developed by BRUCE Henderson of the BOSTON CONSULTING GROUP in the early 1970 • According to this technique business or product are classified as low or high performers depending upon their market growth rate and relative market share
  5. 5. Relative market share and market growth • To understand the Boston Matrix we need to understand market share and market growth interrelate
  6. 6. Market share • Market Share is the percentage of the business unit sales to the total market that is being services by your company measured either in revenue terms or unit volume terms. In indicate the business unit strength MS= Business Unit Sales This Year Total Market Size MS= Market Share
  7. 7. Relative market share • Is the percentage of the business unit sales to the highest competitors sales measured either in revenue terms or unit volume terms it indicate the business unit strength • RMS= (business unit sale this year) leading competitor sales this year RMS= Relative Market Share
  8. 8. Market Growth Rate • Market growth is used as a measure of a market’s attractiveness • Market experiencing high growth are ones where the total market share available is expanding and threes plenty of opportunity for everyone to make money. MGR= (total market sales this year) – (total market sales this year) total market sales last year
  9. 9. Portfolio Analysis • Product portfolio:- the range of product a company has in development or available for consumer at any time • Managing product portfolio is important for cash portfolio • Strategic business unit definition :single independent operation of a company has its own competitors one manager responsible for the performance
  10. 10. Product life cycle • Show the stages that product go through from development to withdrawal from the market • Each product may have a different life cycle • Contributes to strategic marketing planning • Helps to identify when a product needs support redesign withdrawal • Helps in forecasting and managing cash flow
  11. 11. Stages in Product life cycle • • • • • • Development Introduction/launch Growth Maturity Decline Withdrawal
  12. 12. Product life cycle and BCG matrix
  13. 13. Why BCG Matrix? To access  Profiles of product and business  The cash demand of product  The development cycle of products  Resource allocation and divestment decisions
  14. 14. The BCG Matrix
  15. 15. Stares • High Growth, High Market Share stares are leaders in business by having heavy high market share in a growing market share they also require heavy investment to maintain its large market share its leads to large amount of cash consumption and cash generations
  16. 16. Strategy recommendations • Investment Further Growth maintain market position • Cash flow Self sustaining : fund there own growth require funds from other SBU (Cash Cows) • Assure the future of the company • Grow into the cash cows
  17. 17. Question Marks • High Growth, Low Market Share • Question marks are essentially new products where buyers have yet to discover them. Most businesses start of as question marks in growing markets but have low market share • Question marks have high demand and low returns due to low market share. Investment should be high for question marks • They will absorb great amounts of cash if the market share remains unchanged • Question marks have potential to become stares and eventually cash cow but can become also a dog
  18. 18. Strategy recommendations • Investment increase market share selectively develop into Stares • Cash Flow Require Funds From Other SBUs ( cash cows) • Unrealized future opportunities • The marketing strategy is to get markets to adopt this products • These product need to increase their market share quickly or they becomes a dog. • The best way to handle question marks is to either invest heavily in them to gain market share or to sell them
  19. 19. Cash Cow • Low growth, High Market Share • They are foundations of the company and often the stares of yesterday. • They generate more cash then required. • They extract the profit by investing as littlie cash as possible • They are located in an industry that is mature, not growing or declining
  20. 20. Strategy recommendations • Investment maintain market share maintain capacity • Cash Flow positive cash flow provides funding to support Stares and ?. • No potential for profit growth
  21. 21. Dogs • Low Growth, Low Market Share • Dogs are the cash trap • Dogs do not have potential to bring in much cash • Number of dogs in the company should be minimized • Business is situated at declining stage
  22. 22. Strategy recommendations • Investment diversified strategy reduce capacity to free up resources • Cash Flow Goal or positive cash flow negative cash flow • No real growth opportunities
  23. 23. Evaluation of BCG Matrix • Oversimplifies complex decisions • BCG MATRIX users only two dimensions Market Share and Market Growth • Only considered current business no dynamics • Does not recognize possible synergies between SBUs • High market share does not mean profits all that time • Business with low market share can be profitable too.
  24. 24. Evaluation of BCG Matrix • 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 most of them. • Good measurability of market share and growth • Provides information about efficient resources allocation with in the organization • Generator for strategic option • It is used to identify how corporate cash resources can best be used to maximize a companies futures growth and profitability.
  25. 25. Main Steps in BCG Matrix • Identify and dividing company into SBU. • Assessing and comparing the prospects of each SBU according to criteria: SBU’s relative market share Growth rate of SBUs industry • Classifying the SBU’s on the basis on the BCG Matrix • Developing Strategic objective for each SBU.
  26. 26. Conclusion • Though BCG Matrix has its limitations it is one of the most famous and simple portfolio planning matrix, used by large companies having multi-products. • As long as management understands that the BCG growth/Share Matrix generates option which is require further analysis and validation, this tool can greatly enhance strategic decision making.