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Boston Consulting Group Matrix

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Strategic Management

Published in: Business, Economy & Finance

Boston Consulting Group Matrix

  1. 1. Presented by Amit Pramanik Rahul Saini Samrat Kundu Sruthi Nair Ujjawal Kishore Gerald B. Allan Boston Consulting Group, Boston, Massachusetts
  2. 2. PRODUCT ROLE ROLE Cash flow Cost potential CASH FLOW COST POTENTIAL GROWTH FUND SUPPLY ABORT
  3. 3. Market Share Market Growth Rate
  4. 4. Dogs 8 7 3 ? Question marks ? 2 1 Cash cows 6 Stars 5 4 High Low High Low
  5. 5. Leader expanding industry Generates large profits Requires substantial investments to sustain growth Farthest down on experience curve relative to competition Increase sales – e.g. new markets, new channels of distribution Increase market share
  6. 6. Low market share in expanding industry Needs substantial cash to improve its position Slow progress on experience curve Increase sales (limit to niche or increase market share (limit to niche) Leave market
  7. 7. Leader in mature or declining industry Can generate funds for other SBUs Maintain market share e.g. ensure quality, build customer loyalty, develop substitute brands Maximize Cash Flow e.g. increase usage rate, rate of replacement, modify expense structure, raise prices
  8. 8. Low market share in a mature or declining industry Slow progress on experience curve Cost disadvantages and few growth opportunities Concentrate on niches requiring limited effort
  9. 9. • Star – Leader in Expanding Industry – BUILD - Continue to increase market share – if necessary at expense of short-term earnings • Problem Child – Low market share in Expanding Industry – HARVEST if weak, BUILD if strong. – Assess chances of dominating segment. If good, go after share. If bad, redefine business or withdraw.
  10. 10. • Cash Cow – Leader in mature or declining industry – HOLD - Maintain share and cost leadership until further investment becomes marginal – Maximize cash flow • Dogs – Low market share in a mature or declining industry – DIVEST Plan an orderly withdrawal so as to maximize cash flow or concentrate on niches that require limited effort
  11. 11. 1 2 Experience curve Product life cycle
  12. 12. Issue 1 Issue 2 Issue 3 Neglects effect of synergy b/w business unit Market growth is not necessarily related to cash usage. Market share is not only success factor Issue 4 Multiple factors lead to profitability & Cash is not the only factor in evaluating a portfolio
  13. 13. Issue 5 Issue 6 Issue 7 Low market share can also be profitable Dogs can earn more than cash cows Measurement problems
  14. 14. Internal Balance Trends Competitive Evaluation Products are appropriately distributed among the forth quadrants Projection of Trends for a product in the forth coming five year period Product Portfolio charts for major competitors must be developed
  15. 15. Industry Position Financial Balance It can be obtained by plotting market growth against the company’s own product growth It is based on detailed cash flow calculation

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