2. Outlines of the PPT
•
•
•
•
•
•
History of BCG
Market Share and Market Growth
Portfolio Analysis
Product Lifecycle
The BCG Matrix
Conclusion
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. 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. Relative market share and market
growth
• To understand
the Boston Matrix
we need to
understand
market share and
market growth
interrelate
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. 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. 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. 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. 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. Stages in Product life cycle
•
•
•
•
•
•
Development
Introduction/launch
Growth
Maturity
Decline
Withdrawal
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
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. 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. 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. 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. 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
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
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. 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. 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. 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.
