3. BCG Matrix
Boston Consulting Group (BCG) is otherwise
called as Product Portfolio (or) Growth Share
Matrix. BCG developed a matrix to analyse and
understand the entire business portfolio of a firm.
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4. FOUR Quadrants of the BCG Matrix
The BCG Growth-Share Matrix uses a
2x2 grid with growth on one axis and
market share on the other. Each of the
four quadrants represents a specific
combination of relative market share, and
growth.
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5. .
Low Growth, High Share:
Companies should milk these “cash cows” for cash to reinvest
elsewhere.
High Growth, High Share:
Companies should significantly invest in these “stars” as they
have high future potential.
High Growth, Low Share:
Companies should invest in or discard these “question marks,”
depending on their chances of becoming stars.
Low Share, Low Growth:
Companies should liquidate, divest, or reposition these “pets.”
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6. Stars:
The star business generates high profits and high
cash flows. Maximum Investment is advisable in such business
or products.
For Example:
The bottled water Kinley, a Coca-Cola product.
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7. Question Marks
The business has a low
market share in a fast growing
market. It yields low profits and
marginal cash flow. Investment
may be made in such business to
increase market share.
For Example:
Fanta, a Coca-Cola
product.
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8. Cash Cows:
In this business the firm has a high market share in a slow growing market.
Though the profit is low but high cash is being generated. Cows are generally
generous and undemanding animals. If you own a cow, what it brings to your
home is priceless—fresh, clean and raw milk for long time! It asks only for
shelter and some fodder in return.
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9. Dogs:
Business in this category has no future. Therefore,
much investment is not advisable. However, if managed
well dogs business may become cash cows. A Faithful companion
and reliable protector, the dog is also a symbol of loyalty, honesty,
and companionship. Dogs are often symbolic of love and
domesticity. Dogs may also represent sociability and cooperation.
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10. 9
Benefits:
* BCG matrix is simple and easy to understand.
* It helps to quickly and simple screen the
opportunity open to you, and help you think about how you
can make the most of them.
* It is used to identify how corporate cash
resources can be best be used to maximize company’s future
growth & profitability.
11. Limitations:
*BCG Matrix uses only two dimensions, Relative market
share and market growth rate.
*Problems of getting data on market share and market
growth.
*High market share does not means profits all the time.
Business with low market share can be profitable too.
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