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

1. BCG Matrix & GE Matrix

2. BCG MATRIX
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

4. STARS
 Stars are leaders in business.
 May not necessarily produce highest cash flow.
 They also require heavy investment, to maintain its large market share.
 It leads to large amount of cash consumption and cash generation.
 Attempts should be made to hold the market share otherwise the star
will become a Question Mark.

5.  They are foundation of the company
and often the stars of yesterday.
 They generate more cash than
required.
 They extract the profits by investing
as little cash as possible.
 Enjoys economy of scale and high
profit margins being the market
leader.
 They are located in an industry that
is mature, not growing or declining.
CASH COWS

6. DOGS
 Dogs are the cash traps.
 Dogs do not have potential to bring in much cash.
 Number of dogs in the company should be minimized.
 Business is situated at a declining stage

7. QUESTION MARK
 Most businesses start of as question
marks.
 They will absorb great amounts of cash
if the market share remains unchanged,
(low).
 Question marks have potential to
become star and eventually cash cow
but can also become a dog.
 Investments should be high for
question marks

8. GE Matrix

9. In the late sixties and early seventies, while the Boston Consulting Group were devising the BCG
or Growth Share matrix, General Electric, a leading corporation in the United States, were also
looking at concepts and techniques for strategic planning.
The firm was disappointed in the profits that they had made from their investments in the
various businesses, which suggested flaws in GE’s approach to investment decision-making.
GE asked McKinsey and Company, a consulting company in the USA, to develop a portfolio
approach with a wider dimension than the BCG matrix.
In 1971 McKinsey and Co developed the business screen for General Electric to differentiate the
potential for future profit in each of the 43 strategic business units.
Starting point of GE Matrix

10. Firstly, MARKET ATTRACTIVENESS replaces MARKET GROWTH
as the dimension of
industry attractiveness, and includes a broader range of factors other than just the market
growth rate.
Secondly, COMPETITIVE STRENGTH replaces MARKET SHARE
as the
dimension by which the competitive position of each business unit is assessed.
GE OVER BCG

11. In the original GE McKinsey matrix,
business strength is plotted on the
vertical axis; the industry
attractiveness on the horizontal axis
and the size of the circle represents
the size of the industry with a
shaded wedge representing the
firm’s current share of the industry.
The matrix is divided into nine boxes.

12. - Market Size
- Market growth
- Market profitability
- Pricing trends
- Competitive intensity / rivalry
- Overall risk of returns in the industry
- Opportunity to differentiate products and services
- Segmentation
- Distribution structure (e.g. retail, direct, wholesale
Factors that Affect Market
Attractiveness

13. - Strength of assets and competencies
- Relative brand strength
- Market share
- Customer loyalty
- Relative cost position (cost structure
compared with competitors)
- Distribution strength
- Record of technological or other innovation
- Access to financial and other investment
resources
Factors that Affect Competitive
Strength

14. The factors are usually identified by
a representative, experienced
group of managers from the firm
including corporate, business and
functional managers.
Who Defines the Factors?

15. 1. The three cells at the top left hand
side of the matrix are the most
attractive in which to operate and
require a policy of investment for
growth – these are usually colored
green.

16. 2. The three cells running diagonally
from left to right have a medium
attractiveness, are colored yellow and
the management of businesses within
this category should be more cautious
and with a greater emphasis being
placed on selective investment and
earning retention.

17. 3. The three cells at the bottom right
hand side are the least attractive,
therefore colored red and management
should follow a policy of harvesting and /
or divesting unless the relative strengths
can be improved.

18. • If an organization is made up of many
business units or if a business unit is
made up of a number of different
product lines.
• Important for assigning priorities for
investment in the various businesses of
the firm and is guidance for resource
allocation.
• This matrix can be used at all levels
within the organization.
• It allows an organization to focus on
the strengths and weaknesses of the
business units or products.
Best Use