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BCG matrix
REHAMAN M
MBA( STUDENT)
The BCG growth-share matrix
BCG matrix  explanation
It is based on the combination of market growth &
market share relatives of the companies products.
Question Marks
Stars
Cash cows
Dogs
BCG matrix  explanation
Relative market share
This indicates likely cash generation, because the higher
the share the more cash will be generated. As a result of
'economies of scale‘. it is assumed that these earnings
will grow faster the higher the share
Market growth rate
Rapidly growing in rapidly growing markets, are what
organizations strive for; but, as we have seen, the penalty
is that they are usually net cash users – they require
investment. The reason for this is often because the
growth is being 'bought' by the high investment, in the
reasonable expectation that a high market share will
eventually turn into a sound investment in future profits
Question marks
( high growth, low market share)
Growing rapidly and consumes large amounts of cash
But they have low market share.
It has the potential to gain market share and become a
star and when the market growth is slow it will become
cash cow.
When market growth declines it will be degenerate
into dog.
It must be analyzed carefully whether there is worth of
investment required to grow market share.
Stars
(high growth, high market share)
Generate large amount of cash – market share.
Consumes large amount of cash – market growth.
It will become cash cow when market growth rate
declines.
Frequently roughly in balance on net cash flow
however if needed any attempt should be made to
hold share, because the rewards will be cash cow if
market share is kept.
Cash cows
( low growth, high market share)
Generates stable cash flow.
profits and cash generation should be high, and
because of the low growth , investment needed to
be low. Keep profits high.
Cash cows provide the cash required to turn
question marks into market leaders, to cover R&D
and to pay dividends to shareholders.
Dogs
(low growth, low market share)
Neither generate nor consume a large amount of
cash.
Avoid and minimize the number of dogs in a
company.
Beware of expensive turn around plans.
Deliver cash, otherwise liquidate.
Limitation
 BCG matrix uses only two dimensions relative
market share & market growth rate.
 Problem of getting data on market share & market
growth.
 High market share does not mean profits all time.
Business with market share can be profitable too.
Conclusion
Though BCG matrix has its limitation it is one of
the most famous & simple portfolio planning
matrix, used by large companies having multi-
products.
The BCG matrix will be applied for the companies
products and not over the industries.
BCG matrix for companies
products
BCG matrix  explanation
BCG matrix  explanation
BCG matrix  explanation
BCG matrix  explanation
BCG matrix  explanation
BCG matrix  explanation
BCG matrix  explanation

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BCG matrix explanation

  • 4. It is based on the combination of market growth & market share relatives of the companies products. Question Marks Stars Cash cows Dogs
  • 6. Relative market share This indicates likely cash generation, because the higher the share the more cash will be generated. As a result of 'economies of scale‘. it is assumed that these earnings will grow faster the higher the share Market growth rate Rapidly growing in rapidly growing markets, are what organizations strive for; but, as we have seen, the penalty is that they are usually net cash users – they require investment. The reason for this is often because the growth is being 'bought' by the high investment, in the reasonable expectation that a high market share will eventually turn into a sound investment in future profits
  • 7. Question marks ( high growth, low market share) Growing rapidly and consumes large amounts of cash But they have low market share. It has the potential to gain market share and become a star and when the market growth is slow it will become cash cow. When market growth declines it will be degenerate into dog. It must be analyzed carefully whether there is worth of investment required to grow market share.
  • 8. Stars (high growth, high market share) Generate large amount of cash – market share. Consumes large amount of cash – market growth. It will become cash cow when market growth rate declines. Frequently roughly in balance on net cash flow however if needed any attempt should be made to hold share, because the rewards will be cash cow if market share is kept.
  • 9. Cash cows ( low growth, high market share) Generates stable cash flow. profits and cash generation should be high, and because of the low growth , investment needed to be low. Keep profits high. Cash cows provide the cash required to turn question marks into market leaders, to cover R&D and to pay dividends to shareholders.
  • 10. Dogs (low growth, low market share) Neither generate nor consume a large amount of cash. Avoid and minimize the number of dogs in a company. Beware of expensive turn around plans. Deliver cash, otherwise liquidate.
  • 11. Limitation  BCG matrix uses only two dimensions relative market share & market growth rate.  Problem of getting data on market share & market growth.  High market share does not mean profits all time. Business with market share can be profitable too.
  • 12. Conclusion Though BCG matrix has its limitation it is one of the most famous & simple portfolio planning matrix, used by large companies having multi- products. The BCG matrix will be applied for the companies products and not over the industries.
  • 13. BCG matrix for companies products