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BCG matrix with example
The document discusses the Boston Consulting Group (BCG) Matrix, which classifies business units into four categories based on their relative market share and market growth rate: Question Marks, Stars, Cash Cows, and Dogs. Question Marks have high growth but low market share, requiring high investment. Stars have high growth and market share but also require heavy investment. Cash Cows have low growth but high market share, generating cash with little investment. Dogs have low growth and market share and are cash traps. The BCG Matrix helps assess a product portfolio, cash demands, resource allocation, and divestment decisions.
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Introduction to the BCG Matrix developed in the 1970s for classifying business performance based on market growth rate and relative market share.
Explains the concepts of market share and relative market share, measuring a company's market presence in revenue or unit terms.
Defines market growth rate as a measure of market attractiveness and discusses opportunities in high-growth markets.
Introduces the four categories of the BCG Matrix: Question Marks, Stars, Cash Cows, and Dogs, based on market growth and market share.
Describes Question Marks as high growth, low market share businesses requiring significant investment to improve market standing.
Details Stars as high growth, high market share leaders needing heavy investment to maintain their position.
Defines Cash Cows as low growth, high market share units generating significant cash without requiring much reinvestment.
Identifies Dogs as low growth, low market share entities with declining business potential and high costs.
Discusses the utility of the BCG Matrix in assessing product performance, cash demands, development cycles, and resource decisions.
Outlines the main steps in using the BCG Matrix, including identifying business units and assessing them based on market share and growth.
Enumerates the advantages of the BCG Matrix, emphasizing its straightforwardness and strategic insights for resource allocation.
Highlights the limitations of the BCG Matrix, including its reliance on limited dimensions and challenges in data accuracy.
Briefly introduces the application of the BCG Matrix to Coca-Cola's product line for strategic classification.
Examines Coca-Cola's products categorized as Question Marks within the BCG Matrix framework.
Analyzes Coca-Cola's products that fall under the Stars category according to the BCG Matrix.
Details Coca-Cola's Cash Cows and their role in funding other business segments.
Identifies Coca-Cola’s Dogs and discusses their characteristics and implications in the BCG analysis.
Reiterates the characteristics of the Question Marks, Stars, Cash Cows, and Dogs in a summary format.
Concludes that despite its limitations, the BCG Matrix remains a popular tool for portfolio planning among large companies.
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BCG matrix with example
- 1. BUSINESS POLICY AND STRATEGIC MANAGEMENT BCGMatrix Presented By : Mayur Narole MBA (Finance)
- 2. BOSTON CONSULTING GROUP(BCG) Matrix is developed by Bruce Henderson of the Boston Consulting Group in the early 1970’s According to this technique, business or products are classified as low or high performance depending upon their market growth rate & relative market share.
- 3. RELATIVE MARKET SHARE& MARKET GROWTH To understand the Boston Matrix you need to understand how market share & market growth interrelated. Market Share
- 4. Market share isthe percentage of the total market that is being serviced by your company measured either in the revenue terms or unit volume terms.
- 5. RELATIVE MARKET SHARE BusinessUnit Sales this year RMS :- Leading rival sales this year The higher your market share, the higher proportion of the market you control.
- 6. MARKET GROWTH RATE Market Growth is used as a measure of a market’s attractiveness. Individual Sales this year – Individual sales last year MGR = Individual Sales last year
- 7. Markets experiencinghigh growth are ones where the total market share available is expanding & there is plenty of opportunity for everyone to make money
- 8. THE BCG GROWTH-SHAREMATRIX
- 10. It is portfolioplanning model which is based on the observation that company’s business unit can be classified in to four categories . Question Marks Stars Cash cows Dogs It is based on the combination of market growth & market share relative to the next based competitor.
- 12. QUESTION MARKS/PROBLEM CHILDREN( HIGH GROWTH, LOW MARKET SHARE) Most business start of as question marks They will absorb great amount of cash if the market share remains unchanged (low) Question marks have potential to become star & evenly cash cow but can also become dog. Investment should be high for question marks.
- 13. STARS (HIGH GROWTH, HIGHMARKET SHARE) Stars are leader in business They also require heavy investment to maintain it’s large market share. It leads to large amount of cash consumption & cash generation. Attempts should be made to hold the market share otherwise the star will became a cash cow.
- 14. CASH COWS ( LOWGROWTH, HIGH MARKET SHARE) They are foundation of the company & often the stars of yesterday. They generate more cash than required They generate more cash than required. They extract the profits by investing as little cash as possible They are located in an industry that is mature not growing or declining
- 15. DOGS (LOW GROWTH, LOWMARKET SHARE) Dogs are the cash traps Dogs do not have potential to bring High cost – Low quality Business is situated at a declining stage
- 16. WHY BCG MATRIX Toasses Profile of product /business Cash demands of products The development cycle of product Resource allocation & divestment decisions
- 17. MAIN STEPS OFBCG MATRIX Identifying & dividing a company into SBU Assessing & comparing the prospects of each SBU according to two criteria 1) SBU’s relative market share 2) Growth rate of SBU’s industry Classifying the SBU’s on the basis of BCG matrix Developing strategic objective for each SBU
- 18. BENEFITS BCG matrixis simple & easy to understand It helps to quickly & simply screen the opportunity open to you, & help you think about how you can make the most of them. It is used to identify how corporate cash resources can best be used to maximize company’s future growth & profitability.
- 19. LIMITATION BCG matrixuses 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.
- 20. BCG-MATRIX FOR THEPRODUCT LINE OF Coca-Cola
- 21. QUESTION MARKS (HIGH GROWTH,LOW MARKET SHARE
- 22. STARS (HIGH GROWTH, HIGHMARKET SHARE)
- 23. CASH COWS (LOW GROWTH,HIGH MARKET SHARE
- 24. DOGS (LOW GROWTH, LOWMARKET SHARE)
- 26.
- 27. STARS Invest forgrowth
- 28. CASH COWS ( MILKTO FUND OTHER BUSINESS)
- 29.
- 30. CONCLUSION Though BCGmatrix has its limitation it is one of the most famous & simple portfolio planning matrix, used by large companies having multi-products.