bcg matrix

1. BCG
Growth/Share
Matrix

2. History of the BCG Matrix
 1960’s – diversification of businesses
 Need for universal management tool
 First implementation in 1969 by Boston
Consulting Group

3. Portfolio Analysis
 Strategic Business Unit (SBU) Definition
 Single independent operation of a company
 Has its own competitors
 One manager responsible for performance
 Has a different set of requirements of resources
 Allocation of resources over all SBUs

4. Basis of the BCG Portfolio Matrix
Time
Introductory Phase “?”
Growth Phase “Star”
Sales
Volume
Mature Phase “Cash
Cow”
Decline Phase “Dog”

5. BCG Matrix Construction
 Internal measure: Relative market share
 Firm’s sales of the SBU .
Total market’s average sales
 Firm’s Sales of the SBU .
Strongest Competitor’s Sales
 External measure: Market growth
 Match strategy with market stage

6. BCG Matrix Format
 Vertical Axis = Relative Market Growth
 Split at 10% by a horizontal line
 Horizontal Axis = Relative Market Share
 Split at 1x by a vertical line
 Creates four quadrants in which individual
SBUs are positioned as bubbles
 Bubble size = SBU’s total revenue

7. The BCG Matrix
High Low
High
Low
Product Sales
Growth Rate
Relative Market Share

8. 2-8
 BCG Market Share/Market Growth Matrix

9. Strategy Recommendations
 Investment
 Increase market share
 Selectively develop into Stars
 Cash Flow
 Require funds from other SBUs (Cash Cows)
 Unrealized future opportunities

10. Strategy Recommendations
 Investment
 Further Growth
 Maintain Market Position
 Cash flow
 Self-sustaining: Fund their own growth
 Require funds from other SBUs (Cash Cows)
 Assure the future of the company
 Grow into Cash Cows

11. Strategy Recommendations
 Investment
 Maintain market share
 Maintain capacity
 Cash Flow
 Positive cash flow
 Provides funding to support Stars and “?”
 No potential for profit growth

12. Strategy Recommendations
 Investment
 Divestiture strategy
 Reduce capacity to free up resources
 Cash Flow
 Goal of Positive Cash Flow
 Negative Cash Flow = Divestment
 No real growth opportunities

13. Evaluation of BCG Matrix: Cons
 Oversimplifies complex decisions
 Only 2 factors considered = creates risk
 Uncertainty in market and SBU definition
 Only considers current businesses no
dynamics
 Does not recognize possible synergies
between SBUs

14. Evaluation of BCG Matrix: Pros
 Simple and rapid
 Solid basis for decision-making
 Good measurability of market share and
growth
 Provides information about efficient
resource allocation within the organization
 Generator for strategic options

15. Conclusion
 As long as management understands that
the BCG Growth/Share Matrix generates
options which require further analysis and
validation, this tool can greatly enhance
strategic decision making