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Boston Consulting Group (BCG)

The document discusses the Boston Consulting Group (BCG) growth-share matrix, a portfolio planning model that classifies business units based on their relative market share and market growth rate. It categorizes units as Stars (high share, high growth), Cash Cows (high share, low growth), Question Marks (low share, high growth), or Dogs (low share, low growth). The matrix is used to assess units, allocate cash resources, and make investment and divestment decisions. While simple, it only considers two factors and data may be difficult to obtain. However, it remains a commonly used tool to evaluate business portfolios.

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LEZIEL ASINO
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42 views30 pages

Boston Consulting Group (BCG)

The document discusses the Boston Consulting Group (BCG) growth-share matrix, a portfolio planning model that classifies business units based on their relative market share and market growth rate. It categorizes units as Stars (high share, high growth), Cash Cows (high share, low growth), Question Marks (low share, high growth), or Dogs (low share, low growth). The matrix is used to assess units, allocate cash resources, and make investment and divestment decisions. While simple, it only considers two factors and data may be difficult to obtain. However, it remains a commonly used tool to evaluate business portfolios.

Uploaded by

LEZIEL ASINO
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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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.
RELATIVE MARKET
SHARE & MARKET
GROWTH
MARKET SHARE
● is the percentage of the total market
that is being serviced by your
company measured either in the
revenue terms or unit volume terms.
RELATIVE MARKET SHARE
RMS= Business Unit Sales this year /
Leading Rival Sales this year

The higher your market share, the higher


proportion of the market you control.
MARKET GROWTH RATE
● MGR= Individual Sales this year –
Individual sales last year / Individual
sales last year
● Market Growth is used as a measure of a
market’s attractiveness.
Markets experiencing high
growth are ones where the total
market share available is
expanding & there is plenty of
opportunity for everyone to
make money
BCG Growth-Share Matrix
It is portfolio planning model which is based on the
observation that company’s business unit can be classified in
to four categories .
1. Question Marks
2. Stars
3. Cash cows
4. Dogs
It is based on the combination of market growth & market
share relative to the next based competitor.
QUESTION MARKS
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.
STARS
(HIGH GROWTH, HIGH MARKET 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.
CASH COWS
( LOW GROWTH, HIGH MARKET SHARE)
● They are foundation of the company & often the
stars of yesterday.
● 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
DOGS
(LOW GROWTH, LOW MARKET SHARE)
● Dogs are the cash traps
● Dogs do not have potential to bring
● High cost – Low quality
● Business is situated at a declining stage
WHY BCG
MATRIX?
To asses
● Profile of product /business
● Cash demands of products
● The development cycle of product
● Resource allocation & divestment decisions
MAIN STEPS OF BCG MATRIX
1. Identifying & dividing a company into SBU
Assessing & comparing the prospects of each
SBU according to two criteria
● SBU’s relative market share
● Growth rate of SBU’s industry
1. Classifying the SBU’s on the basis of BCG matrix
2. Developing strategic objective for each SBU
BENEFITS BCG
● matrix is 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.
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.
Example 1:
BCG Matrix for Colgate
QUESTION MARKS
(HIGH GROWTH, LOW MARKET SHARE)
STARS
(HIGH GROWTH, HIGH MARKET SHARE)
CASH COWS
(LOW GROWTH, HIGH MARKET SHARE)
DOGS
(LOW GROWTH, LOW MARKET SHARE)
Example 2:
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.

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