BCG MATRIX.ppt
- 1. What Is 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. 1
- 2. THE BCG GROWTH-SHARE MATRIX It is a portfolio planning model which is based on the observation that a company’s business units can be classified in to four categories: Stars Question marks Cash cows Dogs It is based on the combination of market growth and market share relative to the next best competitor. 2
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- 4. BCG MATRIX Market-Growth/Market-Share Matrix A strategic planning tool based on the philosophy that a product’s market growth rate and market share are important in determining marketing strategy Factors determining SBU/product’s position within a matrix Product-market growth rate Relative market share
- 5. Growth-Share Matrix Developed by the Boston Consulting Group Source: Perspectives, No. 66, “The Product Portfolio.” Reprinted by permission from The Boston Consulting Group, Inc., Boston, MA. Copyright © 1970.
- 6. BCG Classification Star—high growth market, dominant market share requires additional resources for continued growth Cash cow—low growth, dominant market share generates surplus resources for allocation to other SBUs Dog—low/declining market, subordinate market share has diminished prospects and represents a drain on the portfolio Question mark—high growth market, low market share represents a high-risk/cost opportunity requiring a large commitment of resources to build market share
- 7. STARS High growth, High market share Stars are leaders in business. 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 CASH COW. 7
- 8. CASH COWS Low growth , High market share 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 They are located in an industry that is mature, not growing or declining. 8
- 9. DOGS Low growth, Low market share 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. 9
- 10. QUESTION MARKS High growth , Low market share Most businesses start of as question marks. They will absorb great amounts of cash if the market share remains unchanged, (low). Why question marks? Question marks have potential to become star and eventually cash cow but can also become a dog. Investments should be high for question marks. 10
- 11. The Boston Consulting Group’s Growth-Share Matrix Market Growth Rate Relative Market Share Dogs ? Question marks ? Cash cows Stars
- 12. Star Leader expanding industry Generates large profits Requires substantial investments to sustain growth Farthest down on experience curve relative to competition Increase sales – e.g. new markets, new channels of distribution Increase market share
- 13. Problem Child or ? Low market share in expanding industry Needs substantial cash to improve its position Slow progress on experience curve Increase sales (limit to niche or increase market share (limit to niche) Leave market
- 14. Cash Cow Leader in mature or declining industry Can generate funds for other SBUs Maintain market share e.g. ensure quality, build customer loyalty, develop substitute brands MaximizeCash Flow e.g. increase usage rate, rate of replacement, modify expense structure, raise prices
- 15. Dogs Low market share in a mature or declining industry Slow progress on experience curve Cost disadvantages and few growth opportunities Concentrate on niches requiring limited effort
- 16. Strategy Implications BCG Star – Leader in Expanding Industry BUILD - Continue to increase market share – if necessary at expense of short-term earnings Problem Child – Low market share in Expanding Industry HARVEST if weak, BUILD if strong. Assess chances of dominating segment. If good, go after share. If bad, redefine business or withdraw.
- 17. Strategy Implications BCG Cash Cow – Leader in mature or declining industry HOLD - Maintain share and cost leadership until further investment becomes marginal Maximize cash flow Dogs – Low market share in a mature or declining industry DIVEST Plan an orderly withdrawal so as to maximize cash flow or concentrate on niches that require limited effort