portfolio analysis-bcg matrix

TRINITY INSTITUTE OF PROFESSIONAL STUDIES

Sector – 9, Dwarka Institutional Area, New Delhi-75Affiliated Institution of G.G.S.IP.U, Delhi

Portfolio Analysis-BCG Matrix

Dr. Jaspreet Kaur Associate Professor

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

Boston Consulting Group(Growth share matrix)

• The SBUs/products are categorized into four cell matrix on the basis of – Market Attractiveness which shows Industry’s annual

growth rate– Business Strength which shows the Company’s Market

Share Relative to Largest Competitor

The Boston Consulting Group’s Growth-Share Matrix

20%-18%-16%-14%-12%-10%- 8%- 6%- 4%- 2%- 0M

arke

t Gro

wth

Rat

e

10x 4x 2x 1.5x 1x Relative Market Share

.5x .4x .3x .2x .1x

Dogs 87

3 ?Question marks? ?

21

Cash cows

6

Stars

5

4

Star Products• Leader expanding industry• Stars generate a large profits• They need substantial

investments to maintain growth

• Farthest down on experience curve relative to competition

• Stars increase the sales of a company like new markets, new channels of distribution

• Stars Increase the market share

Question Mark?• Question marks have a Low

market share in the industry• They need substantial cash

for their growth• Slow progress on experience

curve• They Increase sales and

market share (limited to niche)

• In case they are not successful they will have to Leave market

Cash Cow• They are the Leader in mature

or declining industry• They generate massive funds

for other SBUs• They have a high market

share• They have a high quality and

customer loyalty.• They bring in Maximize Cash

Flow like increase usage rate, modify expense structure and raise prices

Dogs• They have a Low market

share in a mature or declining industry

• Show a Slow progress on experience curve

• They have Cost disadvantages

• Their growth opportunities are limited

• Harvest or Divest

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

Strategies of BCG

• Star – Its is a Leader in Expanding Industry. The star should be BUILD which is Continue to increase market share even if it is at the expense of short-term earnings

• Question Mark– It has a Low market share in Expanding Industry. It should be Harvested if weak, BUILD if strong. If the chances are good, go after share. If the chances are bad, redefine business or withdraw.

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

Strategies for BCG

• Cash Cow – It is a Leader in mature or declining industry. The strategy should be to HOLD that is Maintain share and cost leadership till investment becomes marginal. Also one should Maximize cash flow

• Dogs – Has a Low market share in a mature or declining industry. It should be Divested which is an orderly withdrawal to maximize cash flow or concentrate on niches which needs limited effort.

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

Issues with Growth/Share Matrix

• Market growth is not always related to the cash usage.

• Market growth is not always related to cash usage.

• Market share is not always related cash generation.

• Multiple factors may bring in profitability.• Cash cannot be the only factor in analyzing the

portfolio.

Thank You