information about bcg matrix
TRANSCRIPT
BCG Matrix
Presented by
Pankaj BajajMobile number
9913151617/7802905737
Outlines of the PPT
• History of BCG• Market Share and Market Growth• Portfolio Analysis• Product Lifecycle• The BCG Matrix• Conclusion
History of BCG Matrix
• Founded by Bruce D Henderson in 1963
• A global consulting firm with 42 offline countries
• One of only three companies to appear in the top 15 of fortunes best companies to work for report for seven consecutive years in the 2011 12 fortune list BCG is listed as the second best company to work
BCG Matrix
• BOSTON CONSULTING GROUP MATRIX is developed by BRUCE Henderson of the BOSTON CONSULTING GROUP in the early 1970
• According to this technique business or product are classified as low or high performers depending upon their market growth rate and relative market share
Relative market share and market growth
• To understand the Boston Matrix we need to understand market share and market growth interrelate
Market share• Market Share is the percentage of the business
unit sales to the total market that is being services by your company measured either in revenue terms or unit volume terms. In indicate the business unit strength
MS= Business Unit Sales This Year
Total Market Size
MS= Market Share
Relative market share • Is the percentage of the business
unit sales to the highest competitors sales measured either in revenue terms or unit volume terms it indicate the business unit strength
• RMS= (business unit sale this year)
leading competitor sales this year
RMS= Relative Market Share
Market Growth Rate
• Market growth is used as a measure of a market’s attractiveness
• Market experiencing high growth are ones where the total market share available is expanding and threes plenty of opportunity for everyone to make money.
MGR= (total market sales this year) – (total market sales this year) total market sales last year
Portfolio Analysis
• Product portfolio:- the range of product a company has in development or available for consumer at any time
• Managing product portfolio is important for cash portfolio
• Strategic business unit definition :-
single independent operation of a company
has its own competitors
one manager responsible for the performance
Product life cycle
• Show the stages that product go through from development to withdrawal from the market
• Each product may have a different life cycle
• Contributes to strategic marketing planning
• Helps to identify when a product needs support redesign withdrawal
• Helps in forecasting and managing cash flow
Stages in Product life cycle
• Development • Introduction/launch • Growth • Maturity • Decline • Withdrawal
Product life cycle and BCG matrix
Why BCG Matrix?
To access Profiles of product and business The cash demand of product The development cycle of products Resource allocation and divestment
decisions
The BCG Matrix
Stares
• High Growth, High Market Share
stares are leaders in business by having heavy high market share in a growing market share
they also require heavy investment to maintain its large market share
its leads to large amount of cash consumption and cash generations
Strategy recommendations
• Investment
Further Growth
maintain market position • Cash flow
Self sustaining : fund there own growth
require funds from other SBU (Cash Cows)
• Assure the future of the company• Grow into the cash cows
Question Marks • High Growth, Low Market Share • Question marks are essentially new products
where buyers have yet to discover them. Most businesses start of as question marks in growing markets but have low market share
• Question marks have high demand and low returns due to low market share. Investment should be high for question marks
• They will absorb great amounts of cash if the market share remains unchanged
• Question marks have potential to become stares and eventually cash cow but can become also a dog
Strategy recommendations • Investment
increase market share
selectively develop into Stares • Cash Flow
Require Funds From Other SBUs ( cash cows)• Unrealized future opportunities• The marketing strategy is to get markets to adopt this
products• These product need to increase their market share
quickly or they becomes a dog.• The best way to handle question marks is to either
invest heavily in them to gain market share or to sell them
Cash Cow
• Low growth, High Market Share• They are foundations of the company
and often the stares of yesterday.• They generate more cash then required.• They extract the profit by investing as
littlie cash as possible • They are located in an industry that is
mature, not growing or declining
Strategy recommendations
• Investment
maintain market share
maintain capacity • Cash Flow
positive cash flow
provides funding to support Stares and ?.
• No potential for profit growth
Dogs
• Low Growth, Low Market Share• Dogs are the cash trap • Dogs do not have potential to bring
in much cash• Number of dogs in the company
should be minimized• Business is situated at declining
stage
Strategy recommendations
• Investment diversified strategy reduce capacity to free up resources• Cash Flow Goal or positive cash flow negative cash flow • No real growth opportunities
Evaluation of BCG Matrix
• Oversimplifies complex decisions • BCG MATRIX users only two dimensions Market
Share and Market Growth• Only considered current business no dynamics• Does not recognize possible synergies between SBUs• High market share does not mean profits all that time• Business with low market share can be profitable too.
Evaluation of BCG Matrix
• BCG matrix is simple and easy to understand.• It helps you to quickly and simply screen the opportunities
open to you and helps you think about how you can make most of them.
• Good measurability of market share and growth • Provides information about efficient resources allocation with
in the organization • Generator for strategic option • It is used to identify how corporate cash resources can best be
used to maximize a companies futures growth and profitability.
Main Steps in BCG Matrix
• Identify and dividing company into SBU.• Assessing and comparing the prospects of each SBU
according to criteria:
SBU’s relative market share
Growth rate of SBUs industry• Classifying the SBU’s on the basis on the BCG
Matrix• Developing Strategic objective for each SBU.
Conclusion
• Though BCG Matrix has its limitations it is one of the most famous and simple portfolio planning matrix,
used by large companies having multi-products.
• As long as management understands that the BCG growth/Share Matrix generates option which is
require further analysis and validation, this tool can greatly enhance strategic decision making.
Thank-Y
ou