BCG MATRIX and IE MATIX

Christine Divine M. Baterna

Topics: Boston Consulting Group Matrix (BCG Matrix) Internal and External Matrix (IE Matrix)Grand Strategy Matrix

The Boston Consulting Group Matrix(BCG Matrix) Graphically portrays differences among divisions in terms of relative market share position and industry growth rate.

Matrix is developed by Bruce Henderson of the Boston Consulting group in early 1970s is defined as the ratio of a divisions own market share in a particular industry to the market share held by the largest rival firm in that industry.Computed as follows: Relative market share = Brands Market x 100Largest competitor market

Relative Market share positionAverage annual increase in revenues of the firm.

Computed as follows: Current revenue- Prior Period revenue Prior period revenue

Industry Growth Rate in sales

BCG MatrixQuestion Marks- Absorb great amount of cash Investment requirement is high

Strategies:Market PenetrationMarket DevelopmentProduct DevelopmentDivestiture

StarsLeader of the businessHeavy investment to maintain its share in the market Large amount of cash consumption and cash generation

StarsStrategies:Forward, Backward and Horizontal integrationMarket DevelopmentProduct DevelopmentMarket Penetration

Cash cowGenerate more cash than required extract profits by investing as little cash as possible located in the industry that is mature, not growing or declining.

Cash cowStrategies:Product DevelopmentRetrenchmentDivestiture

Cash trapsSituated in a declining stageStrategies:RetrenchmentDivestitureDogs

BCG Matrix for Nestle

BCG Matrix for product line of:

Question marks

Stars

Cash cows

Dogs

"To be successful, a company should have a portfolio of products with different growth rates and different market shares. The portfolio composition is a function of the balance between cash flows. High growth products require cash inputs to grow. Low growth products should generate excess cash. Both kinds are needed simultaneously. Bruce Henderson

Internal-External Matrix(IE matrix)is based on an analysis of internal and external business factors which are combined into one suggestive modelBased on two key dimensions: The IFE total weighted scores on x- axis The EFE total weighted score on y-axis

20IE Matrix

WalMartInternal Factor EvaluationKey Internal FactorsWeightsRatingWeighted Score0.0 to 1.01 to 4Internal StrengthsStores in all 50 states0.0940.36New Concepts - Hypermarkets, supermarkets0.130.3Wide variety of merchandise0.130.3Nationally advertised merchandise0.0830.24Point-of-sale bar code scanning0.1340.52Great Employee Benefits0.0930.270Internal WeaknessesNo formal mission statement0.130.3Management resisted putting women on board of directors0.1330.39Hiring illegal minorities0.0820.16Growth for employees only in its division0.130.30Totals13.14

WalMartExternal Factor EvaluationKey External FactorsWeightsRatingWeighted Score0.0 to 1.01 to 4OpportunitiesAgreement with Berkshire Hathaway, Inc. acquired McLane Company, Inc. 0.130.3Fortunes number one Most Admired Company and largest company in nation 0.1440.56Worlds largest private satellite communication systems 0.1640.64Ron Brown Corporate Leadership Award 0.1130.330ThreatsBuy American policy 0.1530.45Target 0.1430.42A solution to breaking the monopoly Wal-Mart has created0.240.8Totals13.5

WalMart IE MATRIXGrow and BuildIntensive strategy:Integrative Strategy:Market penetrationBackward integrationMarket developmentForward IntegrationProduct DevelopmentHorizontal integrationI

Grand Strategy MatrixIt is a popular tool for formulating alternative strategies. Based on two major dimensions Competitive position in the x-axis Market Growth on the y- axis

Grand Strategy Matrix

WalMart Grand strategy matrix