BOSTON CONSULTING GROUP
( BCG ) MATRIX
PRESENTED BY:
Shamsher Khan
Bilal Ahmed
M. Umar hayat
INTRODUCTION
BCG MATRIX is developed by BRUCE HENDERSON in the early
1970’s.
According to this technique, businesses/ products are classified as low/ high
performers depending upon their market growth rate and relative market
share.
Relative Market Share & Market Growth
• To understand the Boston Matrix, you need to understand how
market share and market growth interrelate.
Market Share
• Market share is the percentage of the total market that is being
serviced by your company, measured either in revenue terms or unit
volume terms.
• RELATIVE MARKET SHARE (RMS)
• 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
• Market growth is used as a measure of a market’s attractiveness.
• MGR = (Individual sales this year - (individual sales last year)
Individual sales last year
• Markets experiencing high growth when the total market share
available is expanding, and there’s plenty of opportunity for
everyone to make money.
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 into 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.
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 & cash generation.
• Attempts should be made to hold the market share otherwise the star
will become a CASH COW.
• SAMSUNG Mobile phones and tablets can be seen in star category.
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.
• SAMSUNG HOME APPLIANCES
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.
• like SAMSUNG PRINTER, Galaxy 7 has gained negative image due
to battery overheated.
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.
• SAMSUNG TV business decline due to small demand from various
countries.
• SAMSUNG WATCH is not able to gain attention from a customer and
higher competitor is APPLE watch.
WHY BCG MATRIX ?
To assess :
Profiles of products/businesses
The cash demands of products
The development cycles of products
Resource allocation and divestment decisions
MAIN STEPS OF BCG MATRIX
• Identifying & dividing a company into Strategic business unit (SBU).
• Assessing & comparing the prospects of each SBU according to two
criteria :
1. SBU’S relative market share.
2. Growth rate OF SBU’S industry.
• Classifying the SBU’S on the basis of BCG matrix.
• Developing strategic objectives for each SBU.
BCG MATRIX WITH CASH FLOW
BENEFITS
• BCG MATRIX is simple and easy to understand.
• It helps you to quickly & simply screen the opportunities open to
you
• It helps 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 a company’s future growth and profitability.
LIMITATIONS
• BCG MATRIX uses only two dimensions, Relative market share and
market growth rate.
• Problems of getting data on market share and market growth.
• High market share does not mean profits all the time.
• Business with low market share can be profitable too.
PRACTICAL USE
• MAHINDRA & MAHINDRA
• HLL
• IES
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.
THANK YOU
