PRODUCT LIFE CYCLES AND THE BOSTON (BCG) MATRIX by Workforce Stratorg

PRODUCT LIFE CYCLES

AND THE BOSTON (BCG) MATRIX

Strategy Academy

EMERALD Programme

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INTRODUCTION

Organisations face various problems when making significant business decisions

about a product or a business offering. It is sometimes unclear what products to

invest in or divest from or even combine with other services to get the most out of

the market.

This document provides a simple framework to analyse and classify your

organisation’s product portfolio and helps you arrive at those decisions.

Each slides includes explanations and leading questions you can use either

individually or to guide your discussion as a team

Customise the slides as needed. You may want to add your organisation’s branding,

insert new slides, adjust existing slides, and/or revise the talking points

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KEY TERMS

Product Portfolio – the range of products a company has in

development or available for consumers at any one time

Product Life Cycle – shows the stages that products go through

from development to withdrawal from the market

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STAGES OF THE PRODUCT LIFE CYCLE

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THE PRODUCT LIFE CYCLE

Sales

Time

Development Introduction Growth Maturity Saturation Decline

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USES OF THE PRODUCT LIFE CYCLE

Product Life Cycle (PLC):

Different products may have different life cycles. The PLC helps in:

Determining revenue earned

Contributing to strategic marketing planning

Identifying when a product needs support, redesign,

reinvigorating, withdrawal, etc.

New product development planning

Forecasting and managing cash flow of products

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THE BOSTON MATRIX

The Boston Matrix:

Is a means of analysing the product portfolio and informing decision making

about possible marketing strategies

It was developed by the Boston Consulting Group – a business strategy and

marketing consultancy in 1968

It links growth rate, market share and cash flow

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THE BOSTON CONSULTING GROUP’S

GROWTH-SHARE MATRIX

Relative Market Share

Pro

duct

Mark

et

Gro

wth

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IMPLICATIONS OF THE BCG CLASSIFICATION

and curve

• Inject sufficient investments to sustain growth

• First mover advantageleverage on experiencerelative to competition

• Increase markets,

sales –new channels

e.g. new of

distribution

• Inject cash to improve its position

another• Merge with problem child

• Limit to niche

• Leave market

parts) or• Harvest (for Divest

• Generate funds for otherproducts

• Maintain market share e.g. ensurequality, build customer loyalty,develop substitute brands

• Maximise Cash Flow e.g. increaseusage rate, rate of replacement,modify expense structure, raiseprices

Star Question Mark

• Concentrate on niches requiring limited effort

DogCash Cow

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APPLYING BCG IN PRACTICE

1. Choose the product(s)

2. Calculate Relative Market Share (RAS) as

3. Calculate Market Growth Rate (MGR) as

4. Plot RAS on the x/horizontal axis and MGR on the y/vertical axis

5. Apply the strategies most appropriate based on the product classification (next

slide)

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USES OF THE BCG MATRIX

Profile products/services or business units in large organisations

Assess the cash demand for products and services

Assess the development cycle of a business offering

Allocate resources to products or business units and make strategic business decisions

The BCG matrix can be used to:

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2

3

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TO LEARN MORE

strategyacademy.workforcegroup.comPeju Nkemneme: 07032696335

peju.nkemneme@workforcegroup.com