BCG final

BOSTON CONSULTING GROUP MATRIXGeneral Electric (GE) Matrix

PRESENTED BY:

Abhinav Gotmare

Ajay Agrawal

Mayur Amesar

Rahul Shukla

INTRODUCTION

BOSTON CONSULTING GROUP (BCG) MATRIX is developed by BRUCE HENDERSON of the BOSTON CONSULTING GROUP IN THE EARLY 1970’s.

According to this technique, businesses or products 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 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 = Business unit sales this year Leading rival sales this year

• The higher your market share, the higher proportion of the market you control.

MARKET GROWTHRATE Market growth is used as a measure of a market’s

attractiveness.

MGR = Individual sales - individual sales this year last year Individual sales last year Markets experiencing high growth are ones where

the total market share available is expanding, and there’s plenty of opportunity for everyone to make money.

THE 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 in to 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.

STARSHigh 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

and cash generation. Attempts should be made to hold the market

share otherwise the star will become a CASH COW.

CASH COWS Low growth , High market share

They are foundation of the company and 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.

DOGSLow 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.

QUESTION MARKSHigh 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.

WHY BCG MATRIX ?

To assess : Profiles of products/businesses/SBUs The cash demands of products/SBUs The development cycles of products/SBUs Resource allocation and divestment

decisions

Success and Disaster Sequence

Objective of BCG Matrix

Increased focus on strategy and result

Improved organization performance

Improved organization communication : Vision , strategy

MAIN STEPS OF BCG MATRIX

Identifying and dividing a company into SBU. Assessing and 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.

SBUs of TATA group of companies

Tata SteelTata Steel EuropeTata MotorsTata Consultancy ServicesTata TechnologiesTata TeaTitan IndustriesTata PowerTata CommunicationsTata SonsTata TeleservicesTaj HotelsTata ChemicalsTata Global Beverages

Portfolio Analysis of the Tata Group

The BCG Growth Share matrix uses the dimensions of relative market share and the market growth rate to establish a 2*2 matrix containing 4 main quadrants

Stars (high market growth, high market share), Cash Cows (low market growth, high market share), Question marks (high market growth, low market

share) Dogs (low market growth, low market share). The ideal strategy is to hold on to the Stars and the

Cash Cows, divest the Dogs and take a call on the Question Marks (hold/divest).

We have conducted a detailed analysis (using the BCG Matrix) of the portfolio of companies in the Tata Group. This involved analyzing the sectors in which the Tata group operates as well as the companies in the Tata Group within each sector. We studied the operational and financial performances of each company to understand their growth stories. Special emphasis was laid on identifying the organic and inorganic growth routes pursued by each of these companies under the Tata umbrella. The conclusions drawn about these companies are based on analysis of the global strategy of the Tata group and on detailed conversations with top executives in the Tata Group.

Portfolio Analysis of the Tata Group using the BCG Matrix

The analysis reveals that

Tata Steel, Tata Power, Tata Motors and Indian Hotels emerge as clear Stars (high market growth, high market share).

Hence, they should be retained and the investment in these companies should be increased.

Tata Chemicals and Tata Tea emerge as the Cash Cows (low market growth, high market share) and should be held on to for the time being.

Some of the Question Marks (high market growth, low market share) are Tata Teleservices, Voltas and Tata Communications.

BENEFITS

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 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.

General Electric (GE) Matrix

It is the management task concerned with the growth and future of business enterprise.

It provides the route map for the firm and helps to take decision in the future with a greater awareness.

STRATEGIC PLANNING

Developed by McKinsey & Company in 1970’s.

GE is a model to perform business portfolio analysis on the SBU’s.

GE is rated in terms of ‘Market Attractiveness & Business Strength’

It is an Enlarged & Sophisticated version of BCG.

ABOUT GE MATRIX

Classification M

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Strong Medium Weak

Lo

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Hig

hBusiness Strength

Market Attractiveness

Annual market growth rate Overall market size Historical profit margin Current size of market Market structure Market rivalry Demand variability Global opportunities

Current market share Brand image Production capacity Corporate image Profit margins relative to competitors R & D performance Promotional effectiveness

Business Strength

1 2

3

Strategies

2. Invest to Build• Challenge for leadership• Build selectively on strength

1. Protect Position• Invest to grow• Effort on maintaining strength

3. Build Selectively• Invest in most attractive segment• Build up ability to counter competition• Emphasize profitability by raising productivity

6

5

4

Strategies

4. Protect & Refocus• Manage for current earning• Defend strength

5. Selectivity for Earning• Protect existing program• Investments in profitable segments

6. Build Selectively • Specialize around limited strength• Seek ways to overcome weaknesses• Withdraw if indication of sustainable growth are lacking

7

8 9

Strategies

8. Manage for Earnings• Protect position in profitable segment• Upgrade product line• Minimize investment

7. Limited Expansion for Harvest• Look for ways to expand without high risk

9. Divest • Sell at time that will maximize cash value• Cut fixed costs and avoid investment meanwhile

Study of TATA

TATA

• IT (Information Technology) : TCS

• Consumer Durable : Automobiles, Titan etc.

•Textiles : Tata Fabrics, West Sides etc

GE Matrix For TATA

Business Strengths

Mar

ket

A

ttra

ctiv

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s

Low

High

WeakStrong

IT Consumer Durables

Textiles

BCG & GE Matrix

Mar

ket

Att

ract

iven

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Business Strength

Mar

ket

Gro

wth

Relative Position

(Market Share)

BCG v/s GE

BCG GE

Market Growth

Market share

4 cell

Multi Products

Primary tools

Market Attractiveness

Market strength

9 cell

Multi Business Units

Secondary tools