SM Business Portfolio

Business Positioning and Portfolio Analysis

BCG Matrix

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BCG Matrix

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A circle represent the percent of revenues it represent in the overall corporate portfolio.

Market Growth rate is the projected rate of sales-growth for the market being served by a particular business.

Relative market share represent the ratio of a business’s market-share to the market-share headed by the large rival only - in the industry. i.e., market-share of a business divided by the market-share of its’ large competitors.

BCG Matrix …[cont…]

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Problem Child: A cash hog business whose internal cash generation are inadequate to fully fund its’ own needs for the working capital and new capital investment.

Stars: Business has strong competitive position in rapidly growing industry, major revenue contributors and profit growth and, may and may not be cash hogs.

BCG Matrix …[cont…]

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Cash Cows: Business can generate enough cash for financing new acquisitions, funding cash hogs requirements and paying dividends.

Dog/Question marks: Business are oftenunable to generate attractive cash on the on the long run, profit margins are chronically thin, and sometime can not produce enough cash to secure the competitive position.

BCG Matrix: Key Limitations

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Dividing the matrix into four cell is very simplistic

In the competitive market accurately measuring market share & growth rate is a problem

The relationship between market-share & profitability varies across industries and market segments

The matrix often do not reflect diversity options available for the business

Attractiveness of business not only depend on growth rate but also change in technology; seasonality; etc.

GE Nine Cell Industry Attractiveness / Business

Strengths Matrix:

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GE Nine Matrix …[cont…]

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The circle represents relative size of that particular industry segment in-terms of annual sales volume.

Pie wedge represents the firm’s market share as defined by sales volume within that industry segments.

The Life-cycle Portfolio Matrix

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The Life-cycle Portfolio Matrix …[cont…]

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The matrix shows – whether the firm’s businesses are evenly distributed across the stage of the industry life cycle that is, businesses are plotted in-terms of stage of industry evaluation and competitive position or not.

THANK YOU

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