8/2/2019 12 BCG Matrix
1/18
BOSTONCONSULTING GROUP
( BCG ) MATRIX
PROF. MANOJ MEGHRAJANI-SIBACA
8/2/2019 12 BCG Matrix
2/18
INTRODUCTION
BOSTON CONSULTING GROUP (BCG)
MATRIXis developed byBRUCEHENDERSONof theBOSTON
CONSULTING GROUP IN THE EARLY1970s.
According to this technique, businesses or
products are classified as low or highperformers depending upon their marketgrowth rate and relative market share.
PROF. MANOJ MEGHRAJANI-SIBACA
8/2/2019 12 BCG Matrix
3/18
Relative Market Share
and Market Growth
To understand theBoston Matrix youneed to understand how market share
and market growth interrelate.
PROF. MANOJ MEGHRAJANI-SIBACA
8/2/2019 12 BCG Matrix
4/18
MARKET SHARE
Market shareis the percentage of the total marketthat is being serviced by your company, measuredeither in revenue terms or unit volume terms.
RELATIVE MARKET SHARE
RMS = Business unit sales this yearLeading rival sales this year
The higher your market share, the higher proportionof the market you control.
PROF. MANOJ MEGHRAJANI-SIBACA
8/2/2019 12 BCG Matrix
5/18
MARKET GROWTH
RATE Market growthis used as a measure of a markets
attractiveness.
MGR = Individual sales - individual sales
this year last yearIndividual sales last year
Markets experiencing high growth are ones wherethe total market share available is expanding, and
theres plenty of opportunity for everyone to makemoney.
PROF. MANOJ MEGHRAJANI-SIBACA
8/2/2019 12 BCG Matrix
6/18
THE BCG GROWTH-SHARE
MATRIX It is a portfolio planning modelwhich is based on
the observation that a companys business units can
be classified in to four categories:
Stars
Question marks
Cash cows
Dogs
It is based on the combination of market growth andmarket share relative to the next best competitor.
PROF. MANOJ MEGHRAJANI-SIBACA
8/2/2019 12 BCG Matrix
7/18PROF. MANOJ MEGHRAJANI-SIBACA
8/2/2019 12 BCG Matrix
8/18
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 marketshare otherwise the star will become a CASHCOW.
PROF. MANOJ MEGHRAJANI-SIBACA
8/2/2019 12 BCG Matrix
9/18
CASH COWSLow growth , High market share
They are foundation of the company and oftenthe stars of yesterday.
They generate more cash than required.
They extract the profits by investing as littlecash as possible
They are located in an industry that is mature,not growing or declining.
PROF. MANOJ MEGHRAJANI-SIBACA
8/2/2019 12 BCG Matrix
10/18
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 beminimized.
Business is situated at a declining stage.
PROF. MANOJ MEGHRAJANI-SIBACA
8/2/2019 12 BCG Matrix
11/18
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 alsobecome a dog.
Investments should be high for questionmarks.
PROF. MANOJ MEGHRAJANI-SIBACA
8/2/2019 12 BCG Matrix
12/18
WHY BCG MATRIX ?To assess :
Profiles of products/businesses
The cash demands of products The development cycles of products
Resource allocation and divestment
decisions
PROF. MANOJ MEGHRAJANI-SIBACA
8/2/2019 12 BCG Matrix
13/18
MAIN STEPS OF BCG MATRIX
Identifying and dividing a company into SBU.
Assessing and comparing the prospects ofeach SBU according to two criteria :
1. SBUS relative market share.
2. Growth rate OF SBUS industry.
Classifying the SBUS on the basis of BCG
matrix. Developing strategic objectives for each SBU.
PROF. MANOJ MEGHRAJANI-SIBACA
8/2/2019 12 BCG Matrix
14/18
BCG MATRIX WITH CASH FLOW
PROF. MANOJ MEGHRAJANI-SIBACA
8/2/2019 12 BCG Matrix
15/18
BENEFITS
BCG MATRIX is simple and easy tounderstand.
It helps you to quickly and simply screen the
opportunities open to you, and helps youthink about how you can make the most ofthem.
It is used to identify how corporate cashresources can best be used to maximize acompanys future growth and profitability.
PROF. MANOJ MEGHRAJANI-SIBACA
8/2/2019 12 BCG Matrix
16/18
LIMITATIONS BCG MATRIX uses only two dimensions,
Relative market share and market growthrate.
Problems of getting data on market share andmarket growth.
High market share does not mean profits allthe time.
Business with low market share can beprofitable too.
PROF. MANOJ MEGHRAJANI-SIBACA
8/2/2019 12 BCG Matrix
17/18
PRACTICAL USE
MAHINDRA & MAHINDRA
HLL
ITC
PROF. MANOJ MEGHRAJANI-SIBACA
8/2/2019 12 BCG Matrix
18/18
CONCLUSION
Though BCG MATRIX has its limitations it is one
of the most FAMOUS AND SIMPLE portfolioplanning matrix ,used by large companieshaving multi-products.
PROF. MANOJ MEGHRAJANI-SIBACA