BCG Matrix

BCG Matrix
 The BCG growth share matrix is a portfolio planning model
developed by Bruce Henderson of the Boston Consulting Group in
the early 1970s.
 According to this technique, businesses or products are classified
as low or high performers depending upon their market growth rate
and relative market share.
 It is based on product life cycle theory.
 The BCG Matrix has 2 dimensions
 Market share
 Market growth.
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
 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
 The basic idea behind it is, if a product has a bigger market share
or if the product's market grows faster, it is better for the company.
Market Growth
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
BCG Matrix
Star (high growth, high market share)
 Stars are leaders in the business.
 Stars use large amounts of cash.
 Stars usually generate cash for the company
 Attempts should be made to hold the market share otherwise
the star will became a cash cow.
Cash Cows (low growth, high market share)
 Cash Cows are often the stars of yesterday and they are the
foundation of a company.
 Profits and cash generation should be high.
 Low market growth does not attract new competitors.
 Low market growth, call for less investments.
Dogs (low growth, low market share)
 Business is situated at a declining stage .
 Dogs are the cash traps.
 Avoid and minimize the number of Dogs
 Watch out for expensive 'rescue plans‘
 Dogs must deliver cash, otherwise they must be liquidated.
Question Marks (high growth, low
market share)
 Most business start of as question marks.
 Question marks have potential to become star & evenly cash
cow but can also become dog.
 They will absorb great amount of cash if the market share
remains unchanged.
 Question Marks have high cash demands.
 Question Marks generate low returns.
Limitations of BCG Matrix
 The model uses only two dimensions – market share
and growth rate.
 High market share is not the only success factor.
 Market growth is not the only indicator for attractiveness of a
market
 Problems of getting data on market share and market growth.
 There is no clear definition of what constitutes a “ market”.
Thank You
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BCG Matrix

  • 2.  The BCG growth share matrix is a portfolio planning model developed by Bruce Henderson of the Boston Consulting Group in the early 1970s.  According to this technique, businesses or products are classified as low or high performers depending upon their market growth rate and relative market share.  It is based on product life cycle theory.
  • 3.  The BCG Matrix has 2 dimensions  Market share  Market growth.
  • 4. 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
  • 5.  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  The basic idea behind it is, if a product has a bigger market share or if the product's market grows faster, it is better for the company. Market Growth
  • 7. 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
  • 9. Star (high growth, high market share)  Stars are leaders in the business.  Stars use large amounts of cash.  Stars usually generate cash for the company  Attempts should be made to hold the market share otherwise the star will became a cash cow.
  • 10. Cash Cows (low growth, high market share)  Cash Cows are often the stars of yesterday and they are the foundation of a company.  Profits and cash generation should be high.  Low market growth does not attract new competitors.  Low market growth, call for less investments.
  • 11. Dogs (low growth, low market share)  Business is situated at a declining stage .  Dogs are the cash traps.  Avoid and minimize the number of Dogs  Watch out for expensive 'rescue plans‘  Dogs must deliver cash, otherwise they must be liquidated.
  • 12. Question Marks (high growth, low market share)  Most business start of as question marks.  Question marks have potential to become star & evenly cash cow but can also become dog.  They will absorb great amount of cash if the market share remains unchanged.  Question Marks have high cash demands.  Question Marks generate low returns.
  • 13. Limitations of BCG Matrix  The model uses only two dimensions – market share and growth rate.  High market share is not the only success factor.  Market growth is not the only indicator for attractiveness of a market  Problems of getting data on market share and market growth.  There is no clear definition of what constitutes a “ market”.