Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2 matrix) de veloped by BCG, USA.

It is the most renowned corporate portfolio analysis tool. It provides a graphic representation for an organization to examine different bu sinesses in it s portfolio on the basis of their related mar et share and industry g rowth rates. It is a two dimensional analysis on management of SBU s (Strategic Busi ness Units). In other words, it is a comparative analysis of business potential and the evaluation of environment. According to this matrix, business could be classified as high or low according to their industry growth rate and relative mar et share. Relative Mar et Share = SBU Sales this year leading competitors sales this year. Mar et Growth Rate = Industry sales this year - Industry Sales last year. The analysis requires that both measures be calculated for each SBU. The dimensi on of business strength, relative mar et share, will measure comparative advanta ge indicated by mar et dominance. The ey theory underlying this is existence of an experience curve and that mar et share is achieved due to overall cost leade rship. BCG matrix has four cells, with the horizontal axis representing relative mar et share and the vertical axis denoting mar et growth rate. The mid-point of relat ive mar et share is set at 1.0. if all the SBU s are in same industry, the average g rowth rate of the industry is used. While, if all the SBU s are located in different industries, then the mid-point is set at the growth rate for the economy. Resources are allocated to the business units according to their situation on th e grid. The four cells of this matrix have been called as stars, cash cows, ques tion mar s and dogs. Each of these cells represents a particular type of busines s. 10 x 1 x 0.1 x Figure: BCG Matrix Stars- Stars represent business units having large mar et share in a fast growin g industry. They may generate cash but because of fast growing mar et, stars req uire huge investments to maintain their lead. Net cash flow is usually modest. S BU s located in this cell are attractive as they are located in a robust industry an d these business units are highly competitive in the industry. If successful, a star will become a cash cow when the industry matures. Cash Cows- Cash Cows represents business units having a large mar et share in a mature, slow growing industry. Cash cows require little investment and generate cash that can be utilized for investment in other business units. These SBU s are th e corporation s ey source of cash, and are specifically the core business. They are the base of an organization. These businesses usually follow stability strategi es. When cash cows loose their appeal and move towards deterioration, then a ret renchment policy may be pursued. Question Mar s- Question mar s represent business units having low relative mar et share and located in a high growth industry. They require huge amount of cash to maintain or gain mar et share. They require attention to determine if the ve nture can be viable. Question mar s are generally new goods and services which h ave a good commercial prospective. There is no specific strategy which can be ad opted. If the firm thin s it has dominant mar et share, then it can adopt expans ion strategy, else retrenchment strategy can be adopted. Most businesses start a s question mar s as the company tries to enter a high growth mar et in which the re is already a mar et-share. If ignored, then question mar s may become dogs, w hile if huge investment is made, then they have potential of becoming stars. Dogs- Dogs represent businesses having wea mar et shares in low-growth mar ets. They neither generate cash nor require huge amount of cash. Due to low mar et s hare, these business units face cost disadvantages. Generally retrenchment strat

egies are adopted because these firms can gain mar et share only at the expense of competitor s/rival firms. These business firms have wea mar et share because of high costs, poor quality, ineffective mar eting, etc. Unless a dog has some othe r strategic aim, it should be liquidated if there is fewer prospects for it to g ain mar et share. Number of dogs should be avoided and minimized in an organizat ion. Limitations of BCG Matrix The BCG Matrix produces a framewor for allocating resources among different bus iness units and ma es it possible to compare many business units at a glance. Bu t BCG Matrix is not free from limitations, such asBCG matrix classifies businesses as low and high, but generally businesses can b e medium also. Thus, the true nature of business may not be reflected. Mar et is not clearly defined in this model. High mar et share does not always leads to high profits. There are high costs al so involved with high mar et share. Growth rate and relative mar et share are not the only indicators of profitabili ty. This model ignores and overloo s other indicators of profitability. At times, dogs may help other businesses in gaining competitive advantage. They can earn even more than cash cows sometimes. This four-celled approach is considered as to be too simplistic. & Share on faceboo Share on twitterShare on lin edin Share on google_follow Lesson Store Courses Training News Blog Search Newsletter Contact Us About Us Home The General Electric Business Screen The General Electric Business Screen was originally developed to help mar eting managers overcome the problems that are commonly associated with the Boston Matr ix (BCG), such as the problems with the lac of credible business information, t he fact that BCG deals primarily with commodities not brands or Strategic Busine ss Units (SBU's), and that cashflow if often a more reliable indicator of positi on as opposed to mar et growth/share. The GE Business Screen introduces a three by three matrix, which now includes a medium category. It utilizes industry attractiveness as a more inclusive measure than BCG's mar et growth and substitutes competitive position for the original' s mar et share. So in come Strategic Business Units (SBU's). A large corporation may have many S BU's, which essentially operate under the same strategic umbrella, but are disti nctive and individual. A loose example would refer to Microsoft, with SBU's for operating systems, business software, consumer software and mobile and Internet technologies. Growth/share are replaced by competitive position and mar et attractiveness. The point is that successful SBU's will go and do well in attractive mar ets becaus e they add value that customers will pay for. So wea companies do badly for the opposite reasons. To help brea down decision-ma ing further, you then consider a number of sub-criteria: For mar et attractiveness: Size of mar et. Mar et rate of growth. The nature of competition and its diversity. Profit margin.

Impact of technology, the law, and energy efficiency. Environmental impact. ...and for competitive position: Mar et share. Management profile. R & D. Quality of products and services. Branding and promotions success. Place (or distribution). Efficiency. Cost reduction. At this stage the mar eting manager adapts the list above to the needs of his st rategy. The GE matrix has 5 steps: One - Identify your products, brands, experiences, solutions, or SBU's. Two - Answer the question, What ma es this mar et so attractive? Three - Decide on the factors that position the business on the GE matrix. Four - Determine the best ways to measure attractiveness and business position. Five - Finally ran each SBU as either low, medium or high for business strength , and low, medium and high in relation to mar et attractiveness. Now follow the usual words of caution that go with all boxes, models and matrice s. Yes the GE matrix is superior to the Boston Matrix since it uses several dime nsions, as opposed to BCG's two. However, problems or limitations include: There is no research to prove that there is a relationship between mar et attrac tiveness and business position. The interrelationships between SBU's, products, brands, experiences or solutions is not ta en into account. This approach does require extensive data gathering. Scoring is personal and subjective. There is no hard and fast rule on how to weight elements. The GE matrix offers a broad strategy and does not indicate how best to implemen t it. Search Mar eting Teacher Which mar eting topic do you want to study? A-Z Introduction to Mar eting - start here! Consumer Behaviour Creative Mar eting Digital Mar eting International Mar eting Mar eting Communications Mar eting Environment and research Mar eting & Finance Mar eting Mix Mar eting Plans Mar eting Strategy Services Mar eting SWOT Analysis About | Contact Privacy Policy Copyright Mar eting Teacher Ltd 2000 - 2012 Registered in England no. 05936182. A ll rights reserved. Our registered business address is Mar eting Teacher Ltd, Office 8, Dolphin Close, CHICHESTER, West Sussex, PO19 3Q P, United Kingdom +44 (0) 1243 216 215 Become a fan on Faceboo Follow us on Twitter 0){a.style.top=0;a.style.visibility='visible'}else setTimeout(function(){c(b,d*2 )},d)}c(that,10);})(this);" border="0" src="http://pagead2.googlesyndication.com /simgad/14552421961568822871" width="300"

In financial terms, portfolio analysis is a study of the performance of specific portf olios under different circumstances. It includes the efforts made to achieve the best trade-off between ris tolerance and returns. The analysis of a portfolio can be conducted either by a professional or an individual investor who may util izes specialized software. What is Portfolio Analysis? Portfolio analysis involves quantifying the operational and financial impact of the portfolio. It is vital to evaluate the performances of investments and timin g the returns effectively. The analysis of a portfolio extends to all classes of investments such as bonds, equities, indexes, commodities, funds, options and securities. Portfolio analys is gains importance because each asset class has peculiar ris factors and retur ns associated with it. Hence, the composition of a portfolio affects the rate of return of the overall investment. What is involved in Portfolio Analysis? Portfolio analysis is broadly carried out for each asset at two levels: Ris aversion: This method analyzes the portfolio composition while considering the ris appetite of an investor. Some investors may prefer to play safe and acc ept low profits rather than invest in ris y assets that can generate high return s. Analyzing returns: While performing portfolio analysis, prospective returns are calculated through the average and compound return methods. An average return is simply the arithmetic average of returns from individual assets. However, compo und return is the arithmetic mean that considers the cumulative effect on overal l returns. The next step in portfolio analysis involves determining dispersion of returns. It is the measure of volatility or standard deviation of returns for a particula r asset. Simply put, dispersion refers is the difference between the real intere st rate and the calculated average return. Portfolio Analysis Tools Several specialized portfolio analysis softwares are available in the mar et to ease the tas for an investor. These application tools can analyze and predict f uture trends for almost every investment asset. They provide essential data for decision ma ing on the allocation of assets, calculation of ris s and attainment of investment objectives. Featured Reports That You