BCG MATRIX

The BCG matrix is a chart that had been created by Bruce Henderson for the Boston Consulting Group in 1968 to help corporations with analyzing their business units or product lines.
This helps the company allocate resources and is used as an analytical tool in brand marketing, product management, strategic management, and portfolio analysis.

BCG Matrix

STARS
HIGH GROWTH HIGH MARKET SHARE
Stars are leaders in businesses.
They also require heavy investment to maintain its

large market share. It leads to large amount of cash consumption and cash generation

Cash Cows
LOW GROWTH HIGH MARKET SHARE
They are the foundation of the company and often

stars of yesterday. They generate more cash than required. They extract the profits by investing as little cash as possible.

Dogs
LOW GROWTH LOW MARKET SHARE
Dogs are the cash traps.
Dogs do not have potential to bring more cash. Number of dogs should be minimized.

Business is situated at declinig stage.

QUESTION MARKS
HIGH GROWTH LOW MARKET SHARE
Most businesses start as of question marks. Question marks have the potential to become stars but

can also become dog.

Investments shoulld be high question marks.

Limitations of the BCG Matrix

It neglects the effects of synergy between business

units. Market growth is not the only indicator for attractiveness of a market. Sometimes Dogs can earn more cash than Cash Cows. There is no clear definition of what constitutes a "market".

The model uses only two dimensions market share and growth rate. This may tempt management to emphasize a particular product, or to divest prematurely.
A business with a low market share can be profitable too. The model neglects small competitors that have fast growing market shares. A high market share does not necessarily lead to profitability all the time.

Business Mix of ITC Ltd.

FMCG Cigarettes

Foods Lifestyle Retailing Greeting, Gifting & Stationery Safety Matches Agarbattis

Paperboards & Packaging Paperboards & Specialty Papers Packaging

Business Mix (Contd)

Agri - Business Agri-Exports

e-Choupal Leaf Tobacco

Hotels Group Companies ITC Infotech; etc.

Segment Cigarettes Paper & Packg.

Dominance 70% share Packaging board No. 1 in Asia

Contribution % Revenue PBIT 77.0% 87.7% 7.3% 7.0% 10.7% 3.7%

Agri 1of the largest xporters business from India

Hotels
FMCG (Others)

ITC Group ranks No.2

20% share of greeting cards market, 'Aashirvaad' atta is No.1 in branded segment

4.3%
4.4%

5.4%
-7.5%

Stars Hotels Paperboards/ Packaging. Agri business. Cows FMCG-Cigarettes

The BCG Matrix for ITC Ltd.

? FMCG- Others

Dogs Maybe ITC Infotech.

GE / McKinsey Matrix
In consulting engagements with General Electric in

the 1970's, McKinsey & Company developed a ninecell portfolio matrix as a tool for screening GE's large portfolio of strategic business units (SBU). This business screen became known as the GE/McKinsey Matrix.

GE / McKinsey Matrix Vs BCG Matrix

The GE matrix has nine cells vs. four cells in the BCG matrix. The GE / McKinsey matrix is similar to the BCG growth-share matrix in that it maps strategic business units on a grid of the industry and the SBU's position in the industry.

GE / McKinsey Matrix Vs BCG Matrix

The GE matrix however, attempts to improve upon the BCG

matrix in the following two ways: The GE matrix generalizes the axes as "Industry Attractiveness" and "Business Strength/ competitive position. whereas the BCG matrix uses the market growth rate as a proxy for industry attractiveness and relative market share as a proxy for the strength of the business unit/ competitive position.

Industry Attractiveness
The vertical axis of the GE / McKinsey matrix is industry

attractiveness, which is determined by factors such as the following: Market growth rate Market size Demand variability Industry profitability Industry rivalry Global opportunities Macro environmental factors (PEST)

Business Unit Strength / competitive position

The horizontal axis of the GE / McKinsey matrix is the strength of the

business unit. Some factors that can be used to determine business unit strength include: Market share Growth in market share Distribution channel access Profit margins relative to competitors

R & D. Quality of products and services. Branding and promotions success.

GE nine-cell Matrix
The nine cell of the GE matrix are grouped on the basis

of low, medium, high industry attractiveness, and weak, average, strong business unit strength. Three zones of the three cells each are made, denoting different combination represented by green, yellow, and red colors.

GE nine-cell Matrix
Based on the green zone, the signal is go ahead to

grow n build, indicating expansion strategies. Business in the green zone attract major investment.

GE nine-cell Matrix
For the yellow zone, the signal is wait and see

indicating hold and maintain type of strategies aimed at stability strategy. For red zone , the signals is stop, indicating the retrenchment strategies of divestment and liquidation or for adopting turnaround strategies.

GE Mckinsey Matrix
At this stage the marketing manager adapts the list above

to the needs of his strategy. The GE matrix has 5 steps: One - Identify your products, brands, experiences, solutions, or SBU's. Two - Answer the question, What makes this market so attractive? Three - Decide on the factors that position the business on the GE matrix.

GE Mckinsey Matrix
Four - Determine the best ways to measure

attractiveness and business position. Five - Finally rank each SBU as either low, medium or high for business strength, and low, medium and high in relation to market attractiveness.

Benefit:
Yes the GE matrix is superior to the Boston Matrix

since it uses several dimensions, as opposed to BCG's two. Compared to the BCG matrix ,it offers an intermediate classification of medium and average ratings.

limitations
However, problems or limitations include:
There is no research to prove that there is a

relationship between market attractiveness and business position. The interrelationships between SBU's, products, brands, experiences or solutions is not taken into account.

limitations
This approach does require extensive data gathering.
Scoring is personal and subjective. The GE matrix offers a broad strategy and does not

indicate how best to implement it.

EXERCISE FOR YOU

GE MATRIX FOR ITC LTD