Boston Consulting Group (BCG) Matrix When a firm’s divisions compete in different industries, a separate strategy often must be developed for each business. To enhance and formulate strategies. To manage its portfolio of businesses Focuses on relative market share position and the industry growth rate. By Niranjan Chaitanya INC.AURANGABAD BCG Matrix Pie Chart corresponds to corporate revenue generated by that business unit. The pie slice indicates the proportion of division’s profit. Divisions located Quadrant I is called Cash Cows, Quadrant II is called Dogs. Quadrant III is called Question Marks, Quadrant IV is called Stars,
By Niranjan Chaitanya INC.AURANGABAD
BCG Matrix Relative Market Share Position High Medium Low 1.0 High Industry Sales Growth Rate
Stars Question Marks
IV III
Med
Cash Cows Dogs
I II Low
By Niranjan Chaitanya INC.AURANGABAD
BCG Matrix Axes Relative market share position is given on the X-axis of the BCG matrix.
The Y-axis represents the industry growth
rate in sales, measured in percentage terms.
By Niranjan Chaitanya INC.AURANGABAD
Cash Cows High relative market share but compete in a low-growth industry Generate cash in excess of their needs Milked i.e. cash for other purposes Manages to maintain strong position as long as possible Product development Concentric diversification Retrenchment or divestiture if the division becomes weak
By Niranjan Chaitanya INC.AURANGABAD
Dogs Low relative market share and compete in a slow- or no-growth industry Weak internal and external position Liquidation Divestiture Retrenchment
By Niranjan Chaitanya INC.AURANGABAD
Question Marks Low relative market share—compete in a high growth industry Cash needs are high Cash generation is low Decision: strengthen by pursuing an intensive strategy, e.g. to sell them.
By Niranjan Chaitanya INC.AURANGABAD
Stars High relative market share and a high industry growth rate Represent the organization’s best long- run opportunities for growth and profitability. Substantial investment to maintain or strengthen their dominant position. Integration strategies Intensive strategies Joint ventures By Niranjan Chaitanya INC.AURANGABAD BCG Matrix & Benefit Setting the path for growth Knowing dead investments Draws attention to the cash flow, Investment characteristics Needs of an organization’s various divisions. To achieve a portfolio of divisions that are Stars.
By Niranjan Chaitanya INC.AURANGABAD
BCG Matrix Limitations Viewing every business as a star, cash cow, dog, or question mark is overly simplistic. Middle of the BCG matrix is not easily classified. The BCG matrix does not reflect whether or not various divisions or their industries are growing over time. Other variables besides relative market share position and industry growth rate in sales are important in making strategic decisions about various divisions.