BCG Matrix

The BCG matrix model was developed by Bruce Henderson in the early 1970s The BCG matrix stands for Boston consulting group The BCG matrix model is a portfolio planning model The BCG model is a well-known portfolio management tool used in product life cycle theory

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 The higher your market share, the higher proportion of the market you control

Relative Market Share

Business unit sales this year = Leading rival sales this year

y y

Market growth is used as a measure of a markets attractiveness Markets experiencing high growth are ones where the total market share available is expanding, and theres plenty of opportunity for everyone to make money
Individual sales this year-Individual sales last year Individual sales last year

Market = Growth

BCG matrix is often used to prioritize which products within company product mix get more funding and attention It has 2 dimensions: MARKET SHARE & MARKET GROWTH The BCG Matrix consist of 4 category in a portfolio of a company Stars, Cash cows, Dogs, Question marks

Stars (high growth, high market share)

Stars are defined by having high market share in a growing market Large amounts of cash Leaders in the business Generate large amounts of cash Need lot of support from promotion and placement Stars are likely to grow into cash cows

Cash Cows (low growth, high market share)

Cash cows are in a position of high market share in a mature market If competitive advantage has been achieved, cash cows have high profit margins and generate a lot of cash flow Because of the low growth, promotion and placement investments are low Investments into supporting infrastructure can improve efficiency and increase cash flow more Cash Cows are often the stars of yesterday and they are the foundation of a company

Dogs (low growth, low market share)

Dogs are in low growth markets and have low market share Dogs should be avoided and minimized Expensive turn-around plans usually do not help Dogs must deliver cash, otherwise they must be liquidated

Question Marks (high growth, low market share)

They have high cash demands and generate low returns, because of their low market share Question marks have high demands and low returns due to low market share These products are in growing markets but have low market share Question marks are essentially new products where buyers have yet to discover them The marketing strategy is to get markets to adopt these products so as to convert them to Stars for the company These products need to increase their market share quickly or they become dogs The best way to handle Question marks is to either invest heavily in them to gain market share or to sell them

Business Growth Rate

High

STARS Nescafe Maggi Noodles Maggi Sauce

QUESTION MARK Milo Kit-Kat Maggi Soups Nestle Butter

Nestles

Low

CASH COWS Cerelac

DOG Nestea Milkybar Nestle Crunch

BCG
Matrix

High

Low

Market Share

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BCG Matrix is simple and easy to understand It helps to quickly and simply screen the opportunities and make most of them It is used to identify how corporate cash resources can best be used to maximize a companys future growth and profitability BCG model is helpful for managers to evaluate balance in the firms current portfolio of Stars, Cash Cows, Question Marks and Dogs BCG method is applicable to large companies that seek volume and experience effects It provides a base for management to decide and prepare for future actions

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Market growth is not the only indicator for attractiveness of a market. Sometimes Dogs can earn more cash than Cash Cows The problems of getting data on the market share and market growth There is no clear definition of what constitutes a "market" A high market share does not necessarily lead to profitability all the time The model uses only two dimensions market share and growth rate. This may tempt management to emphasize a particular product, or to divest prematurely The model neglects small competitors that have fast growing market shares

Name Devang Kataria Dhiraj Kherajani Disha Desai Fakruddin Faraz Sayed Gurmeet Singh Hardik Dave

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