Post on 21-Sep-2014
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BOSTON CONSULTING GROUP MATRIXGeneral Electric (GE) Matrix
PRESENTED BY:
Abhinav Gotmare
Ajay Agrawal
Mayur Amesar
Rahul Shukla
INTRODUCTION
BOSTON CONSULTING GROUP (BCG) MATRIX is developed by BRUCE HENDERSON of the BOSTON CONSULTING GROUP IN THE EARLY 1970’s.
According to this technique, businesses or products are classified as low or high performers depending upon their market growth rate and relative market share.
Relative Market Share and Market Growth
To understand the Boston Matrix you need to understand how market share and
market growth interrelate.
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
• The higher your market share, the higher proportion of the market you control.
MARKET GROWTHRATE Market growth is used as a measure of a market’s
attractiveness.
MGR = Individual sales - individual sales this year last year Individual sales last year Markets experiencing high growth are ones where
the total market share available is expanding, and there’s plenty of opportunity for everyone to make money.
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
It is based on the combination of market growth and market share relative to the next best competitor.
STARSHigh growth, High market share
Stars are leaders in business. They also require heavy investment, to
maintain its large market share. It leads to large amount of cash consumption
and cash generation. Attempts should be made to hold the market
share otherwise the star will become a CASH COW.
CASH COWS Low growth , High market share
They are foundation of the company and often the stars of yesterday.
They generate more cash than required. They extract the profits by investing as little
cash as possible They are located in an industry that is mature,
not growing or declining.
DOGSLow growth, Low market share
Dogs are the cash traps. Dogs do not have potential to bring in much
cash. Number of dogs in the company should be
minimized. Business is situated at a declining stage.
QUESTION MARKSHigh growth , Low market share
Most businesses start of as question marks. They will absorb great amounts of cash if the
market share remains unchanged, (low). Why question marks? Question marks have potential to become
star and eventually cash cow but can also become a dog.
Investments should be high for question marks.
WHY BCG MATRIX ?
To assess : Profiles of products/businesses/SBUs The cash demands of products/SBUs The development cycles of products/SBUs Resource allocation and divestment
decisions
Success and Disaster Sequence
Objective of BCG Matrix
Increased focus on strategy and result
Improved organization performance
Improved organization communication : Vision , strategy
MAIN STEPS OF BCG MATRIX
Identifying and dividing a company into SBU. Assessing and comparing the prospects of
each SBU according to two criteria :
1. SBU’S relative market share.
2. Growth rate OF SBU’S industry. Classifying the SBU’S on the basis of BCG
matrix. Developing strategic objectives for each SBU.
SBUs of TATA group of companies
Tata SteelTata Steel EuropeTata MotorsTata Consultancy ServicesTata TechnologiesTata TeaTitan IndustriesTata PowerTata CommunicationsTata SonsTata TeleservicesTaj HotelsTata ChemicalsTata Global Beverages
Portfolio Analysis of the Tata Group
The BCG Growth Share matrix uses the dimensions of relative market share and the market growth rate to establish a 2*2 matrix containing 4 main quadrants
Stars (high market growth, high market share), Cash Cows (low market growth, high market share), Question marks (high market growth, low market
share) Dogs (low market growth, low market share). The ideal strategy is to hold on to the Stars and the
Cash Cows, divest the Dogs and take a call on the Question Marks (hold/divest).
We have conducted a detailed analysis (using the BCG Matrix) of the portfolio of companies in the Tata Group. This involved analyzing the sectors in which the Tata group operates as well as the companies in the Tata Group within each sector. We studied the operational and financial performances of each company to understand their growth stories. Special emphasis was laid on identifying the organic and inorganic growth routes pursued by each of these companies under the Tata umbrella. The conclusions drawn about these companies are based on analysis of the global strategy of the Tata group and on detailed conversations with top executives in the Tata Group.
Portfolio Analysis of the Tata Group using the BCG Matrix
The analysis reveals that
Tata Steel, Tata Power, Tata Motors and Indian Hotels emerge as clear Stars (high market growth, high market share).
Hence, they should be retained and the investment in these companies should be increased.
Tata Chemicals and Tata Tea emerge as the Cash Cows (low market growth, high market share) and should be held on to for the time being.
Some of the Question Marks (high market growth, low market share) are Tata Teleservices, Voltas and Tata Communications.
BENEFITS
BCG MATRIX is simple and easy to understand.
It helps you to quickly and simply screen the opportunities open to you, and helps you think about how you can make the most of them.
It is used to identify how corporate cash resources can best be used to maximize a company’s future growth and profitability.
LIMITATIONS
BCG MATRIX uses only two dimensions, Relative market share and market growth rate.
Problems of getting data on market share and market growth.
High market share does not mean profits all the time.
Business with low market share can be profitable too.
General Electric (GE) Matrix
It is the management task concerned with the growth and future of business enterprise.
It provides the route map for the firm and helps to take decision in the future with a greater awareness.
STRATEGIC PLANNING
Developed by McKinsey & Company in 1970’s.
GE is a model to perform business portfolio analysis on the SBU’s.
GE is rated in terms of ‘Market Attractiveness & Business Strength’
It is an Enlarged & Sophisticated version of BCG.
ABOUT GE MATRIX
Classification M
arke
t A
ttra
ctiv
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s
Strong Medium Weak
Lo
wM
ed
ium
Hig
hBusiness Strength
Market Attractiveness
Annual market growth rate Overall market size Historical profit margin Current size of market Market structure Market rivalry Demand variability Global opportunities
Current market share Brand image Production capacity Corporate image Profit margins relative to competitors R & D performance Promotional effectiveness
Business Strength
1 2
3
Strategies
2. Invest to Build• Challenge for leadership• Build selectively on strength
1. Protect Position• Invest to grow• Effort on maintaining strength
3. Build Selectively• Invest in most attractive segment• Build up ability to counter competition• Emphasize profitability by raising productivity
6
5
4
Strategies
4. Protect & Refocus• Manage for current earning• Defend strength
5. Selectivity for Earning• Protect existing program• Investments in profitable segments
6. Build Selectively • Specialize around limited strength• Seek ways to overcome weaknesses• Withdraw if indication of sustainable growth are lacking
7
8 9
Strategies
8. Manage for Earnings• Protect position in profitable segment• Upgrade product line• Minimize investment
7. Limited Expansion for Harvest• Look for ways to expand without high risk
9. Divest • Sell at time that will maximize cash value• Cut fixed costs and avoid investment meanwhile
Study of TATA
TATA
• IT (Information Technology) : TCS
• Consumer Durable : Automobiles, Titan etc.
•Textiles : Tata Fabrics, West Sides etc
GE Matrix For TATA
Business Strengths
Mar
ket
A
ttra
ctiv
enes
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Low
High
WeakStrong
IT Consumer Durables
Textiles
BCG & GE Matrix
Mar
ket
Att
ract
iven
ess
Business Strength
Mar
ket
Gro
wth
Relative Position
(Market Share)
BCG v/s GE
BCG GE
Market Growth
Market share
4 cell
Multi Products
Primary tools
Market Attractiveness
Market strength
9 cell
Multi Business Units
Secondary tools