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BCGGrowth/Share
Matrix
Presented by:
Shashi kumari
PGDM-2nd Year
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Presentation Outline
History of BCG Matrix
Brief explanation of portfolio analysis
BCG Matrix construction Strategy recommendations
Evaluation of the tool
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History of the BCG Matrix
1960s diversification of businesses
Need for universal management tool
First implementation in 1969 by Boston
Consulting Group
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Portfolio Analysis
Strategic Business Unit (SBU) Definition
Single independent operation of a company
Has its own competitors
One manager responsible for performance
Allocation of resources over all SBUs
Goals
Set benchmarks Create generalized descriptions of strategic situations
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Basis of the BCG Portfolio Matrix
Time
Introductory Phase ?
Growth Phase Star
SalesVolume
Mature Phase Cash
Cow
Decline Phase Dog
Source: Das Boston-Consulting-Group-Portfolio Dipl.-Ing. Holger Blumhof
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BCG Matrix Construction
Internal measure: Relative market share
Firms sales of the SBU .
Total markets average sales
Firms Sales of the SBU .
Strongest Competitors Sales
External measure: Market growth Match strategy with market stage
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BCG Matrix Format
Vertical Axis = Relative Market Growth
Split at 10% by a horizontal line
Horizontal Axis = Relative Market Share Split at 1x by a vertical line
Creates four quadrants in which individual
SBUs are positioned as bubbles Bubble size = SBUs total revenue
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The BCG Matrix
High Low
High
Low
Product
Sales
Growth
Rate
Relative Market Share
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Strategy Recommendations
Investment Further Growth
Maintain Market Position
Cash flow Self-sustaining: Fund their own growth
Require funds from other SBUs (Cash Cows)
Assure the future of the company Grow into Cash Cows
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Strategy Recommendations
Investment
Increase market share
Selectively develop into Stars Cash Flow
Require funds from other SBUs (Cash Cows)
Unrealized future opportunities
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Strategy Recommendations
Investment
Maintain market share
Maintain capacity Cash Flow
Positive cash flow
Provides funding to support Stars and ?
No potential for profit growth
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Strategy Recommendations
Investment
Divestiture strategy
Reduce capacity to free up resources Cash Flow
Goal of Positive Cash Flow
Negative Cash Flow = Divestment
No real growth opportunities
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Evaluation of BCG Matrix: Cons
Oversimplifies complex decisions
Only 2 factors considered = creates risk
Uncertainty in market and SBU definition Only considers current businesses no
dynamics
Does not recognize possible synergiesbetween SBUs
Can fall prey to the GIGO syndrome
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Evaluation of BCG Matrix: Pros
Simple and rapid
Solid basis for decision-making
Good measurability of market share andgrowth
Provides information about efficient
resource allocation within the organization Generator for strategic options
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Conclusion
As long as management understands that
the BCG Growth/Share Matrix generates
options which require further analysis andvalidation, this tool can greatly enhance
strategic decision making