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BCG Growth1

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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


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