BCG MATRIX

Prepared By:-

Nidhi Gupta

PGDM Batch (2012-2014)

Section A

WHAT IS BCG MATRIX? The BCG Matrix is one of the most popular

methods of portfolio planning, and is based on the product life cycle.

It was created for the Boston Consulting Group by Bruce Henderson in 1968.The BCG Matrix works on the principle that every company should have a portfolio of products containing both high-growth products requiring cash investment, and low-growth products that throw off excess cash.

Together they ensure long-term business success.

UNDERSTANDINGRELATIVE MARKET SHARE&MARKET GROWTH

WHAT IS MARKET SHARE &RELATIVE MARKET SHARE

Market share -The percentage of a market (defined in terms of either units or revenue) accounted for by a specific entity.

Relative Market Share –  The market share of the business / SBU / Product in the market as compared to its competitors and overall product / category.

Formula to Calculate RMS is:

Relative Market Share = Market Share of SBU/ Market Share of the Leading Competitor Brand

WHAT IS MARKET GROWTH? Market Growth: It is used to measure market’s /

Product’s attractiveness.

Formula of Calculating Market Growth :

Market Growth: (Individual Sales this year- Individual sales last year) / Individual Sales last year.

HOW TO PREPARE BCG MATRIX

Plot your business units or products into the matrix by assessing their relative market share and market growth values. This will result in your portfolio being arranged across four categories:

BCG GROWTH–SHARE MATRIX

Cash Cows –  High market share but low growth rate (most profitable).

Stars –  High market share and High growth rate (high competition)

Question marks –  Low market share and high growth rate (uncertainty)

Dogs –  Low market share and low growth rate (less profitable or may even be negative profitability)

QUESTION MARKThey require huge amount of cash to maintain or gain market share.

Question marks are generally new goods and services which have a good commercial prospective.

If ignored, then question marks may become dogs, while if huge investment is made, then they have potential of becoming stars.

STARS

Stars represent business units having large market share in a fast growing industry.

If successful, a star will become a cash cow when the industry matures.

CASH COWSCash Cows represents business units having a large market share in a mature, slow growing industry.

When cash cows loose their appeal and move towards deterioration, then a retrenchment policy may be pursued.

Cash cows require little investment and generate cash that can be utilized for investment in other business units.

DOGS

Dogs represent businesses having weak market shares in low-growth markets

They neither generate cash nor require huge amount of cash. Due to low market share, these business units face cost disadvantages.

Unless a dog has some other strategic aim, it should be liquidated if there is fewer prospects for it to gain market share.

PLOTTING A BCG MATRIX OF

RECKITT BENCKISER

STARSAir WickHarpicMorteinVeet

CASH COWSDisprinCherry Blossom DettolColinD’coldClearsil

DOGSBrassoFybogel

QUESTION MARKMr. Sheen

REFERENCES

http://en.wikipedia.org/wiki/Market_share

http://www.marketing91.com/bcg-matrix/

http://mba-lectures.com/marketing/principles-of-marketing/1140/how-to-construct-bcg-matrix.html

http://www.slideshare.net/wadekar/bcg-matrix

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/9091839/Cherry-Blossom-shoe-polish-maker-puts-a-shine-on-its-profits.html