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PRODUCT LIFE CYCLES AND THE BOSTON (BCG) MATRIX Strategy Academy EMERALD Programme
| Date post: | 14-Apr-2017 |
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PRODUCT LIFE CYCLES
AND THE BOSTON (BCG) MATRIX
Strategy Academy
EMERALD Programme
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INTRODUCTION
Organisations face various problems when making significant business decisions
about a product or a business offering. It is sometimes unclear what products to
invest in or divest from or even combine with other services to get the most out of
the market.
This document provides a simple framework to analyse and classify your
organisation’s product portfolio and helps you arrive at those decisions.
Each slides includes explanations and leading questions you can use either
individually or to guide your discussion as a team
Customise the slides as needed. You may want to add your organisation’s branding,
insert new slides, adjust existing slides, and/or revise the talking points
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KEY TERMS
Product Portfolio – the range of products a company has in
development or available for consumers at any one time
Product Life Cycle – shows the stages that products go through
from development to withdrawal from the market
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STAGES OF THE PRODUCT LIFE CYCLE
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THE PRODUCT LIFE CYCLE
Sales
Time
Development Introduction Growth Maturity Saturation Decline
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USES OF THE PRODUCT LIFE CYCLE
Product Life Cycle (PLC):
Different products may have different life cycles. The PLC helps in:
Determining revenue earned
Contributing to strategic marketing planning
Identifying when a product needs support, redesign,
reinvigorating, withdrawal, etc.
New product development planning
Forecasting and managing cash flow of products
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THE BOSTON MATRIX
The Boston Matrix:
Is a means of analysing the product portfolio and informing decision making
about possible marketing strategies
It was developed by the Boston Consulting Group – a business strategy and
marketing consultancy in 1968
It links growth rate, market share and cash flow
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THE BOSTON CONSULTING GROUP’S
GROWTH-SHARE MATRIX
Relative Market Share
Pro
duct
Mark
et
Gro
wth
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IMPLICATIONS OF THE BCG CLASSIFICATION
and curve
• Inject sufficient investments to sustain growth
• First mover advantageleverage on experiencerelative to competition
• Increase markets,
sales –new channels
e.g. new of
distribution
• Inject cash to improve its position
another• Merge with problem child
• Limit to niche
• Leave market
parts) or• Harvest (for Divest
• Generate funds for otherproducts
• Maintain market share e.g. ensurequality, build customer loyalty,develop substitute brands
• Maximise Cash Flow e.g. increaseusage rate, rate of replacement,modify expense structure, raiseprices
Star Question Mark
• Concentrate on niches requiring limited effort
DogCash Cow
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APPLYING BCG IN PRACTICE
1. Choose the product(s)
2. Calculate Relative Market Share (RAS) as
3. Calculate Market Growth Rate (MGR) as
4. Plot RAS on the x/horizontal axis and MGR on the y/vertical axis
5. Apply the strategies most appropriate based on the product classification (next
slide)
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USES OF THE BCG MATRIX
Profile products/services or business units in large organisations
Assess the cash demand for products and services
Assess the development cycle of a business offering
Allocate resources to products or business units and make strategic business decisions
The BCG matrix can be used to:
1
2
3
4
