BCG MATRIX

J.K.OKE
 BCG MATRIX
• THE BCG (BOSTON CONSULTING GROUP)
GROWTH SHARE MATRIX,
• ALONGWITH THE GE BUSINESS SCREEN,
• IS ONE OF THE MOST POPULAR AIDS
• IN DEVELOPING CORPORATE STRATEGY
• IN A MULTI-BUSINESS CORPORATION
USING PORTFOLIO ANALYSIS.
• WHILE IN 1970S & 1980S, IT WAS VERY
POPULAR, EVEN TODAY IT IS USED BY
ABOUT 30% OF THE FORTUNE 500
COMPANIES
 BCG MATRIX
• BCG MATRIX IS THE SIMPLEST WAY TO
PORTRAY A CORPORATION’S PORTFOLIO
OF INVESTMENTS
• IT CAN ALSO BE USED TO DEVELOP
STRATEGIES FOR INTERNATIONAL
MARKETS
• EACH OF THE CORPORATION’S PRODUCT
LINES OR BUSINESS UNITS IS PLOTTED ON
THE MATRIX ACCORDING TO BOTH:
• THE GROWTH RATE OF THE INDUSTRY IN
WHICH IT COMPETES & ITS RELATIVE
MARKET SHARE
 BCG MATRIX
• THE KEY TO SUCCESS IS ASSUMED TO BE THE
MARKET SHARE. AS SUCH, A UNIT’S RELATIVE
COMPETITIVE POSITION IS DEFINED AS ITS
MARKET SHARE IN THE INDUSTRY DIVIDED BY
THAT OF THE LARGEST OTHER COMPETITOR.
• BY THIS CALCULATION, A RELATIVE MARKET
SHARE ABOVE 1.0 BELONGS TO THE MARKET
LEADER THE BUSINESS GROWTH RATE IS THE
PERCENTAGE OF MARKET GROWTH, I.E., THE
PERCENTAGE BY WHICH SALES OF A PARTICULAR
BUSINESS UNIT CLASSIFICATION OF PRODUCT
HAS INCREASED.
 BCG MATRIX
• THE LINE SEPARATING AREAS OF HIGH &
LOW RELATIVE COMPETITIVE POSITION IS
SET AT 1.5 TIMES A PRODUCT LINE OR
BUSINESS UNIT MUST HAVE RELATIVE
STRENGTHS OF THIS MAGNITUDE ( 1.5) TO
ENSURE THAT IT WILL HAVE THE DOMINANT
POSITION NEEDED
• TO BE A ‘STAR’ OR ‘CASH COW’. ON THE
OTHER HAND, A PRODUCT LINE OR UNIT
HAVING A RELATIVE COMPETITIVE
POSITION LESS THAN 1.0 HAS ‘DOG’
STATUS.
 BCG MATRIX
• BCG MATRIX CONSISTS OF FOUR
QUADRANTS AS FOLLOWS:
 QUESTION MARK
 STAR
 CASH COW
 DOG
 BCG MATRIX

STAR QUESTION
MARK

CASH DOG
COW
 BCG MATRIX:
QUESTION MARKS
• COMPANIES UNDER THIS CATEGORY
• ARE ALSO KNOWN AS “PROBLEM CHILD” OR
“WILD CAT”
• QUESTION MARKS ARE FIRMS WHICH HAVE
POTENTIAL FOR SUCCESS
• BUT NEED A LOT OF CASH FOR
DEVELOPMENT TO BECOME STAR
• QUESTION MARKS UNABLE TO EMERGE
“STARS” SLOWLY BECOME ‘DOGS’
 BCG MATRIX: STAR
• MARKET LEADERS
• TYPICALLY AT THE PEAK OF THEIR
PRODUCT LIFE CYCLE
• ARE USUALLY ABLE TO GENERATE
ENOUGH CASH
• TO MAINTAIN THEIR HIGH SHARE OF
THE MARKET.
• WHEN THEIR MARKET GROWTH
SLOWS, STARS BECOME CASH COWS
 BCG MATRIX:
CASH COWS
• TYPICALLY BRING IN MORE MONEY
• THAN IS REQUIRED
• TO MAINTAIN THEIR MARKET SHARE.
• THESE PRODUCTS ARE ‘MILKED’
• FOR CASH
• THAT WILL BE INVESTED IN
• NEW “QUESTION MARKS”
 BCG MATRIX: DOGS
• HAVE LOW MARKET SHARE & DO NOT HAVE
THE POTENTIAL TO BRING IN MUCH CASH
AS THEY ARE IN AN UNATTRACTIVE
INDUSTRY .
• ‘QUESTION MARKS’ UNABLE TO OBTAIN A
DOMINANT MARKET SHARE, & THUS
BECOME STARS, BECOME ‘DOGS’
• ACCORDING TO THE BCG MATRIX,
• DOGS SHOULD BE EITHER SOLD OFF OR
MANAGED CAREFULLY FOR THE SMALL
AMOUNT OF CASH THEY GENERATE
 BCG MATRIX
• THE TYPICALMANAGERIAL /
DECISION-MAKING IMPLICATIONS OF
BCG MATRIX ARE:
• INVEST (QUESTION MARK / STAR)
• HARVEST (CASH COW)
• DIVEST (DOGS)
 NEW BCG MATRIX
SIZE OF COMPETITIVE ADVANTAGE

MANY FRAGMENTED SPECIALI-

SATION

FEW STALEMATE VOLUME

 NEW BCG MATRIX
• THE NEW BCG MATRIX WAS UNVEILED
IN 1989
• IT TOO IS A 2 X 2 MATRIX SHOWING
THE SIZE OF THE COMPETITIVE
ADVANTAGE & THE NUMBER OF
APPROACHES TO ACHIEVE
ADVANTAGES
 NEW BCG MATRIX
• IT HAS FOUR QUADRANRS AS
FOLLOWS:
• FRAGMENTED
• SPECIALISATION
• STALEMATE
• VOLUME
 NEW BCG MATRIX:
FRAGMENTED
• FRAGMENTED BUSINESS ARE SMALL
& CONFINED TO SPECIFIC AREA /
REGION
• THERE IS NO PREMIUM ON GROWTH
& PROFITABILITY IS NOT RELATED TO
SIZE
• EXAMPLES:
• MTR IN BANGALORE / NIRULAS IN
NEW DELHI / BOUTIQUES
 NEW BCG MATRIX
SPECIALISATION
• SPECIALISED BUSINESS HAS
FOCUSSED SEGMENT & ARE
CHARACTERISED BY STEEP
LEARNING CURVES
• THE FIRMS MUST LEARN TO PROTECT
THEIR FOCUS
• EXAMPLES:
• BIOCON / CRAY RESEARCH (SUPER
COMPUTERS)
 NEW BCG MATRIX
STALEMATE
• STALEMATED BUSINESS ARE THOSE
WHERE IT IS DIFFICULT TO GAIN ANY
ADVANTAGE
• IT IS THEIR SHEER SUSTAINING
POWER WHICH GIVES THEM
COMPETITIVE ADVANTAGE
• EXAMPLES:
• KELLOGS IN INDIA / P&G /
 NEW BCG MATRIX
VOLUME
• VOLUME BUSINESSES ARE THOSE
WHERE ECONOMIES OF SCALE &
INCREASING RETURNS OPERATE
• THEY ARE CONSTRAINED BY MARKET
SEGMENTATION & DIFFERENTIATION
• EXAMPLES:
• CAR INDUSTRY IN INDIA
 BCG MATRIX : ADVANTAGES

• IT IS QUANTIFIABLE
• IT IS EASY TO USE
• CASH COWS, DOGS & STARS ARE AN
EASY TO REMEMBER WAY TO REFER
TO A CORPORATION’S BUSINESS
UNITS OR PRODUCTS
 BCG MATRIX : LIMITATIONS

• THE USE OF HIGHS & LOWS TO FORM

4 CATEGORIES IS TOO SIMPLISTIC
• THE LINK BETWEEN MARKET SHARE &
PROFITABILITY IS QUESTIONABLE
• LOW SHARE BUSINESSES CAN ALSO
BE PROFITABLE (‘NICHE’ PRODUCTS)
• MARKET SHARE / GROWTH IS ONLY
ONE, NOT THE ONLY, ASPECT OF
INDUSTRY ATTRACTIVENESS
 BCG MATRIX : LIMITATIONS

• ONLY THE MARKET LEADER IS

CONSIDERED.
• THERE COULD/ARE ALSO THE SMALL
COMPETITORS WITH FAST-GROWING
MARKET SHARE.
• SUCH PLAYERS ARE IGNORED
• MARKET SHARE IS ONLY ONE, NOT
THE ONLY, ASPECT OF COMPETITIVE
POSITION
 GE MATRIX
• THE GE MATRIX WAS DEVELOPED
BY GE WITH ASSISTANCE FROM
McKINSEY COMPANY
• IT IS ALSO KNOWN AS
• GE MULTI-FACTOR PORTFOLIO
MATRIX, OR
• GE BUSINESS ATTRACTIVENESS
SCREEN
 GE MATRIX
HIGH WINNERS WINNERS QUESTION
MARKS
MEDIUM WINNERS AVERAGE LOSERS
BUSINESS
LOW PROFIT LOSERS LOSERS
PRODU-
CERS
STRONG AVERAGE WEAK
 GE MATRIX
• IN CONTRAST TO BCG MATRIX, THE
GE MATRIX INCLUDES MORE DATA
AS REGARDS
b) INDUSTRY ATTRACTIVENESS
c) BUSINESS STRENGTH /
COMPETITIVE POSITION
 GE MATRIX
INDUSTRY ATTRACTIVENESS
INCLUDES
 MARKET GROWTH RATE
 MARKET SIZE
 PRICING PRACTICES
 INDUSTRY PROFITABILITY,
AMOMG OTHER OPPORTUNITIES &
THREATS
 GE MATRIX
BUSINESS STRENGTH / COMPETITIVE
POSITION INCLUDE:
 MARKET SHARE
 TECHNOLOGICAL POSITION
 SIZE & PROFITABILITY
AMONG OTHER POSSIBLE
STRENGTHS & WEAKNESSES
GE MATRIX:LIMITATIONS
GE MATRIX
GE MATRIX