It facilitates a company think about its products and services and makes decisions about which it should keep, which it should let go and which it should invest in further. Also called the BCG Matrix, it provides a useful way of screening the opportunities open to the company and helps to think about where one can best allocate resources to maximize profit in the future. The BCG Growth-Share Matrix is a four- cell 2 by 2 matrix used to execute business portfolio analysis as a footstep in the strategic planning process. BCG matrix is often used to prioritize which products within company product mix get more funding and attention BCG matrix takes into account two strategic parameter into consideration namely, market share and market growth.
The four quadrants of the growth-share matrix. Growth-share matrix is a business tool, which uses relative market share and Swot bcg growth rate factors to evaluate the potential of business brand Swot bcg and suggest further investment strategies.
Understanding the tool BCG matrix is a framework created by Boston Consulting Group to evaluate the strategic position of the business brand portfolio and its potential. It classifies business portfolio into four categories based on industry attractiveness growth rate of that industry and competitive position relative market share.
These two dimensions reveal likely profitability of the business portfolio in terms of cash needed to support that unit and cash generated by it. The general purpose of the analysis is to help understand, which brands the firm should invest in and which ones should be divested.
One of the dimensions used to evaluate business portfolio is relative market share. This is because a firm that produces more, benefits from higher economies of scale and experience curve, which results in higher profits. Nonetheless, it is worth to note that some firms may experience the same benefits with lower production outputs and lower market share.
High market growth rate means higher earnings and sometimes profits but it also consumes lots of cash, which is used as investment to stimulate further growth. Therefore, business units that operate in rapid growth industries are cash users and are worth investing in only when they are expected to grow or maintain market share in the future.
There are four quadrants into which firms brands are classified: Dogs hold low market share compared to competitors and operate in a slowly growing market. In general, they are not worth investing in because they generate low or negative cash returns.
But this is not always the truth. Some dogs may be profitable for long period of time, they may provide synergies for other brands or SBUs or simple act as a defense to counter competitors moves.
Therefore, it is always important to perform deeper analysis of each brand or SBU to make sure they are not worth investing in or have to be divested. Retrenchment, divestiture, liquidation Cash cows. According to growth-share matrix, corporates should not invest into cash cows to induce growth but only to support them so they can maintain their current market share.
Again, this is not always the truth. Cash cows are usually large corporations or SBUs that are capable of innovating new products or processes, which may become new stars.
If there would be no support for cash cows, they would not be capable of such innovations. Product development, diversification, divestiture, retrenchment Stars. Stars operate in high growth industries and maintain high market share. Stars are both cash generators and cash users.
They are the primary units in which the company should invest its money, because stars are expected to become cash cows and generate positive cash flows.
Yet, not all stars become cash flows. This is especially true in rapidly changing industries, where new innovative products can soon be outcompeted by new technological advancements, so a star instead of becoming a cash cow, becomes a dog.
Vertical integration, horizontal integration, market penetration, market development, product development Question marks.
Question marks are the brands that require much closer consideration. They hold low market share in fast growing markets consuming large amount of cash and incurring losses.
It has potential to gain market share and become a star, which would later become cash cow. Question marks do not always succeed and even after large amount of investments they struggle to gain market share and eventually become dogs.
Therefore, they require very close consideration to decide if they are worth investing in or not. Market penetration, market development, product development, divestiture BCG matrix quadrants are simplified versions of the reality and cannot be applied blindly. They can help as general investment guidelines but should not change strategic thinking.
Business should rely on management judgement, business unit strengths and weaknesses and external environment factors to make more reasonable investment decisions.BCG matrix (or growth-share matrix) is a corporate planning tool, which is used to portray firm’s brand portfolio or SBUs on a quadrant along relative market share axis (horizontal axis) and speed of market growth (vertical axis) axis.
BCG Model: Boston Cusnsulting Group (BCG) model is a technique developed by BRUCE HENDERSON of the Boston Cunsulting Group in early ’s. According to this technique businesses or products are classified as low or high performers depending upon their market growth rate and relative market share. SWOT analysis of BCG (Boston Consulting Group) is covered on this page along with its segmentation, targeting & positioning (STP).
Analysis of Boston Consulting (BCG) . A SWOT analysis of Boston Consulting Group Inc. (BCG), a privately held global management consulting company and advisor on business strategy, is presented. BCG's strong acceptance as a strategy consulting brand differentiates it from many of its peers.
Topics include the company's strong brand. BCG Matrix & SWOT Analysis 1. BY: Piyush Patel Kirit Kene Ashish Jaint 2. Market Growth/Market-Share Matrix A strategic planning tool based on the philosophy that a product’s market growth rate and market share are important in determining marketing strategy Factors determining SBU/product’s position within a matrix Product-market .
The growth–share matrix (BCG Matrix) was created by Bruce D. Henderson for the Boston Consulting Group in to help corporations to analyze their business units and to help the company allocate resources.
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