Summary of the BCG Model. To ensure long-term value creation, a company should have a portfolio of products that contains both high-growth products in need of cash inputs and low-growth products that generate a lot of cash. It has 2 dimensions:
It is the most renowned corporate portfolio analysis tool. In other words, it is a comparative analysis of business potential and the evaluation of environment.
According to this matrix, business could be classified as high or low according to their industry growth rate and relative market share. The analysis requires that both measures be calculated for each SBU. The dimension of business strength, relative market share, will measure comparative advantage indicated by market dominance.
The Boston Consulting Group (BCG) is a global management consulting firm with over 80 offices around the world. Our consultants advise leading organizations in value creation strategies, innovation, transformation, supply chain management and more. The Boston Consulting Group (BCG) is a global management consulting firm with over 80 offices around the world. Our consultants advise leading organizations in value creation strategies, innovation, transformation, supply chain management and more. The growth–share matrix (aka the product portfolio matrix, Boston Box, BCG-matrix, Boston matrix, Boston Consulting Group analysis, portfolio diagram) is a chart that was created by Bruce D. Henderson for the Boston Consulting Group in to help corporations to analyze their business units, that is, their product lines.
The key theory underlying this is existence of an experience curve and that market share is achieved due to overall cost leadership. BCG matrix has four cells, with the horizontal axis representing relative market share and the vertical axis denoting market growth rate.
The mid-point of relative market share is set at 1. Resources are allocated to the business units according to their situation Boston consulting group matrix the grid. The four cells of this matrix have been called as stars, cash cows, question marks and dogs. Each of these cells represents a particular type of business.
BCG Matrix Stars- Stars represent business units having large market share in a fast growing industry. They may generate cash but because of fast growing market, stars require huge investments to maintain their lead.
Net cash flow is usually modest. If successful, a star will become a cash cow when the industry matures. Cash Cows- Cash Cows represents business units having a large market share in a mature, slow growing industry.
Cash cows require little investment and generate cash that can be utilized for investment in other business units. They are the base of an organization. These businesses usually follow stability strategies. When cash cows loose their appeal and move towards deterioration, then a retrenchment policy may be pursued.
Question Marks- Question marks represent business units having low relative market share and located in a high growth industry. They require huge amount of cash to maintain or gain market share.
They require attention to determine if the venture can be viable.
Question marks are generally new goods and services which have a good commercial prospective. There is no specific strategy which can be adopted. If the firm thinks it has dominant market share, then it can adopt expansion strategy, else retrenchment strategy can be adopted.
Most businesses start as question marks as the company tries to enter a high growth market in which there is already a market-share. If ignored, then question marks may become dogs, while if huge investment is made, then they have potential of becoming stars.
Dogs- Dogs represent businesses having weak market shares in low-growth markets. They neither generate cash nor require huge amount of cash.Marketing Theories – Boston Consulting Group Matrix.
Visit our Marketing Theories Page to see more of our marketing buzzword busting blogs.. If you are working with a product portfolio you have a range of tools at your disposal to determine how each one or a group of the products are doing.
The Boston Consulting group’s product portfolio matrix (BCG) is designed to help with long-term strategic planning. We give BCG matrix examples to help you. Strategic Management > BCG Matrix. The BCG Growth-Share Matrix. The BCG Growth-Share Matrix is a portfolio planning model developed by Bruce Henderson of the Boston Consulting Group .
The Boston Consulting Group’s Strategy Institute is taking a fresh look at some of BCG’s classic thinking on strategy to explore its relevance to today’s business environment. This article, the fourth in the series, examines the growth share matrix, a portfolio management tool developed by .
Full explanation of the Boston Consulting Group Matrix, where and how it can be used.
Includes links to similar strategy tools and organizational theories. The Boston Consulting Group’s Strategy Institute is taking a fresh look at some of BCG’s classic thinking on strategy to explore its relevance to today’s business environment.
This article, the fourth in the series, examines the growth share matrix, a portfolio management tool developed by .