Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2 matrix) developed by BCG, USA. t is t!

e most re"o#"ed corporate portfolio a"alysis tool. t provides a $rap!ic represe"tatio" for a" or$a"i%atio" to exami"e differe"t busi"esses i" it&s portfolio o" t!e basis of t!eir related mar'et s!are a"d i"dustry $ro#t! rates. t is a t#o dime"sio"al a"alysis o" ma"a$eme"t of SBU&s (Strate$ic Busi"ess U"its). " ot!er #ords, it is a comparative a"alysis of busi"ess pote"tial a"d t!e evaluatio" of e"viro"me"t. Accordi"$ to t!is matrix, busi"ess could be classified as !i$! or lo# accordi"$ to t!eir i"dustry $ro#t! rate a"d relative mar'et s!are. Relative Market Share ( SBU Sales t!is year leadi"$ competitors sales t!is year. Market Growth Rate ( "dustry sales t!is year ) "dustry Sales last year. *!e a"alysis re+uires t!at bot! measures be calculated for eac! SBU. *!e dime"sio" of busi"ess stre"$t!, relative mar'et s!are, #ill measure comparative adva"ta$e i"dicated by mar'et domi"a"ce. *!e 'ey t!eory u"derlyi"$ t!is is existe"ce of a" experie"ce curve a"d t!at mar'et s!are is ac!ieved due to overall cost leaders!ip. BCG matrix !as four cells, #it! t!e !ori%o"tal axis represe"ti"$ relative mar'et s!are a"d t!e vertical axis de"oti"$ mar'et $ro#t! rate. *!e mid)poi"t of relative mar'et s!are is set at ,.-. if all t!e SBU&s are i" same i"dustry, t!e avera$e $ro#t! rate of t!e i"dustry is used. .!ile, if all t!e SBU&s are located i" differe"t i"dustries, t!e" t!e mid)poi"t is set at t!e $ro#t! rate for t!e eco"omy. /esources are allocated to t!e busi"ess u"its accordi"$ to t!eir situatio" o" t!e $rid. *!e four cells of t!is matrix !ave bee" called as stars, cas! co#s, +uestio" mar's a"d do$s. 0ac! of t!ese cells represe"ts a particular type of busi"ess.

10 x x

1x

0.1

Figure: BCG Matrix ,. Stars Stars represe"t busi"ess u"its !avi"$ lar$e mar'et s!are i" a fast $ro#i"$ i"dustry. *!ey may $e"erate cas! but because of fast $ro#i"$ mar'et, stars re+uire !u$e i"vestme"ts to mai"tai" t!eir lead. 1et cas! flo# is usually modest. SBU&s located i" t!is cell are attractive as t!ey are located i" a robust i"dustry a"d t!ese

busi"ess u"its are !i$!ly competitive i" t!e i"dustry. f successful, a star #ill become a cas! co# #!e" t!e i"dustry matures. 2. Cash Cows Cas! Co#s represe"ts busi"ess u"its !avi"$ a lar$e mar'et s!are i" a mature, slo# $ro#i"$ i"dustry. Cas! co#s re+uire little i"vestme"t a"d $e"erate cas! t!at ca" be utili%ed for i"vestme"t i" ot!er busi"ess u"its. *!ese SBU&s are t!e corporatio"&s 'ey source of cas!, a"d are specifically t!e core busi"ess. *!ey are t!e base of a" or$a"i%atio". *!ese busi"esses usually follo# stability strate$ies. .!e" cas! co#s loose t!eir appeal a"d move to#ards deterioratio", t!e" a retre"c!me"t policy may be pursued. 2. !uestion Marks 3uestio" mar's represe"t busi"ess u"its !avi"$ lo# relative mar'et s!are a"d located i" a !i$! $ro#t! i"dustry. *!ey re+uire !u$e amou"t of cas! to mai"tai" or $ai" mar'et s!are. *!ey re+uire atte"tio" to determi"e if t!e ve"ture ca" be viable. 3uestio" mar's are $e"erally "e# $oods a"d services #!ic! !ave a $ood commercial prospective. *!ere is "o specific strate$y #!ic! ca" be adopted. f t!e firm t!i"'s it !as domi"a"t mar'et s!are, t!e" it ca" adopt expa"sio" strate$y, else retre"c!me"t strate$y ca" be adopted. 4ost busi"esses start as +uestio" mar's as t!e compa"y tries to e"ter a !i$! $ro#t! mar'et i" #!ic! t!ere is already a mar'et)s!are. f i$"ored, t!e" +uestio" mar's may become do$s, #!ile if !u$e i"vestme"t is made, t!e" t!ey !ave pote"tial of becomi"$ stars. 5. "ogs 6o$s represe"t busi"esses !avi"$ #ea' mar'et s!ares i" lo#)$ro#t! mar'ets. *!ey "eit!er $e"erate cas! "or re+uire !u$e amou"t of cas!. 6ue to lo# mar'et s!are, t!ese busi"ess u"its face cost disadva"ta$es. Ge"erally retre"c!me"t strate$ies are adopted because t!ese firms ca" $ai" mar'et s!are o"ly at t!e expe"se of competitor&s7rival firms. *!ese busi"ess firms !ave #ea' mar'et s!are because of !i$! costs, poor +uality, i"effective mar'eti"$, etc. U"less a do$ !as some ot!er strate$ic aim, it s!ould be li+uidated if t!ere is fe#er prospects for it to $ai" mar'et s!are. 1umber of do$s s!ould be avoided a"d mi"imi%ed i" a" or$a"i%atio".
#i$itations o% BCG Matrix

*!e BCG 4atrix produces a frame#or' for allocati"$ resources amo"$ differe"t busi"ess u"its a"d ma'es it possible to compare ma"y busi"ess u"its at a $la"ce. But BCG 4atrix is "ot free from limitatio"s, suc! as) ,. BCG matrix classifies busi"esses as lo# a"d !i$!, but $e"erally busi"esses ca" be medium also. *!us, t!e true "ature of busi"ess may "ot be reflected. 2. 4ar'et is "ot clearly defi"ed i" t!is model. 2. 8i$! mar'et s!are does "ot al#ays leads to !i$! profits. *!ere are !i$! costs also i"volved #it! !i$! mar'et s!are. 5. Gro#t! rate a"d relative mar'et s!are are "ot t!e o"ly i"dicators of profitability. *!is model i$"ores a"d overloo's ot!er i"dicators of profitability. 9. At times, do$s may !elp ot!er busi"esses i" $ai"i"$ competitive adva"ta$e. *!ey ca" ear" eve" more t!a" cas! co#s sometimes. :. *!is four)celled approac! is co"sidered as to be too simplistic.

McKinsey 7S Framework
From Wikipedia, the free encyclopedia Jump to: navigation, search

Visual representation of the model

*!e M&'inse( )S Fra$ework is a ma"a$eme"t model developed by #ell)'"o#" busi"ess co"sulta"ts /obert 8. .aterma", ;r. a"d *om <eters (#!o also developed t!e 4B.A)) =4a"a$eme"t By .al'i"$ Arou"d= motif, a"d aut!ored In Search of Excellence) i" t!e ,>?-s. *!is #as a strate$ic visio" for $roups, to i"clude busi"esses, busi"ess u"its, a"d teams. *!e @S are structure, strate$y, systems, s'ills, style, staff a"d s!ared values. *!e model is most ofte" used as a tool to assess a"d mo"itor c!a"$es i" t!e i"ter"al situatio" of a" or$a"i%atio".

*!e model is based o" t!e t!eory t!at, for a" or$a"i%atio" to perform #ell, t!ese seve" eleme"ts "eed to be ali$"ed a"d mutually rei"forci"$. So, t!e model ca" be used to !elp ide"tify #!at "eeds to be reali$"ed to improve performa"ce, or to mai"tai" ali$"me"t (a"d performa"ce) duri"$ ot!er types of c!a"$e. .!atever t!e type of c!a"$e A restructuri"$, "e# processes, or$a"i%atio"al mer$er, "e# systems, c!a"$e of leaders!ip, a"d so o" A t!e model ca" be used to u"dersta"d !o# t!e or$a"i%atio"al eleme"ts are i"terrelated, a"d so e"sure t!at t!e #ider impact of c!a"$es made i" o"e area is ta'e" i"to co"sideratio". .!e" it comes to as'i"$ t!e ri$!t +uestio"s, t!e #ebsite, 4i"d *ools (mi"dtools.com), !as developed a c!ec'list a"d a matrix to 'eep trac' of !o# t!e seve" eleme"ts ali$" #it! eac! ot!er. BB;0C* C0 BD *80 4B60E (*o a"aly%e !o# #ell a" or$a"i%atio" is positio"ed to ac!ieve its i"te"ded obFective Usa$e

Improve the performance of a company Examine the likely effects of future changes within a company lign departments and processes during a merger or ac!uisition "etermine how #est to implement a proposed strategy

*!e Seve" "terdepe"de"t 0leme"ts

$he #asic premise of the model is that there are seven internal aspects of an organi%ation that need to #e aligned if it is to #e successful

8ard 0leme"ts

&trategy &tructure &ystems

Soft 0leme"ts

&hared Values &kills &tyle &taff

The McKinsey 7S Framework

Ensuring That All Parts of Your Organization !armony ork in

Eear" !o# to use t!e @S Drame#or', #it! ;ames 4a"'telo# G Amy Carlso".

8o# do you $o about a"aly%i"$ !o# #ell your or$a"i%atio" is positio"ed to ac!ieve its i"te"ded obFectiveH *!is is a +uestio" t!at !as bee" as'ed for ma"y years, a"d t!ere are ma"y differe"t a"s#ers. Some approac!es loo' at i"ter"al factors, ot!ers loo' at exter"al o"es, some combi"e t!ese perspectives, a"d ot!ers loo' for co"$rue"ce bet#ee" various aspects of t!e or$a"i%atio" bei"$ studied. Ultimately, t!e issue comes do#" to #!ic! factors to study. .!ile some models of or$a"i%atio"al effective"ess $o i" a"d out of fas!io", o"e t!at !as persisted is t!e 4cIi"sey @S frame#or'. 6eveloped i" t!e early ,>?-s by *om <eters a"d /obert .aterma", t#o co"sulta"ts #or'i"$ at t!e 4cIi"sey G Compa"y co"sulti"$ firm, t!e basic premise of t!e model is t!at t!ere are seve" i"ter"al aspects of a" or$a"i%atio" t!at "eed to be ali$"ed if it is to be successful. *!e @S model ca" be used i" a #ide variety of situatio"s #!ere a" ali$"me"t perspective is useful, for example to !elp youJ

Improve the performance of a company' Examine the likely effects of future changes within a company' lign departments and processes during a merger or ac!uisition' "etermine how #est to implement a proposed strategy'

*ip: *!e 4cIi"sey @S model ca" be applied to eleme"ts of a team or a proFect as #ell. *!e ali$"me"t issues apply, re$ardless of !o# you decide to defi"e t!e scope of t!e areas you study.

The Se"en Elements

*!e 4cIi"sey @S model i"volves seve" i"terdepe"de"t factors #!ic! are cate$ori%ed as eit!er =!ard= or =soft= eleme"tsJ

!ar# Elements

Soft Elements

Strate$y Structure Systems

S!ared Calues S'ills Style Staff

=8ard= eleme"ts are easier to defi"e or ide"tify a"d ma"a$eme"t ca" directly i"flue"ce t!emJ *!ese are strate$y stateme"tsK or$a"i%atio" c!arts a"d reporti"$ li"esK a"d formal processes a"d * systems. =Soft= eleme"ts, o" t!e ot!er !a"d, ca" be more difficult to describe, a"d are less ta"$ible a"d more i"flue"ced by culture. 8o#ever, t!ese soft eleme"ts are as importa"t as t!e !ard eleme"ts if t!e or$a"i%atio" is $oi"$ to be successful. *!e #ay t!e model is prese"ted i" Di$ure , belo# depicts t!e i"terdepe"de"cy of t!e eleme"ts a"d i"dicates !o# a c!a"$e i" o"e affects all t!e ot!ers.

EetLs loo' at eac! of t!e eleme"ts specificallyJ

Strategy$ the plan devised to maintain and #uild competitive advantage over the competition' Structure$ the way the organi%ation is structured and who reports to whom'

Systems$ the daily activities and procedures that staff mem#ers engage in to get the (o# done' Share# %alues$ called )superordinate goals) when the model was first developed, these are the core values of the company that are evidenced in the corporate culture and the general work ethic' Style$ the style of leadership adopted' Staff$ the employees and their general capa#ilities' Skills$ the actual skills and competencies of the employees working for the company'

+ote: <laci"$ S!ared Calues i" t!e middle of t!e model emp!asi%es t!at t!ese values are ce"tral to t!e developme"t of all t!e ot!er critical eleme"ts. *!e compa"yLs structure, strate$y, systems, style, staff a"d s'ills all stem from #!y t!e or$a"i%atio" #as ori$i"ally created, a"d #!at it sta"ds for. *!e ori$i"al visio" of t!e compa"y #as formed from t!e values of t!e creators. As t!e values c!a"$e, so do all t!e ot!er eleme"ts.

!ow to &se the Mo#el

1o# you '"o# #!at t!e model covers, !o# ca" you use itH *!e model is based o" t!e t!eory t!at, for a" or$a"i%atio" to perform #ell, t!ese seve" eleme"ts "eed to be ali$"ed a"d mutually rei"forci"$. So, t!e model ca" be used to !elp ide"tify #!at "eeds to be reali$"ed to improve performa"ce, or to mai"tai" ali$"me"t (a"d performa"ce) duri"$ ot!er types of c!a"$e. .!atever t!e type of c!a"$e A restructuri"$, "e# processes, or$a"i%atio"al mer$er, "e# systems, c!a"$e of leaders!ip, a"d so o" A t!e model ca" be used to u"dersta"d !o# t!e or$a"i%atio"al eleme"ts are i"terrelated, a"d so e"sure t!at t!e #ider impact of c!a"$es made i" o"e area is ta'e" i"to co"sideratio". Mou ca" use t!e @S model to !elp a"aly%e t!e curre"t situatio" (<oi"t A), a proposed future situatio" (<oi"t B) a"d to ide"tify $aps a"d i"co"siste"cies bet#ee" t!em. tLs t!e" a +uestio" of adFusti"$ a"d tu"i"$ t!e eleme"ts of t!e @S model to e"sure t!at your or$a"i%atio" #or's effectively a"d #ell o"ce you reac! t!e desired e"dpoi"t. Sou"ds simpleH .ell, of course "otJ C!a"$i"$ your or$a"i%atio" probably #ill "ot be simple at allN .!ole boo's a"d met!odolo$ies are dedicated to a"aly%i"$ or$a"i%atio"al strate$y, improvi"$ performa"ce a"d ma"a$i"$ c!a"$e. *!e @S model is a $ood frame#or' to !elp you as' t!e ri$!t +uestio"s A but it #o"Lt $ive you all t!e a"s#ers. Dor t!at youLll "eed to bri"$ to$et!er t!e ri$!t '"o#led$e, s'ills a"d experie"ce. .!e" it comes to as'i"$ t!e ri$!t +uestio"s, #eLve developed a 4i"d *ools c!ec'list a"d a matrix to 'eep trac' of !o# t!e seve" eleme"ts ali$" #it! eac! ot!er. Suppleme"t t!ese #it!

your o#" +uestio"s, based o" your or$a"i%atio"Ls specific circumsta"ces a"d accumulated #isdom.
7S 'hecklist (uestions

8ere are some of t!e +uestio"s t!at youLll "eed to explore to !elp you u"dersta"d your situatio" i" terms of t!e @S frame#or'. Use t!em to a"aly%e your curre"t (<oi"t A) situatio" first, a"d t!e" repeat t!e exercise for your proposed situatio" (<oi"t B). Strateg(:

What is our strategy* +ow do we intend to achieve our o#(ectives* +ow do we deal with competitive pressure* +ow are changes in customer demands dealt with* +ow is strategy ad(usted for environmental issues*

Stru&ture:

+ow is the company,team divided* What is the hierarchy* +ow do the various departments coordinate activities* +ow do the team mem#ers organi%e and align themselves* Is decision making and controlling centrali%ed or decentrali%ed* Is this as it should #e, given what we-re doing* Where are the lines of communication* Explicit and implicit*

S(ste$s:

What are the main systems that run the organi%ation* .onsider financial and +/ systems as well as communications and document storage' Where are the controls and how are they monitored and evaluated* What internal rules and processes does the team use to keep on track*

Share, -alues:

What are the core values* What is the corporate,team culture* +ow strong are the values* What are the fundamental values that the company,team was #uilt on*

St(le:

+ow participative is the management,leadership style*

+ow effective is that leadership* "o employees,team mem#ers tend to #e competitive or cooperative* re there real teams functioning within the organi%ation or are they (ust nominal groups*

Sta%%:

What positions or speciali%ations are represented within the team* What positions need to #e filled* re there gaps in re!uired competencies*

Skills:

What are the strongest skills represented within the company,team* re there any skills gaps* What is the company,team known for doing well* "o the current employees,team mem#ers have the a#ility to do the (o#* +ow are skills monitored and assessed*

7S Matri) (uestions

Usi"$ t!e i"formatio" you !ave $at!ered, "o# exami"e #!ere t!ere are $aps a"d i"co"siste"cies bet#ee" eleme"ts. /emember you ca" use t!is to loo' at eit!er your curre"t or your desired or$a"i%atio". Clic' !ere to do#"load our 4cIi"sey @S .or's!eet, #!ic! co"tai"s a matrix t!at you ca" use to c!ec' off ali$"me"t bet#ee" eac! of t!e eleme"ts as you $o t!rou$! t!e follo#i"$ stepsJ

&tart with your &hared Values: re they consistent with your structure, strategy, and systems* If not, what needs to change* $hen look at the hard elements' +ow well does each one support the others* Identify where changes need to #e made' 0ext look at the other soft elements' "o they support the desired hard elements* "o they support one another* If not, what needs to change* s you ad(ust and align the elements, you-ll need to use an iterative 1and often time consuming2 process of making ad(ustments, and then re3 analy%ing how that impacts other elements and their alignment' $he end result of #etter performance will #e worth it'

*ip: Dor similar approac!es to t!is, see our articles o" t!e Bur'e)Eit#i" C!a"$e 4odel, a"d t!e

Co"$rue"ce 4odel. Mou may also fi"d our articles o" t!e C!a"$e Curve, mpact A"alysis a"d Ee#i"Ls C!a"$e 4a"a$eme"t 4odel useful.

Key Points
*!e 4cIi"sey @Ss model is o"e t!at ca" be applied to almost a"y or$a"i%atio"al or team effective"ess issue. f somet!i"$ #it!i" your or$a"i%atio" or team is"Lt #or'i"$, c!a"ces are t!ere is i"co"siste"cy bet#ee" some of t!e eleme"ts ide"tified by t!is classic model. B"ce t!ese i"co"siste"cies are revealed, you ca" #or' to ali$" t!e i"ter"al eleme"ts to ma'e sure t!ey are all co"tributi"$ to t!e s!ared $oals a"d values. *!e process of a"aly%i"$ #!ere you are ri$!t "o# i" terms of t!ese eleme"ts is #ort!#!ile i" a"d of itself. But by ta'i"$ t!is a"alysis to t!e "ext level a"d determi"i"$ t!e ultimate state for eac! of t!e factors, you ca" really move your or$a"i%atio" or team for#ard.

*E Matri)
*!e .usiness port%olio is t!e collectio" of busi"esses a"d products t!at ma'e up t!e compa"y. *!e best busi"ess portfolio is o"e t!at fits t!e compa"yLs stre"$t!s a"d !elps exploit t!e most attractive opportu"ities. *!e compa"y mustJ (,) A"alyse its curre"t busi"ess portfolio a"d decide #!ic! busi"esses s!ould receive more or less i"vestme"t, a"d (2) 6evelop $ro#t! strate$ies for addi"$ "e# products a"d busi"esses to t!e portfolio, #!ilst at t!e same time decidi"$ #!e" products a"d busi"esses s!ould "o lo"$er be retai"ed. *!e t#o best)'"o#" portfolio pla""i"$ met!ods are t!e Bosto" Co"sulti"$ Group <ortfolio 4atrix a"d t!e 4cIi"sey 7 Ge"eral 0lectric 4atrix (discussed i" t!is revisio" "ote). " bot! met!ods, t!e first step is to ide"tify t!e various Strate$ic Busi"ess U"its (=SBULs=) i" a compa"y portfolio. A" SBU is a u"it of t!e compa"y t!at !as a separate missio" a"d obFectives a"d t!at ca" be pla""ed i"depe"de"tly from t!e ot!er busi"esses. A" SBU ca" be a compa"y divisio", a product li"e or eve" i"dividual bra"ds ) it all depe"ds o" !o# t!e compa"y is or$a"ised. *he M&'inse( / General 0le&tri& Matrix *!e 4cIi"sey7G0 4atrix overcomes a "umber of t!e disadva"ta$es of t!e BCG Box. Dirstly, $arket attra&tiveness replaces $arket growth as t!e dime"sio" of i"dustry attractive"ess, a"d i"cludes a broader ra"$e of factors ot!er t!a" Fust t!e mar'et $ro#t! rate. Seco"dly, &o$petitive strength replaces $arket share as t!e dime"sio" by #!ic! t!e competitive positio" of eac! SBU is assessed.

*!e dia$ram belo# illustrates some of t!e possible eleme"ts t!at determi"e mar'et attractive"ess a"d competitive stre"$t! by applyi"$ t!e 4cIi"sey7G0 4atrix to t!e UI retaili"$ mar'etJ

Fa&tors that 1%%e&t Market 1ttra&tiveness .!ilst a"y assessme"t of mar'et attractive"ess is "ecessarily subFective, t!ere are several factors #!ic! ca" !elp determi"e attractive"ess. *!ese are listed belo#J ) 4ar'et Si%e ) 4ar'et $ro#t! ) 4ar'et profitability ) <rici"$ tre"ds ) Competitive i"te"sity 7 rivalry ) Bverall ris' of retur"s i" t!e i"dustry ) Bpportu"ity to differe"tiate products a"d services ) Se$me"tatio" ) 6istributio" structure (e.$. retail, direct, #!olesale Fa&tors that 1%%e&t Co$petitive Strength Dactors to co"sider i"cludeJ ) Stre"$t! of assets a"d compete"cies ) /elative bra"d stre"$t! ) 4ar'et s!are ) Customer loyalty ) /elative cost positio" (cost structure compared #it! competitors) ) 6istributio" stre"$t! ) /ecord of tec!"olo$ical or ot!er i""ovatio" ) Access to fi"a"cial a"d ot!er i"vestme"t resources

Metho# of calculating the +'* matri)

,e#it- .efinition
BCG $ro#t!)s!are matrix is a met!od i"volvi"$ t!e $rap!ical prese"tatio" of t!e compa"y i" t!e mar'et relative to its maFor competitors. t #as 6eveloped by Bosto" Cou"sulti"$ Group i" ,>@-. BCG met!od is o"e of t!e best '"o#" a"d most #idely used met!ods of portfolio a"alysis, #!ic! is a direct reflectio" of researc! participatio" a"d t!e competitive"ess of compa"ies i" t!e mar'et.

,e#it- 'onstruction of +'* Matri) 'hart an# 'om/utational Metho#s

8ori%o"tal axis o" a lo$arit!mic scale i"dicates s!are of t!e compa"y a"d its lar$est competitor.Certical axis i"dicates rate of sales $ro#t!. *!e "ext step is t!e divisio" of t!e !ori%o"tal axis i"to t#o parts at t!e poi"t e+uals t!e s!are of its "earest competitor #it! a vertical axis at t!e poi"t e+ual to !alf t!e spa" of mar'et dy"amics. *!is creates four +uadra"ts of t!e c!art, called t!e =star=, =+uestio" mar's= (or =difficult c!ildre"=), =cas! co#s= a"d =do$s=. *!ese "ames are e+uivale"t to t!e product developme"t p!ases. " t!e literature #e ca" fi"d t!e usual i"terpretatio" of t!e descriptive met!od of BCG, but its applicatio" i" practice re+uires some a"alytical procedures leadi"$ to t!e preparatio" of BCG $rap!. *!e follo#i"$ fi$ure is a classic BCG matrix $rap!. Circles s!o#s sales of particular bra"ds o" t!e mar'et, #it! curre"t sales mea" $ray circles, #!ile t!e clear ) t!e predicted sale.

*!e surfaces of t!e #!eels represe"t t!e si%e of sales, t!eir radius is calculated by t!e follo#i"$ formulaJ

Coordi"ates of t!e ce"ter of t!e #!eel are calculated as follo#sJ

'

,e#it- Proce#ure for #rawing the gra/h Matri) +'*

4' .onsideration of the firm-s position in the market for each product, taking into account sales 1own and competitor-s2 and rate of growth 1in52 6' 7ased on these data to calculate the appropriate wheel radius and the x,y coordinates 8' "rawing circles in the coordinate system and creating 7.9 map :' nalysis of the phases of development of different products'

9.

:. BCG a"alysis is mai"ly used for 4ulti Cate$ory 7 4ulti <roduct compa"ies. All cate$ories a"d products to$et!er are said to be Busi"ess portfolio. *!us, t!e various e"tities of your busi"ess portfolio may move for#ard by a differe"t pace a"d #it! a differe"t strate$y. *!e BCG a"alysis actually !elps you i" decidi"$ #!ic! e"tities i" your busi"ess portfolio are actually profitable, #!ic! are duds, #!ic! you s!ould co"ce"trate o" a"d #!ic! $ives you a competitive adva"ta$e over ot!ers. @. B"ce you '"o# #!ic! busi"esses sta"d #!ere i" your busi"ess portfolio, you also come to '"o# #!ic! busi"esses "eed i"vestme"ts, #!ic! "eeds !arvesti"$ (ma'i"$ mo"ey), #!ic! "eeds divesti"$ (reduci"$ i"vestme"t) a"d #!ic! "eeds to be completely ta'e" out of t!e busi"ess portfolio. Dor a maFor or$a"i%atio" li'e 8UE, *C etc #!ic! !ave multiple cate$ories a"d #it!i" t!e cate$ories, t!ey !ave multiple li"es of products, t!e BCG a"alysis becomes very importa"t. At a !olistic level, t!ey $et to ma'e a decisio" o" #!ic! product to co"ti"ue a"d #!ic! product to be divested. .!ic! product ca" $ive "e# retur"s #it! $ood i"vestme"t, a"d #!ic! products are reac!i"$ t!e apex of mar'et s!are. ?. BCG Growth Share Matrix A *!e BCG $ro#t! s!are matrix #as developed by 8e"derso" of t!e BCG $roup i" ,>@-Os. *!e matrix classifies busi"esses 7 SBU&s by >. 1) Relative Market Share A *!e mar'et s!are of t!e busi"ess 7 SBU 7 <roduct i" t!e mar'et as compared to its competitors a"d overall product 7 cate$ory. ,-. 2) Market growth rate A *!e $ro#t! rate of t!e i"dustry as a #!ole is ta'e" i"to co"sideratio" from #!ic! t!e $ro#t! rate of t!e product is extrapolated. *!is $ro#t! rate is t!e" pitc!ed o" t!e $rap!. ,,. *!us by !avi"$ 2 basic but at t!e same time very importa"t factors o" P axis a"d M axis, t!e BCG matrix ma'es sure t!at t!e classificatio"s are co"crete. Calculati"$ t!e 4ar'et $ro#t! rate comprises of bot! i"dustry $ro#t! a"d product $ro#t! rate t!ereby $ivi"$ a fair '"o#led$e of #!ere t!e product 7 SBU sta"ds i" compariso" to t!e "dustry. *!e mar'et s!are o" t!e ot!er !a"d comprises of t!e competitio" a"d t!e product pote"tial i" t!e mar'et. *!us #!e" #e co"sider $ro#t! rate a"d mar'et s!are to$et!er, it automatically $ives us a" overvie# of t!e competitio" a"d t!e i"dustry sta"dards as #ell as a" idea of #!at t!e future mi$!t bri"$ for t!e product. ,2. B"ce t!e busi"esses !ave bee" classified, t!ey are placed i"to four differe"t +uadra"ts of t!e matrix. *!e +uadra"ts of t!e matrix are divided i"to ,2. 1) Cash Cows A 8i$! mar'et s!are but lo# $ro#t! rate (most profitable). ,5. 2) Stars A 8i$! mar'et s!are a"d 8i$! $ro#t! rate (!i$! competitio") ,9. 3) !uestion $arks A Eo# mar'et s!are a"d !i$! $ro#t! rate (u"certai"ty) ,:. 4) "ogs A Eo# mar'et s!are a"d lo# $ro#t! rate (less profitable or may eve" be "e$ative profitability) ,@. B" t!e basis of t!is classificatio", strate$ies are decided for eac! SBU 7 <roduct. Eets discuss t!e c!aracteristics a"d strate$ies of eac! +uadra"t i" detail.

,?. 1) Cash Cows A *!e cor"ersto"e of a"y multi product busi"ess, cas! co#s are products #!ic! are !avi"$ a !i$! mar'et s!are i" a lo# $ro#i"$ mar'et. As t!e mar'et is "ot $ro#i"$, t!at cas! co# $ai"s t!e maximum adva"ta$e by $e"erati"$ maximum reve"ue due to its !i$! mar'et s!are. *!us for a"y compa"y, t!e cas! co#s are t!e o"es #!ic! re+uire least i"vestme"t but at t!e same time $ive !i$!er retur"s. *!ese !i$!er retur"s e"!a"ce t!e overall profitability of t!e firm because t!is excess reve"ue ca" be used i" ot!er busi"esses #!ic! are Stars, 6o$s or 3uestio" mar's. ,>. Strate$ies for cas! co# A *!e cas! co#s are t!e most stable for a"y busi"ess a"d !e"ce t!e strate$y $e"erally i"cludes rete"tio" of t!e mar'et s!are. As t!e mar'et is "ot $ro#i"$, ac+uisitio" is less a"d rete"tio" is !i$!. *!us customer satisfactio" pro$rams, loyalty pro$rams a"d ot!er suc! promotio"al met!ods form t!e core of t!e mar'eti"$ pla" for a cas! co# product 7 SBU. 2-. 2) Stars A *!e best product #!ic! comes i" mi"d #!e" t!i"'i"$ of Stars is t!e telecom products. f you loo' at a"y top 9 telecom compa"y, t!e mar'et s!are is $ood but t!e $ro#t! rate too is $ood. *!us because t!ese t#o factors are !i$!, t!e telecom compa"ies are al#ays i" competitive mode a"d t!ey !ave to Fu$$le bet#ee" i"vestme"t a"d !arvesti"$ vis i"vesti"$ mo"ey a"d ta'i"$ out mo"ey time to time. U"li'e cas! co#s, Stars ca""ot be complace"t #!e" t!ey are top o" because t!ey ca" immediately be overta'e" by a"ot!er compa"y #!ic! capitali%es o" t!e mar'et $ro#t! rate. 8o#ever, if t!e strate$ies are successful, a Star ca" become a cas! co# i" t!e lo"$ ru". 2,. Strate$ies for Stars A All types of mar'eti"$, sales promotio" a"d advertisi"$ strate$ies are used for Stars. *!is is because i" cas! co#, already t!ese strate$ies !ave bee" used a"d t!ey !ave resulted i" t!e formatio" of a cas! co#. Similarly i" Stars, because of t!e !i$! competitio" a"d risi"$ mar'et s!are, t!e co"ce"tratio" a"d i"vestme"t "eeds to be !i$! i" mar'eti"$ activities so as to i"crease a"d retai" mar'et s!are. 22. 3) !uestion Marks A Several times, a compa"y mi$!t come up #it! a" i""ovative product #!ic! immediately $ai"s $ood $ro#t! rate. 8o#ever t!e mar'et s!are of suc! a product is u"'"o#". *!e product mi$!t lose customer i"terest a"d mi$!t "ot be bou$!t a"ymore i" #!ic! case it #ill "ot $ai" mar'et s!are, t!e $ro#t! rate #ill $o do#" a"d it #ill ultimately become a 6o$. B" t!e ot!er !a"d, t!e product mi$!t i"crease customer i"terest a"d more a"d more people mi$!t buy t!e product t!us ma'i"$ t!e product a !i$! mar'et s!are product. Drom !ere t!e product ca" move o" to be a Cas! Co# as it !as lo#er competitio" a"d !i$! mar'et s!are. *!us 3uestio" mar's are products #!ic! may $ive !i$! retur"s but at t!e same time may also flop a"d may !ave to be ta'e" out of t!e mar'et. *!is u"certai"ty $ives t!e +uadra"t t!e "ame Q3uestio" 4ar'R. *!e maFor problem associated #it! !avi"$ 3uestio" mar's is t!e amou"t of i"vestme"t #!ic! it mi$!t "eed a"d #!et!er t!e i"vestme"t #ill $ive retur"s i" t!e e"d or #!et!er it #ill be completely #asted. 22. Strate$ies for 3uestio" mar's A As t!ey are "e# e"try products #it! !i$! $ro#t! rate, t!e $ro#t! rate "eeds to be capitali%ed i" suc! a ma""er t!at +uestio" mar's tur" i"to !i$! mar'et s!are products. 1e# Customer ac+uisitio" strate$ies are t!e best strate$ies for co"verti"$ 3uestio" mar's to Stars or Cas! co#s. Durt!ermore, time to time mar'et researc! also !elps i" determi"i"$ co"sumer psyc!olo$y for t!e product

as #ell as t!e possible future of t!e product a"d a !ard decisio" mi$!t !ave to be ta'e" if t!e product $oes i"to "e$ative profitability. 25. 4) "ogs A <roducts are classified as do$s #!e" t!ey !ave lo# mar'et s!are a"d lo# $ro#t! rate. *!us t!ese products "eit!er $e"erate !i$! amou"t of cas! "or re+uire !i$!er i"vestme"ts. 8o#ever, t!ey are co"sidered as "e$ative profitability products mai"ly because t!e mo"ey already i"vested i" t!e product ca" be used some#!ere else. *!us over !ere busi"esses !ave to ta'e a decisio" #!et!er t!ey s!ould divest t!ese products or t!ey ca" revamp t!em a"d t!ereby ma'e t!em saleable a$ai" #!ic! #ill subse+ue"tly i"crease t!e mar'et s!are of t!e product. 29. Strate$ies for 6o$s A 6epe"di"$ o" t!e amou"t of cas! #!ic! is already i"vested i" t!is +uadra"t, t!e compa"y ca" eit!er divest t!e product alto$et!er or it ca" revamp t!e product t!rou$! rebra"di"$ 7 i""ovatio" 7 addi"$ features etc. 8o#ever, movi"$ a do$ to#ards a star or a cas! co# is very difficult. t ca" be moved o"ly to t!e +uestio" mar' re$io" #!ere a$ai" t!e future of t!e product is u"'"o#". *!us i" cases of 6o$ products, divestme"t strate$y is used. 2:. Se5uen&es in BCG Matrix

2@. 2?. Su&&ess Se5uen&e in BCG Matrix A *!e Success se+ue"ce of BCG matrix !appe"s #!e" a +uestio" mar' becomes a Star a"d fi"ally it becomes a cas! co#. *!is is t!e best se+ue"ce #!ic! really $ive a boost to t!e compa"ies profits a"d $ro#t!. *!e success se+ue"ce u"li'e t!e disaster se+ue"ce is e"tirely depe"de"t o" t!e right decision making. 2>. "isaster se5uen&e in BCG Matrix A 6isaster se+ue"ce of BCG matrix !appe"s #!e" a product #!ic! is a cas! co#, due to competitive pressure mi$!t be moved to

a star. t fails out from t!e competitio" a"d it is moved to a +uestio" mar' a"d fi"ally it may !ave to be divested because of its lo# mar'et s!are a"d lo# $ro#t! rate. *!us t!e disaster se+ue"ce mi$!t !appe" because of wrong decision making. *!is se+ue"ce affects t!e compa"y as a lot of i"vestme"ts are lost to t!e divested product. Alo"$ #it! t!is t!e mo"ey comi"$ i" from t!e cas! co# #!ic! is used for ot!er products too is lost. 2-. Strategies .ase, on the BCG Matrix. 2,. *!ere are four strate$ies possible for a"y product 7 SBU a"d t!ese are t!e strate$ies #!ic! are used after t!e BCG a"alysis. *!ese strate$ies are 22. ,) Build A By i"creasi"$ i"vestme"t, t!e product is $ive" a" impetus suc! t!at t!e product i"creases its mar'et s!are. 0xample A <us!i"$ a 3uestio" mar' i"to a Star a"d fi"ally a cas! co# (Success se+ue"ce) 22. 2) 8old A *!e compa"y ca""ot i"vest or it !as ot!er i"vestme"t commitme"ts due to #!ic! it !olds t!e product i" t!e same +uadra"t. 0xample A 8oldi"$ a star t!ere itself as !i$!er i"vestme"t to move a star i"to cas! co# is curre"tly "ot possible. 25. 2) 8arvest A Best observed i" t!e Cas! co# sce"ario, #!erei" t!e compa"y reduces t!e amou"t of i"vestme"t a"d tries to ta'e out maximum cas! flo# from t!e said product #!ic! i"creases t!e overall profitability. 29. 5) 6ivest A Best observed i" case of 6o$ +uadra"t products #!ic! are $e"erally divested to release t!e amou"t of mo"ey already stuc' i" t!e busi"ess. 2:. *!us t!e BCG matrix is t!e best #ay for a busi"ess portfolio a"alysis. *!e strate$ies recomme"ded after BCG a"alysis !elp t!e firm decide o" t!e ri$!t li"e of actio" a"d !elp t!em impleme"t t!e same.