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Analysis
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Copyright
Marketing Institute of Singapore
Outline
Introduction
BCG (Boston Consulting
Group) Matrix
PIMS (Profit Impact of
Market Strategy)
GE(General
Electric)/McKinsey Multi-
Factor Matrix
Introduction
The creation of SBUs enables the
setting of SBU’s mission and
objectives and the allocation of
resources across SBUs in the
organization
Senior management need to have
a framework to evaluate SBUs and
to assign limited resources among
them; hence portfolio analysis
Many models but only 3 are
covered here: BCG, PIMS, & GE
BCG (Boston Consulting
Group) Matrix
Provides a framework for
senior management in
allocating resources across
business units in a diversified
firm by
Balancing cash flows among
business units, and
Balancing stages in the product
life-cycle (PLC)
BCG Product Portfolio Matrix
Dimensions
Product
Sales
Growth
Rate
High
Product
Sales
Growth
Rate
Low
Key Assumptions of BCG
Matrix
Stable cost/price relationship
Not valid if the firm is pricing on
projected lower average unit costs in
the future
Market leader influences the
average costs
Profit margin is a function of
market share
This ignores profitable niches
Strategic Perspectives of Products
in Different Quadrants
Anchoring
High Systems Cable Tray
Systems
Product Electric
Sales Power
Growth Tools
Rate
Low Powder
Actuated
Tools Concrete
Lifting
Systems
Note that the Anchoring System SBU is forecasted to move to new positio
BCG Matrix
(Three Paths to Success)
Continuously generate cash cows
and use the cash throw-up by the
cash cows to invest in the question
marks that are not self-sustaining
Stars need a lot of reinvestments
and as the market matures, stars will
degenerate into cash cows and the
process will be repeated.
As for dogs, segment the markets
and nurse the dogs to health or
manage for cash
Three Paths to Success
(cont’d)
Relative Market Share
High Low
High
Market
Growth
Rate
Low
BCG Matrix
(Three Paths to Failure)
Over invest in cash cows and
under invest in question marks
Trade further opportunities for
present cash flow
Under invest in the stars
Allow competitors to gain share in a
high growth market
Over milked the cash cows
Three Paths to Failure (cont’d)
Relative Market Share
High Low
High
Market
Growth
Rate
Low
PIMS (Profit Impact of
Marketing Strategy) Program
Selectively Limited
Build
Medium selectively manage for expansion Invest/Grow
earnings or harvest
Selectivity
/earnings
Protect & Manage for
Low refocus earnings Harvest
Divest /Divest
GE Multifactor Portfolio Matrix (Cont’d)
Industry Attractiveness
High Medium Low
High
Business Strengths
Medium Invest/Grow
Selectivity
/earnings
Low Harvest
/Divest
Some Limitations of the GE
Model
Subjective measurements across
SBUs
Process also highly subjective
From the selection and weighting of
factors to the subsequent
development of both a firm’s position
and the market attractiveness
Businesses may have been
evaluated with respect to different
criteria