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OUTLINES
History of BCG Market share & market growth Portfolio analysis Product life cycle The BCG matrix The case Conclusion
HISTORY OF BCG
BCG is founded by Bruce D. Henderson in 1963 A global management consulting firm with offices in 42 countries.
One of only three companies to appear in the top 15 of Fortune's "Best Companies to Work For" report for seven consecutive years.
In the 2011 and 2012 Fortune lists, BCG is listed as the second best company to work for
BCG MATRIX
BOSTON CONSULTING GROUP (BCG) MATRIX is developed by BRUCE HENDERSON of the BOSTON CONSULTING GROUP IN THE EARLY 1970s. According to this technique, businesses or products are classified as low or high performers depending upon their market growth rate and relative market share.
To understand the Boston Matrix we need to understand how market share and market growth interrelate
MARKET SHARE
Market share is the percentage of the business unit sales to the total market that is being serviced by your company, measured either in revenue terms or unit volume terms. It indicates the business unit strength. MS = Business unit sales this year Total market size
Relative market share is the percentage of the business unit sales to the highest competitor's sales, measured either in revenue terms or unit volume terms. It indicates the business unit strength.
RMS = Business unit sales this year
Leading competitor sales this year
PORTFOLIO ANALYSIS
Product Portfolio the range of products a company has in development or available for consumers at any one time Managing product portfolio is important for cash flow Strategic Business Unit (SBU) Definition
Single independent operation of a company
Profit maturity
Growth
Decline
Withdrawal
Time
To assess :
Low
High
STARS
Stars are leaders in business by having high market share in a growing market.. They also require heavy investment, to maintain its large market share. It leads to large amount of cash consumption and cash generation.
STRATEGY RECOMMENDATIONS
Investment
Further Growth
Maintain Market Position Cash flow
QUESTION MARKS
STRATEGY RECOMMENDATIONS
Investment
Cash Flow Unrealized future opportunities The marketing strategy is to get markets to adopt these products. These products need to increase their market share quickly or they become dogs.
The best way to handle Question marks is to either invest heavily in them to gain market share or to sell them .
CASH COWS
They are foundation of the company and often the stars of yesterday.
They generate more cash than required. They extract the profits by investing as little cash as possible
STRATEGY RECOMMENDATIONS
Investment Maintain market share Maintain capacity Cash Flow Positive cash flow Provides funding to support Stars and ?
STRATEGY RECOMMENDATIONS
Investment Divestiture strategy Reduce capacity to free up resources Cash Flow Goal of Positive Cash Flow Negative Cash Flow = Divestment
BCG MATRIX uses only two dimensions, Relative market share and market growth rate.
Only considers current businesses no dynamics Does not recognize possible synergies between SBUs
High market share does not mean profits all the time.
Business with low market share can be profitable too.
It is used to identify how corporate cash resources can best be used to maximize a companys future
growth and profitability.
THE CASE
CONCLUSION
Though BCG MATRIX has its limitations it is one of the most FAMOUS AND SIMPLE portfolio planning matrix ,used by large companies having multi-products.
As long as management understands that the BCG Growth/Share Matrix generates options which require further analysis and validation, this tool can greatly enhance strategic decision making GAMAL AHMED ARAFA
THANK YOU