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Submitted by:
Ashish Chatarath
Boston Consulting Growth Matrix [BCG]
The BCG matrix (aka B.C.G. analysis, BCG-matrix, Boston Box, Boston Matrix,
Boston Consulting Group analysis) is a chart that had been created by Bruce
Henderson for the Boston Consulting Group in 1970 to help corporations with
analyzing their business units or product lines. This helps the company allocate
resources and is used as an analytical tool in brand marketing, product
management, strategic management, and portfolio analysis.
The Boston Matrix categorizes opportunities into four groups, shown on axes of
Market Growth and Market Share:
Dogs :
These are more charitably called pets, are units with low market share in a mature,
slow-growing industry. These units typically "break even", generating barely
enough cash to maintain the business's market share. Though owning a break-even
unit provides the social benefit of providing jobs and possible synergies that assist
other business units, from an accounting point of view such a unit is worthless, not
generating cash for the company. They depress a profitable company's return on
assets ratio, used by many investors to judge how well a company is being
managed. Dogs, it is thought, should be sold off.
Cash Cows :
They are units with high market share in a slow-growing industry. These units
typically generate cash in excess of the amount of cash needed to maintain the
business. They are regarded as staid and boring, in a "mature" market, and every
corporation would be thrilled to own as many as possible. They are to be "milked"
continuously with as little investment as possible, since such investment would be
wasted in an industry with low growth
Stars :
They are units with a high market share in a fast-growing industry. The hope is
that stars become the next cash cows. Sustaining the business unit's market
leadership may require extra cash, but this is worthwhile if that's what it takes for
the unit to remain a leader. When growth slows, stars become cash cows if they
have been able to maintain their category leadership, or they move from brief
stardom to dogdom.
As a particular industry matures and its growth slows, all business units become
either cash cows or dogs. The natural cycle for most business units is that they
start as question marks, then turn into stars. Eventually the market stops growing
thus the business unit becomes a cash cow. At the end of the cycle the cash cow
turns into a dog.
The overall goal of this ranking was to help corporate analysts decide which of
their business units to fund, and how much; and which units to sell. Managers
were supposed to gain perspective from this analysis that allowed them to plan
with confidence to use money generated by the cash cows to fund the stars and,
possibly, the question marks. As the BCG stated in 1970:
Only a diversified company with a balanced portfolio can use its strengths to truly
capitalize on its growth opportunities. The balanced portfolio has:
• stars whose high share and high growth assure the future;
• cash cows that supply funds for that future growth; and
• question marks to be converted into stars with the added funds.
We would explain the BCG Matrix in light of ITC. So let’s take a look at the
company first.
ITC was incorporated on August 24, 1910 under the name of 'Imperial
Tobacco Company of India Limited'.
ITC's Packaging & Printing Business Division was set up in 1925.
In 1975 the Company launched its Hotels business with the acquisition of a
hotel in Chennai .
In 1979, ITC entered the Paperboards business.
In 1990, ITC acquired Tribeni Tissues Limited.
In 2000, ITC's Packaging & Printing business launched a line of high
quality greeting cards under the brand name 'Expressions'.
ITC also entered the Lifestyle Retailing business with the Wills Sport
range of international quality relaxed wear for men and women in 2000.
In 2000, ITC spun off its information technology business into a wholly
owned subsidiary, ITC Infotech India Limited.
From 2002 onwards, ITC have also ventured in the market of safety
matches, agarbattis and fragrances.
CORE VALUES:
Trusteeship
Customer Focus
Excellence
Innovation
Nation Orientation
Hotels
Agri Business Leaf Tobacco Agri Commodities
Infotech
Rural Initiatives :
ITC's Agri-Business is India's second largest exporter of agricultural products. ITC
is one of the India's biggest foreign exchange earners (US $ 2 billion in the last
decade). The Company's 'e-Choupal' initiative is enabling Indian agriculture
significantly enhance its competitiveness by empowering Indian farmers through
the power of the Internet. This transformational strategy, which has already
become the subject matter of a case study at Harvard Business School, is expected
to progressively create for ITC a huge rural distribution infrastructure,
significantly enhancing the Company's marketing reach.
Corporate philanthropy :
ITC Echoupal creatively leverages information technology to set up a meta-market
in favor of India's small and poor farmers, who would otherwise continue to
operate and transact in 'un-evolved' markets.
As of July 2007, ITC Echoupal services, through 6400 Echoupal across 8 states,
reach more than 4 million farmers in about 40,000 villages. ITC intends scaling up
the initiative with 20,000 choupals and 700 saagars to reach 10 million farmers in
100,000 villages by 2010.
Free access to Internet is also opening windows of rural India to the world at large.
ITC eChoupal is now being regarded as a reliable delivery mechanism for resource
development initiatives. Its potential is being tested through pilot projects in
healthcare, educational services, water management and cattle health management
with the help of several service providers including non-governmental
organizations.
ANALYSIS:
Stars ?
• Hotels • FMCG- Others
• Paperboards/ • ITC Infotech
Packaging.
• Agri business.
Cows Dogs
• FMCG-Cigarettes
Market leadership
Powerful brands across segments
Leadership in all segments - geographic & price
Extensive FMCG distribution network
Direct servicing of 1,00,000 markets & 2 million retail outlets
World-class state-of-the-art technology and products
Investment - Rs.10 billion in six years
Exciting long term growth potential
Growth Potential:
Cigarettes account for only 15% of tobacco consumed in India unlike world
pattern of 85% due to prolonged punitive taxation
Cigarettes (15% of tobacco consumption) contribute nearly 85% of
Revenue to the Exchequer from tobacco sector
Of the 58% of adult Indian males who consume tobacco, barely 15% can
afford cigarettes
Biri : Cigarettes ratio = 10 : 1
Annual per capita adult cigarette consumption in India is appx. one tenth
world average : 141
Future growth depends on relative rates of growth of per capita income and
moderation in taxes
RECENT DIVERSIFICATIONS :
Wills Lifestyle:
ITC's Lifestyle Retailing Business Division has established a nationwide
retailing presence through its Wills Lifestyle chain of exclusive specialty
stores, which offers:
• Wills Classic work wear
• Wills Sport relaxed wear
• Wills Clublife evening wear
• Wills Signature designer wear
Foods:
ITC made its entry into the branded & packaged Foods business in August
2001 with the launch of the Kitchens of India brand.
A more broad-based entry has been made since June 2002 with brand
launches in the Confectionery, Staples and Snack Foods segments.
The packaged foods business is an ideal avenue to leverage ITC's proven
strengths in the areas of hospitality and branded cuisine, contemporary
packaging and sourcing of agricultural commodities.
The unwavering commitment to internationally benchmarked quality
standards enabled ITC to rapidly gain market standing in all its 6 brands:
• Kitchens of India
• Aashirvaad
• Sunfeast
• mint-o
• Candyman
• Bingo!
We had begun working on a New Example as told by you. The company we
picked was Bajaj Two wheelers. We could make its BCG Matrix
usingour Current knowledge and a little bit of research but couldn’t find the
exact figures of sales, profitability and industry growth rates.
Still the work that we did is as follows:
Stars ?
CT 100 Kristal
XCD 125cc (Scooter)
Avenger Pulsar 200
Pulsar 220
Cows Dogs
Pulsar 150 cc Platina
Discover 110 cc Pulsar 180