Boston Consulting Group

TheBCG matrix(Boston Consulting Group) is a chart that had been created by Bruce Henderson for theBoston Consulting Groupin 1968. It was created to helpcorporationswith analyzing theirbusinessunits orproduct lines. This helps the company allocate resources and is used as an analytical tool inbrand marketing, product management , strategic management, andportfolio analysis.

Yaxis
20 % 18 % 16 % 14 % 12 % 10 % 8% 6%

Boston Consulting Group Matrix

STARS QUESTIO N MARK ?

Market Growth Rate

CASH COWS

DOGS

10x

2x 1.5 x

4% 2%

Relative Market Share

0.5 x 0.4 x 0.3 x 0.2 x 0.1 x

4x

1x

Xaxis

QUESTION MARKS
These are products or businesses, that compete in high growth markets but where the market share is relatively low. A new product launched into a high growth market and with an existing market leader would normally be considered as a question mark. Because of the high growth environment, they can be a cash sink. Strategic options for question marks include: i. Market penetration ii. Market development iii. Product development

STARS
Successful question marks become stars. i.e. market leaders in high growth industries. However, investment is normally still required to maintain growth and to defend the leadership position. Stars are frequently only marginally profitable but as they reach a more mature status in their life cycle and growth slows, returns become more attractive. The stars provide the basis for long term growth and profitability. Strategic options for stars include: i. Integration forward, backward and horizontal ii. Market penetration iii. Market development iv. Product development v. Joint ventures

CASH COWS
These are characterised by high relative market share in low growth industries. As the market matures the need for investment reduces. Cash Cows are the most profitable products in the portfolio. The situation is frequently boosted by economies of scale that may be present with market leaders. Cash Cows may be used to fund the businesses in the other three quadrants. It is desirable to maintain the strong position as long as possible and strategic options include: i. Product development ii. Concentric diversification If the position weakens as a result of loss of market share or market contraction then options would include: i. Retrenchment (or even divestment)

DOGS
These describe businesses that have low market shares in slow growth markets. They may well have been Cash Cows. Often they enjoy misguided loyalty from management although some Dogs can be revitalised. Profitability is, at best, marginal. Strategic options would include: i. Retrenchment (if it is believed that it could be revitalised) ii. Liquidation iii. Divestment (if you can find someone to buy!)

Yaxis
20 % 18 % 16 % 14 % 12 % 10 % 8% 6%

Boston Consulting Group Disaster Matrix Sequences

Success Sequences QUESTIO N MARK ? STARS

Market Growth Rate

CASH COWS

DOGS

10x

2x 1.5 x

4% 2%

Relative Market Share

0.5 x 0.4 x 0.3 x 0.2 x 0.1 x

4x

1x

Xaxis

BENIFITS
BCG MATRIX is simple and easy to understand. It helps you to quickly and simply screen the opportunities open to you, and helps you think about how you can make the most of them. It is used to identify how corporate cash resources can best be used to maximize a companys future growth and profitability.

Limitations
BCG MATRIX uses only two dimensions : Relative market share and market growth rate. Problems of getting data on market share and market growth. High market share does not mean profits all the time. Business with low market share can be profitable too.

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.