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21/09/2014
1
BCG Matrix
High Low
High
Low
Market
Growth
Rate
Relative Market Share
Theoretical Path to Success
21/09/2014
2
What is Relative Market Share?
In BCG terms, ratio of your market share to that of your largest competitor
If you have a higher share than that of your largest competitor Your Relative Share is > 1
If you have a lower share than that of your largest competitor ... Your Relative Share is < 1
Is plotted on the vertical axis
Uses a simple % scale
The range and midpoint is
dependent on analysis and type of
industry
In Information Technology the High
may be 50, the Low 10, and the
average (midpoint) 30
In Tobacco, the High may be 10, the
Low -10, and the midpoint 0
Plotting Market Growth Rate
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3
High = 12 Low = -5 Ave. = 3
Illustration
The bubbleshave been
positioned from the RMS and
Market Growth data
The circle size has been
calculated from the annual
turnover
The Chemical Portfolio
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4
BCG Cash Quadrants (Day 1977)[email protected]
Balancing the product portfolio (Day 1977)[email protected]
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Which is a Better Portfolio?
Not thinking of the approach as a comprehensive theory
but as a tool (Morrison and Wensley 1991)
Rapidly adopted because of their appealing visual
displays and the immediate comparisons and
recommendations offered (Brown, 1991).
Fulfills an innate human desire for taxonomy and the
classifications offered easy-to-grasp catch phrases
(Hooley and Saunders, 1993).
Why do Marketers Love Such Models?
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6
1970s: the brand is born
1980s: early growth/survival
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1990s: entrepreneurial start ups
Virgin brand so far: Transport & Travel
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Not designed for new business opportunities and inhibits creative thinking (Day 1986)
Strategic recommendations sometimes too drastic (for e.g. for Dogs), especially in mature markets with slow growth rates (Gelderman 2003)
Fundamental assumptions questioned (for e.g. relationship between market share and profitability) (Jacobson and Aaker 1985)
Rely on managerial judgement to identify the relevant factors and determine their relative importance (Gelderman, 2003)
According to Wind and Mahajan (1981), two businesses with very different underlying factors could find themselves in the same position on the matrix simply on the basis of their summed up scores.
Why do some Academics Despise such Models?