BOSTON BOSTON CONSULTING CONSULTING GROUP GROUP PORTFOLIO PORTFOLIO (BCG)(BCG)

INTRODUCTIONINTRODUCTION BOSTON CONSULTING GROUP (BCG) BOSTON CONSULTING GROUP (BCG)

MATRIXMATRIX is developed by is developed by BRUCE BRUCE HENDERSONHENDERSON of the of the BOSTON BOSTON CONSULTING GROUP IN THE EARLY CONSULTING GROUP IN THE EARLY 1970’s.1970’s.

According to this technique, businesses or According to this technique, businesses or products are classified as low or high products are classified as low or high performers depending upon their market performers depending upon their market growth rate and relative market share. growth rate and relative market share.

Relative Market Share Relative Market Share and Market Growthand Market Growth

To understand the To understand the Boston MatrixBoston Matrix you need to understand market you need to understand market share and market growth rate.share and market growth rate.

    

THE BCG GROWTH-SHARE THE BCG GROWTH-SHARE MATRIX MATRIX

It is a It is a portfolio planning modelportfolio planning model which is based on the which is based on the observation that a company’s business units can be observation that a company’s business units can be classified in to four categories:classified in to four categories:

Stars Stars Question marks Question marks Cash cowsCash cows DogsDogs

It is based on the combination of market growth and It is based on the combination of market growth and market share market share

HOLD

HARVEST DIVEST

BUILD

STARSSTARSHigh growth, High market shareHigh growth, High market share

Stars are leaders in business.Stars are leaders in business.

They also require heavy investment, to They also require heavy investment, to maintain its large market share.maintain its large market share.

It leads to large amount of cash It leads to large amount of cash consumption and cash generation.consumption and cash generation.

QUESTION MARKSQUESTION MARKSHigh growth , Low market shareHigh growth , Low market share

Most businesses start of as Most businesses start of as question marks.question marks.

They will absorb great They will absorb great amounts of cash if the market amounts of cash if the market share remains unchanged, share remains unchanged, (low).(low).

Why question marks? Question Why question marks? Question marks have potential to marks have potential to become star and eventually become star and eventually cash cow but can also become cash cow but can also become a dog.a dog.

Investments should be high for Investments should be high for question marks.question marks.

CASH COWSCASH COWSLOW GROWTH, HIGH MARKET LOW GROWTH, HIGH MARKET

SHARESHARE

They are foundation of the They are foundation of the company and often the stars company and often the stars of yesterday.of yesterday.

They generate more cash They generate more cash than required.than required.

They extract the profits by They extract the profits by investing as little cash as investing as little cash as possiblepossible

DOGSDOGSLow growth, Low market shareLow growth, Low market share

Dogs do not have Dogs do not have potential to bring in potential to bring in much cash.much cash.

Number of dogs in the Number of dogs in the company should be company should be minimized.minimized.

Business is situated at a Business is situated at a declining stage. declining stage.

WHY BCG MATRIX ?WHY BCG MATRIX ?

To assess :To assess : Profiles of productsProfiles of products The cash demands of products The cash demands of products The development cycles of productsThe development cycles of products Resource allocation and divestment decisionsResource allocation and divestment decisions

BENEFITSBENEFITS

BCG MATRIXBCG MATRIX is simple and easy to is simple and easy to understand.understand.

It helps you to quickly and simply screen the It helps you to quickly and simply screen the opportunities open to you, and helps you think opportunities open to you, and helps you think about how you can make the most of them.about how you can make the most of them.

It is used to identify how corporate cash It is used to identify how corporate cash resources can best be used to maximize a resources can best be used to maximize a company’s future growth and profitability.company’s future growth and profitability.

LIMITATIONSLIMITATIONS

High market share is not the only success High market share is not the only success factor.factor.

The model uses only two dimension – market The model uses only two dimension – market share and growth rate.share and growth rate.

CASE STUDYCASE STUDY

You are required to plot Maruti’s Brand of You are required to plot Maruti’s Brand of products in BCG Matrix…products in BCG Matrix…

BCG MATRIX BCG MATRIX

MARUTI SWIFT SX4

MARUTI800 OMNIVERSA

CONCLUSIONCONCLUSION

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.

Any Questions????Any Questions????