Portfolio Analysis
BCG Tool for Analyzing Opportunities & Ability to
Compete
Types of Portfolio Analysis• Growth Share Matrix (Boston Consulting
Group)
• analyzes business opportunities according to market growth rate and market share. The comparison results in four possible business conditions, each with strategic implications
The Boston Consulting Group’s Growth-Share Matrix
20%-18%-16%-14%-12%-10%- 8%- 6%- 4%- 2%- 0M
ark
et
Gro
wth
Ra
te
10 4 2 1.5 1 Market Share
.5 .4 .3 .2 .1
Dogs 87
3 ?Question marks
? ?2
1
Cash cows
6
Stars
5
4
Star Strategies
• high-market share businesses in high growth-markets. (Leader expanding industry)
• produce large profits through expanding markets.
• The preferred strategy for stars is growth and further investments for growth (Increase sales – e.g. new markets, new channels of distribution)
Question marks ?• –low-market share businesses in
high-growth markets. (Low market share in expanding industry)
• They do not produce much profit, but they compete in fast growing markets.
• The preferred strategy is growth but the risk exists that further investment will not result in improved market share. (Needs more cash to improve its position)
• Only promising question marks should be targeted for growth (Increase sales and limit to niche or follower);
• others are candidates for retrenchment by re-structuring or divestiture ( Leave the business)
Cash Cows• are high-market share
businesses in low-growth markets or declining industry
• They produce large profits and a strong cash flow. (Can generate funds for other units)
• Because the markets offer little growth opportunity, the preferred strategy is stability or light growth.
• “Cows” should be “milked” to generate cash that can be used to support investments in stars and question marks.
Dogs
• Low market share business in a low growth market or declining industry
• They do not produce much profit, and they show little potential for future improvement.
• The preferred strategy for dogs is retrenchment by divesting (leave business)
Significance of Environment Scanning:
• to identify the opportunities and threats prevailing. A firm can avail the opportunities and
prepare to defend against the threats.• Study of competitors’ position enables to frame
strategies to improve the market standing. • to improve the internal strengths pertaining to its
resources so as to face the external challenges. helps to prepare for any change through alterations in internal factors.
• incorporates a culture of dynamic and pro-active organisation
Levels of Planning: Strategic—Tactical—Operational
Strategic Planning Features:• Strategic planning is meant to be long-term in
nature say, 1-3 yrs• It is the job of the top management-Set
Objectives at the corporate (Group) and Business Level (Individual Business in the group)
• Resource mobilization—Finance, HR, Production, Marketing
• Strategic Partnerships and Alliances• Commitment on Information Technology—MIS• Establish Policies and Action plans in
consultation with middle management
Levels of Planning: Strategic—Tactical—Operational
• Tactical Planning Features:• It is for a period of 1 to 6 months• Job of the Middle Management• Resource utilization is a key area—Commitment of
funds, Creation of Facilities, R & D Activities, HR initiates and Market support
• Establish Time standards, Procedures and Budgets• Operational decisions like Outsourcing—Make or Buy • Benchmarking of operations—JIT, TQM, etc. • Decisions related to Sourcing (Vendor Management or
Supplier Relationship Management), Inventory, Logistics, Product/Service related Strategies—Channel Partners Management, Custromer Relationship Management (CRM).
• Preparation of reports for feedback to Top management
Levels of Planning: Strategic—Tactical—Operational
• Operational Planning Features:• Job of the lower management 1 week/1 month• Day-to Day Activities—Rules and Regulations• Scheduling the working of the company on
daily/weekly basis• Demand planning and forecasting—both market
(Finished product) and production (Raw material)• Inventory management—receiving, storing, issuing,
transport and delivery of Finished product to markets• Transaction processing, accounting, banking,
employee salaries & Wages, Welfare• Customer Relationship Management-After Sales
Service.
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