BCG Matrix: Question Marks???

BCG Matrix
Introduction:
It is the simplest way of showing a company's portfolio of investments. The company's product lines or
business units are plotted on the matrix according to the growth rate of the industry and its relative
market share.
Question Marks???
• Also called as 'problem child' or 'wild cat'.
• These are products that have Low relative market shares in high-growth markets.
• Need heavy investments for development.
• These businesses are called' question marks because the organization must decide whether to
strengthen them or to sell them.
Stars:
• Stars are market leaders.
• High growth rate means they need heavy investment.
• High market share means they have economies of scale and generate large amounts of cash.
• But they need more cash than they generate.
• Overall, the general strategy is to take cash from the cash cows to fund stars.
• Over the time, all growth may slow down and the stars may eventually become cash cows. If
they cannot hold market share, they may even become dogs.
Cash cows:
• They were having high relative market shares but exist in low-growth markets.
• They generate both cash and profits.
• The business is mature and needs lower levels of investment.
• Profits are transferred to support stars/question marks.
• Cash cows may however ultimately become dogs if they lose the market share.
Dogs:
• These are products that have low market shares in low-growth businesses.
• They are not profit earners.
• They absorb cash.
• They are unattractive and often recommended for disposal.
GE 9 cell Matrix
Introduction:
This matrix was developed in 1970s by the General electric Company with the assistance of the
consulting firm, McKinsey & Co., USA.
The GE matrix has been developed to overcome the obvious limitations of BCG matrix.
This matrix consists of nine cells, based on two key variables: i) Business strength; and ii) Industry
attractiveness.
The horizontal axis represents "business strength" and the vertical axis represents "industry
attractiveness.
The business strength is measured by considering such factors as:
 Relative market share
 Profit margins
 Ability to compete on price and quality
 Knowledge of customer and market
 Competitive strengths and weaknesses
 Technological capacity
Industry attractiveness is measured considering such factors as:
 Market size and growth rate
 Industry profit margin
 Competitive intensity
 Economies of scale
 Technology
 Social, environmental, legal and human aspects
SWOT analysis
SWOT Analysis is a powerful technique for understanding your Strengths and Weaknesses, and
for looking at the Opportunities and Threats you face.
Used in a business context, it helps you carve a sustainable niche in your market. Used in a personal
context, it helps you develop your career in a way that takes best advantage of your talents, abilities and
opportunities.
More than this, by looking at yourself and your competitors using the SWOT framework, you can start to
craft a strategy that helps you distinguish yourself from your competitors, so that you can compete
successfully in your market.
Strengths:
 What advantages does your company have?
 What do you do better than anyone else?
 What unique or lowest-cost resources do you have access to?
 What do people in your market see as your strengths?
 What factors mean that you "get the sale"?
Examples of such strengths include:
 Your specialist marketing expertise.

 A new, innovative product or service.
 Location of your business.
 strong brand names
 good reputation among customers
 exclusive access to high grade natural resources
Weaknesses:
 What could you improve?
 What should you avoid?
 What are people in your market likely to see as weaknesses?
 What factors lose you sales?
 a weak brand name

 poor reputation among customers
 lack of access to the best natural resources
 Lack of marketing expertise.
 Location of your business.
 Poor quality goods or services.
Opportunities:
 Where are the good opportunities facing you?
 What are the interesting trends you are aware of?

A useful approach for looking at opportunities is to look at your strengths and ask yourself whether
these open up any opportunities.Alternatively, look at your weaknesses and ask yourself whether you
could create opportunities by eliminating them.
An opportunity could be:
 an unfulfilled customer need
 arrival of new technologies
 loosening of regulations
 removal of international trade barriers
 A developing market such as the Internet.
 Mergers, joint ventures or strategic alliances.
Threats:
 What obstacles do you face?
 What is your competition doing that you should be worried about?
 Are the required specifications for your job, products or services changing?
 Is changing technology threatening your position?

• Could any of your weaknesses seriously threaten your business?
A threat could be:
 Changing Government policies
 shifts in consumer tastes away from the firm's products
 emergence of substitute products
 increased trade barriers
 Price wars with competitors.
 A competitor has a new, innovative product or service.
 Taxation is introduced on your product or service.
Portfolio Analysis
Introduction:
 Senior management need to have a framework to evaluate SBUs and to assign limited resources
among them; hence portfolio analysis
 Portfolio analysis involves the balancing of the company's investments in different products and
business units.
 It is useful for highly diversified and multi-product companies operating in a limited market.
Hofer's Product/Market Evolution Matrix
According to this matrix,

 Businesses in the development or the growth stage have the potential to become stars. If the
marketshare is large in these businesses, additional resources must be invested to develop their
competitive position. If the marketshare is low, a strategy to improve should be developed.
Suppose the industry is relatively small and marketshare is small despite high growth rate, it
may be advisable to divest and redeploy the resources in more competitive businesses.
 Businesses in shake out/maturity stages can be cash cows. These may require some investments
to maintain a higher marketshare.
 Businesses in the decline stage with a low marketshare are in the category of dogs and should
be considered for divestment or liquidation.
The Five Forces model

The Five Forces model developed by Michnal E. Porter.
According to this model, the intensity of competition in an industry depends on five basic forces. These
five forces are:
Threat of new entrants
 Place a limit on prices,
 Affect the profitability of existing players
Intensity of rivalry among industry competitors
• Price competition,
• Requires product development,
• Customer loyalty challenged.
Bargaining power of buyers
• Reduced Prices,
• Higher quality services demanded,
• Encourages competition.
Bargaining power of suppliers
• Raised price,
• Reduced quality,
• Reduced availability.
Threat of substitute products and services.
• Limits market,
• Limits pricing
• Limits profit

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BCG Matrix

 What do people in your market see as your strengths?

 What factors mean that you "get the sale"?

Examples of such strengths include:

 Your specialist marketing expertise.

 What should you avoid?

 What are people in your market likely to see as weaknesses?

 What factors lose you sales?

 a weak brand name

 Where are the good opportunities facing you?

 What are the interesting trends you are aware of?

 What obstacles do you face?

 What is your competition doing that you should be worried about?

 Is changing technology threatening your position?

According to this matrix,

The Five Forces model

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