Assignment

Q1: Explain in brief BCG Matrix?

Answer: BCG matrix (or growth-share matrix) is a corporate planning tool, which is used to
portray firm’s brand portfolio or SBUs on a quadrant along relative market share axis
(horizontal axis) and speed of market growth (vertical axis) axis.
Growth-share matrix is a business tool, which uses relative market share and industry growth
rate factors to evaluate the potential of business brand portfolio and suggest further investment
strategies.
The BCG Matrix (also known as the Boston Consulting Group analysis, the Growth-Share
matrix, the Boston Box or Product Portfolio matrix) is a tool used in corporate strategy to
analyze business units or product lines based on two variables:
 Relative market share and
 The market growth rate.
By combining these two variables into a matrix, a corporation can plot their business units
accordingly and determine where to allocate extra (financial) resources, where to cash out and
where to divest. The main purpose of the BCG Matrix is therefore to make investment
decisions on a corporate level. Depending on how well the unit and the industry is doing, four
different category labels can be attributed to each unit: Dogs, Question Marks, Cash Cows and
Stars.
Relative Market Share

The creator of the BCG Matrix used this variable to actually measure a company’s
competitiveness. The exact measure for Relative Market Share is the focal company’s share
relative to its largest competitor.

Market Growth Rate

The second variable is the Market Growth Rate, which is used to measure the market
attractiveness. Rapidly growing markets are what organizations usually strive for, since they
are promising for interesting returns on investments in the long term. The drawback however is
that companies in growing markets are likely to be in need for investments in order to make
growth possible.

Q2: Explain each quadrants of the BCG Growth Share Matrix?

Answer:
Question Marks

Question marks are the brands that require much closer consideration. They hold low market
share in fast growing markets consuming large amount of cash and incurring losses. It has
potential to gain market share and become a star, which would later become cash cow.
Question marks do not always succeed and even after large amount of investments they
struggle to gain market share and eventually become dogs. Therefore, they require very close
consideration to decide if they are worth investing in or not.
Strategic choices: Market penetration, market development, product development, divestiture

Stars
Stars operate in high growth industries and maintain high market share. Stars are both cash
generators and cash users. They are the primary units in which the company should invest its
money, because stars are expected to become cash cows and generate positive cash flows. Yet,
not all stars become cash flows. This is especially true in rapidly changing industries, where
new innovative products can soon be outcompeted by new technological advancements, so a
star instead of becoming a cash cow, becomes a dog.
Strategic choices: Vertical integration, horizontal integration, market penetration, market
development, product development

Dogs

Dogs hold low market share compared to competitors and operate in a slowly growing market.
In general, they are not worth investing in because they generate low or negative cash returns.
But this is not always the truth. Some dogs may be profitable for long period of time, they may
provide synergies for other brands or SBUs or simple act as a defense to counter competitors
moves. Therefore, it is always important to perform deeper analysis of each brand or SBU to
make sure they are not worth investing in or have to be divested.
Strategic choices: Retrenchment, divestiture, liquidation.

Cash Cows
Cash cows are the most profitable brands and should be “milked” to provide as much cash as
possible. The cash gained from “cows” should be invested into stars to support their further
growth. According to growth-share matrix, corporates should not invest into cash cows to
induce growth but only to support them so they can maintain their current market share. Again,
this is not always the truth. Cash cows are usually large corporations or SBUs that are capable
of innovating new products or processes, which may become new stars. If there would be no
support for cash cows, they would not be capable of such innovations.
Strategic choices: Product development, diversification, divestiture, retrenchment.

Q3: Show the results what will happen if Market Growth for product 1 changes from 3% to 30
%, product 5 7% to 17 %?

Answer:

Market share of
Market Market largest Relative
Products growth share competitor market share
HP 1% 22% 32% 0.68
Dell 2% 17% 13% 1.31
Acer 1% 6% 25% 0.24
Asus 1% 6% 26% 0.23
 COMPUTER VENDORS
3%
Question
1.60 Stars 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
Marks
Relative Market Share

2%
ACER ASUS

2%

1%
Prouct5

1%
HP
DELL

Cash Cows
0% Dogs
Market Growth http://best-excel-
tutorial.com

Market share of
Market Market largest Relative
Products growth share competitor market share
HP 1% 22% 32% 0.68
Dell 2% 17% 13% 1.31
Acer 1% 6% 25% 0.24
Asus 1% 6% 26% 0.23
Interpretation: When Product1 has 3% growth rate it lies in dog category (3%market growth
and 5market share) i.e., product1 has low market growth or low market share while with
increase of 27% (Now30%) it shows that procduct1 lie in question mark (15%, market growth
..5market share) category which represents product is in high growth market with low market
share. Similarly when product 5has 7% growth rate ,it lies in dog category i.e., product5 has
low market growth or low market share while with increase of 10% (Now17%) it shows that
procduct1 lie in question mark category which represents product is in high growth market
with low market share.

COMPUTER VENDORS
3%
Question
1.60 Stars 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
Marks
Relative Market Share

2%
ACER ASUS

2%

1%
Prouct5

1%
HP
DELL

Cash Cows
0% Dogs
Market Growth http://best-excel-
tutorial.com
Q4: Prepare a BCG Growth Matrix for following tables? Also explain what are the difference
in both the table once forming the growth matrix?

Answer:

Table1
Table 2
Interpretation: In table1 market growth and market share and markets share of largest
competitor is different. Table shows market growth of all products except product5 (facing
decrease in market growth). Market share of product 1, 2 and 3 is increasing but product 4 and
5 is decreasing. Market share of largest competitor’s share is decreasing in case of product 2
and 4and in other product cases it is showing increment. According to table 1 analysis product
1 lies in cash cows category i.e., product 1 has low market growth with high market share ,
product2 shows in cash cows it means it has characteristics of cash cows which says it shows
product in low growth market with high growth share . Similarly product 3, 4 and 5 lies in cash
cows, question marks (both 4 and 5) respectively. In table 2 product 1, 2, 3, 4 and 5 shows that
they lie in stars, question marks, dogs (both 4 and 5) respectively.
Q5: Show the results what will happen if Market share for product 3( changes from 16 % to
15 %.
Answer:
 COMPUTER VENDORS
3%
Question
1.60 Stars 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
Marks
Relative Market Share

2%
ACER ASUS

2%

1%
Prouct5

1%
HP
DELL

Cash Cows
0% Dogs
Market Growth http://best-excel-
tutorial.com

Interpretation: When Product 3 has 51% growth rate it lies in star category (2% market
growth and .50 market share) i.e. product 3 is in high growth market with high market share
while with decrease of 36% (Now15%) it shows that product 3 lie in cash cow category (6%
market growth and 1.70 market share) which represents product is in low growth market with
high market share.

Q6: Show the results what will happen if Market share of largest competitor of Product4
changes from 26% to 36 %?

Answer:
 Market share of
Market Market largest Relative
Products growth share competitor market share
HP 1% 22% 32% 0.68
Dell 2% 17% 13% 1.31
Acer 1% 6% 25% 0.24
Asus 1% 6% 26% 0.23

COMPUTER VENDORS
3%
Question
1.60 Stars 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
Marks
Relative Market Share

2%
ACER ASUS

2%

1%
Prouct5

1%
HP
DELL

Cash Cows
0% Dogs
Market Growth http://best-excel-
tutorial.com
 Market share of
Market Market largest Relative
Products growth share competitor market share
HP 1% 22% 32% 0.68
Dell 2% 17% 13% 1.31
Acer 1% 6% 25% 0.24
Asus 1% 6% 26% 0.23
Interpretation: When largest competitor of Product 4 has 26% market share it lies in question mark
quadrant (15% market growth and .50 market share) i.e. product 4 is in high growth market with low
market share while with increase of 10% (Now36%).
Market share of
Market Market largest Relative
Products growth share competitor market share
HP 1% 22% 32% 0.68
Dell 2% 17% 13% 1.31
Acer 1% 6% 25% 0.24
Asus 1% 6% 26% 0.23

It shows that product 4 lie in question mark category (16% market growth and .50 market share)
which represents product is in high growth market with low market share.

Q7: What is the formula for Relative market share?

Answer: Relative market share is a marketing metric used to compare the firm’s market share
to the largest competitor in the market. When calculating relative market share, the market
leader’s market share is used as the benchmark.

The formula for relative market share is:

% Market share of the firm’s brand/% market share of their largest competitive brand in the
market

Q8: Create your own BCG Matrix of your company? There should be a proper name to a
product? Also explain in brief the position of each and every product?

Answer: Company Name- GrapeVine Pvt. Ltd.

Products Offered - Soft Drink, Fruit Drink, Fizzy Drink, Health Drink and Energy Drink.

Market share of
Market Market largest Relative
Products growth share competitor market share
HP 1% 22% 32% 0.68
Dell 2% 17% 13% 1.31
Acer 1% 6% 25% 0.24
Asus 1% 6% 26% 0.23
 COMPUTER VENDORS
3%
Question
1.60 Stars 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
Marks
Relative Market Share

2%
ACER ASUS

2%

1%
Prouct5

1%
HP
DELL

Cash Cows
0% Dogs
Market Growth http://best-excel-
tutorial.com

Interpretation: GrapeVine Pvt. Ltd. Offers 5 different products. The fizzy drink is
categorized in star category that means this product is in high growth market with high market
share. The Energy drink lies maximum in dog’s quadrant and also Soft drinks lies in dog’s
quadrant which shows this product has low growth rate or low market share. Healthy drink lies
in question mark, this quadrant is confused in nature as it shows that products are in high
growth market with low share.
Q9: How I can convert Dogs into Question mark? Explain it by showing it in the form of excel
BCG Template?

Answer:

COMPUTER VENDORS
3%
Question
1.60 Stars 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
Marks
Relative Market Share

2%
ACER ASUS

2%

1%
Prouct5

1%
HP
DELL

Cash Cows
0% Dogs
Market Growth http://best-excel-
tutorial.com
 Market share of
Market Market largest Relative
Products growth share competitor market share
HP 1% 22% 32% 0.68
Dell 2% 17% 13% 1.31
Acer 1% 6% 25% 0.24
Asus 1% 6% 26% 0.23

COMPUTER VENDORS
3%
Question
1.60 Stars 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
Marks
Relative Market Share

2%
ACER ASUS

2%

1%
Prouct5

1%
HP
DELL

Cash Cows
0% Dogs
Market Growth http://best-excel-
tutorial.com
Interpretation: By changing 3% to 43% for product 1 market growth it shows change in
quadrant from dogs to question mark which states that product 1 has improve their position by
shifting from low market or growth share to high growth market with low market share
changing 7% to 27% for product 5 market growth, it shows same changes as product 1 has
shown i.e. movement from dogs to question mark.

Q10: How I can convert Stars into Cash Cows? Explain it by showing it in the form of excel
BCG Template?

Answer:

Market share of
Market Market largest Relative
Products growth share competitor market share
HP 1% 22% 32% 0.68
Dell 2% 17% 13% 1.31
Acer 1% 6% 25% 0.24
Asus 1% 6% 26% 0.23
 COMPUTER VENDORS
3%
Question
1.60 Stars 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
Marks
Relative Market Share

2%
ACER ASUS

2%

1%
Prouct5

1%
HP
DELL

Cash Cows
0% Dogs
Market Growth http://best-excel-
tutorial.com

Market share of
Market Market largest Relative
Products growth share competitor market share
HP 1% 22% 32% 0.68
Dell 2% 17% 13% 1.31
Acer 1% 6% 25% 0.24
Asus 1% 6% 26% 0.23
Interpretation: By changing product 3 from 14% market share to 2% it shows change in
quadrant from stars to cash cows which states that product 3 had high growth rate with high
market share. It confuse their position shifting to low market growth share with high growth
market.